US a big winner of China-Australia trade war

American exporters are emerging as winners from the China-Australian trade war. US goods filling market openings caused by Beijing’s punitive tariffs on Australian goods

Statistics from the Chinese Commerce Ministry, General Administration of Customs of China and trade associations in Australia all show deep dives in the value of Australian exports to China in recent months. 

Australian exporters have been ensnared in a wider geopolitical feud over everything from Huawei’s reputed security risks to the pandemic to alleged foreign interference in local politics. Beijing has taken particular umbrage to Australia’s call for an independent investigation into Covid-19’s origins.

At the same time, American exports ranging from wine, beef, cotton, timber to coal have seen their market share in China grow since last year. US producers are filling the void left by the China-Australia trade row. Beijing has also pledged to buy more from the US as part of its first-stage deal to ease trade tensions with the US. 

Winemakers in Australia who compete with American producers worldwide for market share are particularly being hung out to dry. They exported wines worth a paltry A$12 million (US$9.1 million) to China between December 2020 and this March, representing just 4% of the amount shipped in the same period a year ago.

Chinese tariffs as high as 218.4% on Australian wines have slowed shipments to its usual largest overseas market to a trickle, according to the Australian government’s Wine Australia portal. 

Dramatic changes in the past 12 months

Australian wines used to enjoy zero-duty treatment under a free trade pact between Beijing and Canberra ratified in 2015. Canberra is now seeking redress from the World Trade Organization as it contests Beijing’s sanctions against its wines and other exports.  

Meanwhile, Australian barley and other agricultural products face tariffs of up to 80.5%, after Beijing concluded in May 2020 that China’s annual import of A$2 billion worth of such cereal grain from Australia as animal fodder and beer and beverage ingredient put Chinese farmers at a disadvantage due to Canberra’s supposed “rampant trade subsidies.”

China Customs data also show the nation’s meat imports from Australia dropped 8.5% in the first four months of this while Xinhua said China had stopped importing live lobsters since October as a precaution against “food safety risks.”

Recent price surges of iron ore, which represents the bulk of Australia’s exports to China, have helped to offset slumps across other categories and pushed the total value of exports to China in May up 55.4% to US$13.6 billion. 

American barley has become the new favorite of Chinese brewers and fodder producers after Beijing opened the door for more US agricultural products in May 2020. In March, the US Department of Agriculture also hailed a new monthly high in beef exports to China, hitting 14,552 tons.

The final quarter of 2020 was also a blowout season for American coal exporters when Chinese power plants were told to boycott Australian mined coal and tap other nations’ supplies.

Not just agriculture is hit

A power shortage at the time caused China’s imports of American coking and thermal coal to soar more than sevenfold over the previous quarter. The momentum lasted well into the first quarter of this year, with monthly average imports hovering at around 280,000 tons, according to Xinhua which cited data from China Customs. 

Altogether China imported US$73.59 billion worth of goods from the US in the first five months of 2021, up a whopping 59.8%. Australia’s corresponding total stood at US$62.37 billion, up 33.3%, the latest data from the General Administration of Customs show. 

Xinhua and state broadcaster China Central Television have suggested in recent op-eds and current affairs programs that Beijing should leverage its purchasing power to drive a wedge between Canberra and Washington as Australian businesses and politicians complain about US exporters exploiting their woes and undercutting their markets in China. 

Can Australia achieve economic growth without China?

By Stan Grant

China, India, Indonesia, Russia, Brazil: What do these five countries have in common?

They are the future. Our future depends on them. They are not the West.

Collectively, they will account for more than half of all global growth through to 2024, according to figures from the International Monetary Fund. Think again about that: five countries, 50 per cent of growth.

The giant among the five is, of course, China. It has already surpassed the United States as the biggest engine of global economic growth — 28 per cent annually between 2013 and 2018.

By the end of this decade, China is expected to overtake America as the single biggest economy in the world. And of the other four countries — Brazil, Russia, Indonesia, India — each lists China as its biggest trading partner.

The IMF says there is no way the global economy can grow unless these countries also grow. Yet in this week’s budget, did we hear mention of any of them?

