In the escalating falling-out between the two countries, China’s catastrophic tariffs on Australian wine exports is a ruinous impost on the $1.2 billion fast-growth market.
But the symbolic destruction of an Australian export trade is not without risk to China.
While it can happily survive without our coal, barley, lobsters and wine, it flies in the face of its “dual circulation” strategy. Chinese leaders claim to want a “wider, broader and deeper” economic opening to the world and do not want to decouple to pursue pure self-sufficiency.
But a partner that willingly uses trade to attempt to leverage political advantage outside the control of the supplier brings new risks to export equations.
The targeted sanctions are being noticed by exporters around the world who must now recalibrate decisions about how much to rely on the vast but unpredictable Chinese market.
The White House under Donald Trump has signalled a possible informal alliance of Western nations to respond collectively when China attempts trade coercion. It’s unclear if the Biden administration will pursue this.
Around the Western world people are now choosing to offer a mild rebuke to China by buying Australian wine. Significantly the White House noted in a press release it would be serving and enjoying it.
In the meantime, Chinese decision makers won’t pick up the phone to Australian ministers, but if they did little would change. There’s a bigger picture.
Empires ebb and flow. Over the past millennia various empires have taken the rudder: Macedonians, Carthaginians, Romans, Mongolians, Arabs and Persians, Franks, the Holy Roman Empire, Mongolians again, Ottoman Turks, the Spanish, Dutch, Portuguese, French, British and, currently, Americans.
The West has been in evident decline relative to the East for some time. Much of Europe is losing significance and slowly becoming a museum, and the United States, while still dominant, is very wobbly.
A baton change from the US to China is far from inevitable, for the Chinese Communist Party (CCP) has problems of its own. It has an unspoken compact with citizens that it will increase their wellbeing in exchange for power. This has led to almost half of their citizens being lifted from poverty in a handful of decades, one of the great achievements of humankind.
But real GDP has matured, peaked and is slowing, and will for the next few years. COVID-19 hit hard and with no Western-style personal stimulus programs consumption is down.
Furthermore, with real or undelivered expectations of greater economic security comes greater desire for self-determination by the citizenry, and the potential for conflict with the authoritarian instincts of a centralised government. The CCP is riding a tiger.
Two issues of substance are concerning. First, the collapse of empires is usually bookended by wars — caused by the friction between old expectations and new realities, and the extent to which each side is prepared to enforce their desires. We must hope we are wise enough to avoid this danger, and recognise that politicians start wars but populations suffer them.
The West must differentiate between the Chinese people and the Chinese Communist Party and not allow our inner cab drivers to emerge.
Second is the tussle for dominant ideology. China’s authoritarianism is fundamentally different from US values. There may be ugly years ahead.
In the meantime, the Australian wine industry has become a casualty in a skirmish it can’t hope to control. If you want to help, go home straight away and open a very good bottle of local plonk.
Toby Ralph is a global marketing consultant who has worked for the Liberal Party in Australia and on elections around the world.
Toby Ralph – the PR/executive/guru (“As seen on the ABC’s The Drum & 7:30”?) who sold us on the joys of “Honest John” Howard – from non-core promises to the buggery of East Timor – holding forth on the rights and wrongs of politics?
As for “But a partner that willingly uses trade to attempt to leverage political advantage outside the control of the supplier brings new risks to export equations”?
What about “But a partner that willing uses their spy service to bug, to eavesdrop on the governmental conversations of the other lesser partner to benefit a company of donors in the bugger’s country”? That was all right – when you’re selling Howard?
…. Is he working for the wine industry now?
Very insightful analysis Toby. My take: We can get in front of the China wave by a radical shift to renewable cheap energy, having the confidence to inhabit the leading-edge of storage, renewable and hydrogen tech the using world’s most flexible and cheapest energy generation capacity to redevelop steel and aluminium production. That will completely re-energise viable manufacturing here and make our relationship with China less critical, apart from making cheaper steel and aluminium than China.
Very brave of the US to stand up to other countries doing ‘trade coercion’, Lol
At least with PRC what you see is what you get from a nation becoming more important globally for trade (while ageing) while the US has not been consistent on trade policy; yet Australia has been willing to bend over to please the US?
Wait for the data as this does not mean the end of all exports to China a significant market; wine globally has new players and as observed over decades often an oversupply of cheap wine.
I understand about ten years ago many small medium, but long standing, Australian family wineries were actively looking for investment and asking to be taken over. almost liek stranded assets.
Pointless article. Neither good history nor any kind of economics. Like Schwab’s contribution it should be in “Letters to the editor.” Australia’s present issues with China were precipitated by the stupid remarks about the origins of COVID-19. It went downhill from there with each prickly Beijing response being exacerbated by further shouting from Canberra. Political dealings with Beijing should be done with the objective of achieving something, not making a point through a megaphone. Making a point at the expense of losing a contract is a good way to go hungry, as I’m sure quite a few of our barley growers, wine producers and even the companies that dig up coal must have noticed. But we’re “standing up to the bully.” A strange position indeed for the country in view of our military history.
I reckon these issues started before that with the sniping rhetoric and twittering from a certain section of myopic (xenophobic) members big noting themselves by playing to their (xenophobic) domestic audience.