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Can Australia Flatten the Curve of Its Economic Dependence on China?

6 18 19

After Canberra called for an independent, international inquiry into the origins and handling of COVID-19 in April 2020, its bilateral relations with Beijing have reached a nadir. China’s ambassador to Australia, Cheng Jingye, warned of a potential Chinese consumer boycott against Australian products and services if Canberra insisted on pushing for an international investigation. China then imposed an 80 percent import tax on Australian barley, and suspended beef imports from four Australian abattoirs. In response, Canberra indicated that it would consider logging a complaint against China with the World Trade Organization over the barley tariffs.

The current trade tensions have been widely seen as a tit-for-tat strategy retaliating against Canberra’s call for an independent investigation into the COVID-19 pandemic. However, this also exposes Australia’s preexisting economic vulnerability to China. Since 2009, China has been an indispensable trading partner for Australia due to its insatiable demand for mineral resources and agricultural products. Excessive reliance on China for economic growth has become a potential security risk for Australia. In 2018, Australia’s trade surplus with China (A$58.26 billion) amounted to more than 250 percent of its total trade surplus (A$23.23 billion), indicating that Australia ran a trade deficit with many of its trading partners (such as the U.S., the U.K. and ASEAN). China accounted for more than 31 percent of Australia’s total exports, and Australia’s bilateral trade with China (A$214.86 billion) was also much larger than that with its second trading partner, Japan (A$85.78 billion).

Many have agreed that Australia is too dependent on China economically but we need to have a cool-headed assessment of just how fragile Australia is to China’s economic pressure. Second, while this paper is not proposing any decoupling, which has been labelled a “zombie economic idea” by some, it explores how Australia can........

© The Diplomat