No. We did not even hear mention of China. Incredible, given China is Australia’s biggest trading partner, too.

How is Australia handling this hinge point of history?

Australia’s trade with China dwarfs its trade with any other country: more than $90 billion, an enormous 43 per cent of all our exports. For comparison, the next biggest market is Japan, at $19 billion.

Trade is equivalent to 45 per cent of Australian GDP and one in every five jobs in the country.

Treasurer Josh Frydenberg has said this budget is about stimulating, spending and creating jobs. How do we seriously achieve that when our political leaders cannot speak to their counterparts in Beijing? 

In the meantime, we hear increasing talk of the “drumbeats of war”. How can we achieve economic growth and boost jobs when the Treasurer, in his budget speech, cannot mention China by name and instead makes allusions about a more dangerous world (read: China threat) and commits to ever more spending on our military?

This isn’t to deny that we live in a more perilous age or that an authoritarian China does not present a threat — or that we need to keep our defence force ready and equipped for any eventuality. But there are serious questions about how our political leaders are handling this hinge point of history.

China is an indispensable nation; our future depends on it. Our future depends on those other countries that make up half the world’s growth — countries we rarely even talk about.

This is not 1992. We have not just emerged from the Cold War; America is not the predominant or sole power in the world; this is not the end of history. We can no longer say, as Western political leaders did then, that China is on the wrong side of history.

The world is turning, history is turning

In its report The World in 2050, international professional services company PwC lists what will be the top 10 economies in the world:

1.China

2.India

3.US

4.Indonesia

5.Brazil

6.Russia

7.Mexico

8.Japan

9.Germany

10.UK

Where did the West go? The report says simply: today’s developing markets will be tomorrow’s economic superpowers.

Outside of the top 10, Vietnam, the Philippines and Nigeria will be the biggest movers in the rankings.

The report compares the E7 (emerging economies) with the G7. In 1995, the E7 were half the size of the G7; by 2015, the E7 had drawn level; by 2040, the E7 could be double the size of the G7.

A Rip Van Winkle “go to sleep and dream away the future” approach won’t work.

The West has been battered by war, growing inequality, stagnant wages, terrorism, economic collapse, declining democracy and rising political populism.

America — the so-called leader of the free world — is a country damaged by unending crisis.

President Joe Biden talks a good game about “America is back” and rebuilding alliances. But how does America lead a world where economic power has so dramatically shifted?

Betting against America

In his recent speech to Congress to mark the first 100 days of his presidency, Joe Biden said it was never a good idea to bet against America. But that’s precisely what many countries are doing.

China’s massive Belt and Road Initiative — one of the largest infrastructure and investment projects in history, covering 70 countries, 65 per cent of the world’s population and 40 per cent of gross domestic product — is a bet against America.

It is part of Xi’s China Dream of a rejuvenated nation, returned to the apex of global power.

Australia is caught in the crosshairs of this global historical turn. We are still a European outpost in Asia, a country with historical ties to Britain and all in with the US. 

It has served us well, but that world is passing. The geopolitical, economic and military plates are shifting as the world walks ever more treacherous fault lines.

But this isn’t the discussion we have been having post-budget.

Instead, we are talking about debt and deficit and vaccine rollout and possible election dates. Journalists are engaging in the usual round of predictable “gotcha” questions, and politicians are looking to score tit-for-tat political points.

All around us, the world we knew is giving way to the world we don’t truly understand, let alone are truly equipped for.

China, our biggest trading partner, is now a global Voldemort — he who cannot be named.

But call it what we will — or won’t — China looms over our world and it is dragging those other emerging economic giants along with it.

To stay with the movie analogy, for the West, there is no back to the future.


Source: ABC

Hydrogen could be the future of energy, but…

Hydrogen could be the future of energy – but there’s one big road block

Cairney, Hutchinson, Preuss & Chen

CEO of Fortescue Metals Andrew Forrest recently said that green hydrogen offers “a colossal opportunity.” It is a solution that could change the world’s fate in the face of climate change.

Experts believe hydrogen could be a boon for renewables and a death knell for the burning of fossil fuels. “Green” hydrogen requiring only electricity and water for its manufacture.

As per the 2019 Australian National Hydrogen Strategy, Australia is at full-speed preparing to use hydrogen as a clean, flexible, sustainable, and storable energy source to achieve the decarbonisation promised in the 2015 Paris Agreement.

Australia also has the potential to become a superpower in the global supply of hydrogen fuel. Simply due to our world-leading renewable energy capacity and our existing strong networks of infrastructure for gas transport and storage.

There are clear environmental and economic incentives for Australia to establish a hydrogen economy. However it’s not as simple as changing out one source of energy for hydrogen.

For a large roll-out of hydrogen power and for Australia to lead in this space, there’s one huge hurdle that must be addressed. That hurdle is known as “hydrogen embrittlement.”

What is hydrogen embrittlement?

When engineering alloys such as steels or nickel-based alloys are exposed to hydrogen-containing environments, their mechanical performance can deteriorate to the point that catastrophic failure occurs. Scientists and engineers have known about hydrogen embrittlement for more than a century. But the problem remains unsolved.

The National Hydrogen Strategy proposes a kickstart project that allows up to 10 percent hydrogen into existing gas distribution networks. A goal of transporting 100 percent hydrogen in the long term. However, seeing as most of Australia’s existing gas distribution infrastructure is made from steel, embrittlement of these pipelines remains an issue.

A COAG Energy Council-commissioned report highlights that, while most existing structures should be capable of carrying 10 per cent hydrogen under normal circumstances, the situation is different at higher pressures and temperatures, or for welded structures, all of which are present in our existing gas network. It states that further consultation is required determine the tolerable hydrogen percentage for each type of process.

The risks are great: hydrogen is highly explosive and an accident could lead to major damage or loss of life. And potentially setting back our progress with participation in this new industry.

The challenge

The hydrogen embrittlement challenge is a highly complex materials and engineering problem. There are many aspects that still need to be understood before tangible solutions can be proposed.

For example, what are the conditions for hydrogen entry into different metals? Can this be controlled? Is it possible to completely stop hydrogen entry in metals using coatings or other surface treatments? What if these coatings get a scratch? If the hydrogen does get in, under what conditions will it cause failure of the metal? How much hydrogen is too much? How quickly will it accumulate? Can we design new engineering alloys that can better resist hydrogen embrittlement for the global hydrogen economy? If so, will the new alloys be economically feasible?

These questions can only be answered through collaboration between researchers and engineers who have a deep understanding of hydrogen embrittlement.

A solution

The development of materials for a hydrogen economy is a challenge that requires a coherent and coordinated national effort. It’s not a problem that will be fixed with one or two projects.

Hydrogen embrittlement is not just limited to steel. Other alloys are also affected. These materials will be required for hydrogen generation, transport, storage and conversion.

Addressing this issue requires long-term investment in the emerging generations of researchers and engineers. They will serve the hydrogen energy sector for the next 50 years.

Similar national initiatives are already in development in countries such as Japan, Germany, China, and the United States as they gear up for a future hydrogen energy world. Australia will have to follow suit quickly to capitalise on this emerging market.

There are many skill sets that are required to solve the hydrogen embrittlement problem. However, at its core will be metallurgy and metallurgical engineering.

Australia has a long and distinguished history in metallurgy as a result of our natural resources. Metallurgy remains a major research strength at several Australian universities.

This is a strength that will need to be leveraged to solve the hydrogen embrittlement problem. Otherwise, the hydrogen economy will be a long time waiting.

Australian researchers are working on it

Australian researchers are already active and making important new contributions to the hydrogen embrittlement problem.

In order to understand exactly how hydrogen interacts with metals at the atomic level – which is the critical information for designing a metal that can better withstand embrittlement – Australian researchers developed a unique-in-the-world microscope that can directly observe hydrogen atoms in metallic samples.

The new microscopy technique has revealed the first direct evidence that hydrogen clusters at crystal defects, leading to embrittlement. It is a major piece of the hydrogen embrittlement puzzle that needs to be solved to develop a solution to counter it.

Australia already has the ingredients for success – we have the skills, smarts, raw materials infrastructure to support a national hydrogen economy and export market. Our universities, industries and government must work together and lead the world in finding the answer to hydrogen embrittlement.

While the path to a hydrogen future isn’t an easy one, if we can solve hydrogen embrittlement we be much closer to achieving a decarbonised energy portfolio, and creating a new, clean export market in Australia.


Authors: Professor Julie Cairney, University of Sydney, Professor Christopher Hutchinson, Monash University, Professor Michael Preuss, Monash University, Dr Eason Chen, University of Sydney

The EU wants to impose carbon tariffs on Australian exports

What Australian politicians call carbon tariffs, the European Union labels a carbon border adjustment mechanism.

While one sounds bad (the WTO has rules that restrict tariffs) the other sounds understandable. If the EU is imposing a carbon tax on its own products, surely it is reasonable to impose it on products from overseas.

The argument is that if a German steel manufacturer has to pay a tax of, say, $77 a tonne for the carbon it emits while making the steel, an Australian manufacturer should be charged the same when its product enters the country, unless it has already paid the same tax here.

To do otherwise would give the Australian product an unfair price advantage — it would create “carbon leakage” of the kind Australian businesses used to warn about in the leadup to Australia’s carbon price.

The European Union approved the idea in principle on March 10.

The details are less than clear. In part because it is possible that carbon tariffs are not permitted under the rules of the WTO.

WTO rules might help Australia…

The rules say taxes or “charges of any kind” can only be imposed on imported products the same way as they are domestically.

That appears to mean that they can be imposed on importers but not on producers. However it isn’t quite what the European Union has in mind.

Ideally the WTO would be able to provide guidance. However, (in part because of the actions of the US Trump administration) it isn’t really in a position to do.

…if only they were enforceable

The WTO has a new director general in Ngozi Okonjo-Iweala. He took office this month. However it will remain unable to make rulings for as long as its appellate body is unable to hear disputes.

Under Trump, the US kept vetoing appointments to the appellate body until the expiration of terms of its existing members meant it no longer had a quorum.

Disputes can still be initiated by countries such as Australia, forcing consultations. But without final determinations.

EU says it wants to ensure that its adjustment mechanism complies with the WTO’s rules. However, it hasn’t ruled out the possibility of relying on provisions that allow exceptions.

Both sides could make a case

Exceptions are allowed for the protection of human, animal or plant life or health or the protection of an exhaustible natural resource.

The catch is these exceptions are not allowed to discriminate between countries and must not be disguised restrictions on trade.

It is arguable that an adjustment mechanism designed to protect the competitiveness of European industries will breach these provisions.

Russia looks to replace Australian coal exports to China

Russia’s coal miners could boost exports to China. Beijing slapped tariffs on Australian imports amid a growing trade rift.

Chinese authorities completely halted supplies of coal from Australia in late 2020. Triggered by Canberra voiced its support for an international inquiry into China’s handling of the coronavirus crisis.

However, China’s appetite for energy imports steadily increasing. Russia is looking to fill the void by boosting coal exports to its neighbor.

“As imports of coal from Australia to China are expected to decline, Russia has a chance to replace at least part of it with its own coal,” said TS Lombard analyst Madina Khrustaleva, as quoted by SCMP, a Hong Kong-based English-language news outlet.

The expert noted that Russia has several large coal deposits ready to begin supplying China. Transport being the only hurdle.

Mutual trade between Russia and China has been growing since 2014, and China has since become Russia’s biggest trade partner.

Russia is in pole position to substitute imports from Australia

“Russia is clearly in pole position to substitute imports from Australia. The increase in oil prices is also helping Russia. All in all there are really tailwinds for Russia,” Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, told the media.

Over the past year, a political rift between China and Australia has spilled over into the economic world. Chinese authorities applied import duties on a wide range of Australian produce, including wine, lobster, meat, barley, timber, and coal. Canberra hit back with tariffs on Chinese aluminum, paper, and steel.

Last week, Russian President Vladimir Putin called for boosting coal exports to Asia by at least 30 percent over the next three years. Putin also approved financing for expanding the country’s rail routes for transporting coal to the continent from the Kuzbass region, Russia’s key mining area.

Russia has invested in modernizing the Baikal-Amur and Trans-Siberian railway networks, the nation’s key rail routes. The expert also said that Russian coal companies are developing joint ventures with Chinese firms to boost coal trade.

In December, Elgaugol, the company behind the Elga coal project in the Russian Far East, agreed to launch a joint venture with China’s Fujian Guohang Ocean Shipping Group that will export metallurgical coal to China. The Elga project aims to ship 30 million tons of coal to China in 2023, almost doubling Russia’s total coal exports to China, which stood at around 33 million tons in 2019.


Here is the view from Australia by ABC News (Australian Public Broadcast Service)

China not happy with Australian foreign policy white paper

@ascorrespondent

CHINA’s foreign ministry has publicly rebuked “irresponsible remarks” regarding the South China Sea in an Australian white paper released this week, a document which warned of China’s rising regional influence and highlighted the need to bolster ties with “like-minded” partners.

The 115-page 2017 Foreign Policy White Paper argued that a more insular United States would be detrimental to a global “rules-based order”

“Australia believes that international challenges can only be tackled effectively when the world’s wealthiest, most innovative and most powerful country is engaged in solving them,” read the paper, which is a guide for Australian diplomacy.

“Powerful drivers are converging in a way that is reshaping the international order and challenging Australia’s interests,” it said – seemingly a thinly veiled allusion to the rise of China.

The Asian hegemon is Australia’s largest trading partner, however the country has remained concerned about the political influence of the Chinese Communist Party. China, meanwhile, is suspicious of Australia’s close military relationship with the United States.

Australia warned in the paper of risks it faces, particularly in the “Indo-Pacific region” due to a shift in the balance of power.

It highlighted the South China Sea as a “major fault line in the regional order”, and said it was “particularly concerned by the unprecedented pace and scale” of China’s land reclamation and construction activities in the disputed waters.

Responding to the white paper on Thursday, Chinese foreign ministry official Lu Kang said that “Australia is not a claimant state of the South China Sea issue and has repeatedly stated that the country does not have any stance on issues of sovereignty disputes.”

Lu urged Australia to keep its promise and stop making “irresponsible remarks” on the issue, reported the Chinese English-language daily Global Times.

An opinion piece also published on Thursday in the Global Times – the international mouthpiece of the Chinese Communist Party –criticised the white paper, stating that it “reveals Australia’s anxiety”.

“Australia is geographically distant from China, but it has been trying to get involved in the disputes that China has with its neighboyring countries. It has called on the US to play a balancing role and incited China’s neighbours to adopt a tough attitude toward China,” said the article.

While the Australian government recognised the economic benefits from China’s rise, it was also trying to “wish China away”, said Jane Golley, deputy director at the Australian Centre on China in the World, Australian National University.

“To actually drop the word ‘Asia’ from ‘Asia-Pacific’ undoes three decades of diplomatic effort,” Golley said, referring to the use of the phrase “Indo-Pacific” which came up 120 times in the paper. “Asia-Pacific” was not used once.

The United States and some of its allies have recently been talking up their vision of the “Indo-Pacific”, instead of the “Asia-Pacific”, in a play on words aimed at undermining the influence of China.

“There is a small reference to China’s geo-economic strategy in the paper but the emphasis is on the tensions that could create, rather than the economic benefits,” Golley said.

Relations between Australia and China sank to a low point this year after Australia rejected high-profile Chinese investments, citing “national interest”.

Australia has also shown little enthusiasm for China’s ambitious Belt and Road initiative, which aims to connect China to Europe and beyond with infrastructure projects. The initiative was mentioned just once in the paper.

“We are not embracing the future,” Golley said. “We are holding on to the past and reaching on to the life jacket rather than thinking of building a whole new ship.”
Source: https://asiancorrespondent.com/2017/11/china-not-happy-australian-foreign-policy-white-paper/#2aZFHdl3JuQHAJTL.97