‘Team approach’ with industry mitigates Beijing tensions as Quad ties deepen

Australia wants to hash out its disputes with China through dialogue, but is willing to be “patient,” Canberra’s Trade Minister said in interview.

“What I’d like to do is be able to sit down and work through these issues,” said Dan Tehan, who took on the trade, tourism and investment portfolio late last year as China-Australia ties swiftly deteriorated.

Tehan was visiting Japan as part of a tour including Singapore, Vietnam, South Korea and the U.S., aiming to strengthen Australia’s other trading relationships and reduce dependence on China, its No. 1 Partner. But when it comes to dealing with Beijing, he stressed the need to talk.

“The best way you can work on the differences is through dialogue,” he told Nikkei Asia on Saturday, emphasising that he wants to maintain “our very strong trading relationship with China.”

Beijing has reportedly snubbed such overtures from Tehan before, and the minister said he hoped the lines of communication would open “sooner rather than later.” Still, he said that “obviously, we are being very clear that we will remain patient.”

“We have to remember our trading relationship with China is helping millions out of poverty in China. At the same time, it has helped us maintain our standard of living in Australia. So it’s in both countries’ interests that the economic partnership continue.”

Since Prime Minister Scott Morrison’s government in April 2020 called for an independent investigation into the origins of COVID-19, Beijing has imposed crippling tariffs & unofficial import bans on a host of Australian exports, from wine and barley to lobsters and coal.

The relationship has only soured further this year. In May, China suspended a bilateral economic dialogue shortly after the Morrison government tore up two Belt & Road Initiative deals between the state of Victoria and Beijing. In June, the two sides took tariff grievances to the World Trade Organisation within days of each other.

Despite all this, the overall trading relationship indeed remains strong. In fact, shipments to China have been growing, mainly driven by a voracious Chinese appetite for iron ore. Overall China-bound exports grew 16% on the month in May, according to the Australian Bureau of Statistics, with iron ore up 20%.

Yet some state governments and corporate executives have warned about unnecessarily provoking their top export destination and hurting the Australian economy. Mark McGowan, the premier of Western Australia, the top exporting state in June urged the federal government to stop antagonising Beijing, according to Reuters. “There needs to be a national reset in that relationship,” McGowan was quoted as saying.

In a report published the same month, the Australian Chamber of Commerce and Industry highlighted the challenges facing China-reliant exporters. “For those firms trading in the Asian region, especially with China, there is growing disillusionment with the difficulties of managing international relationships,” the chamber said. For many small and medium-sized wine producers, it added, “China is now seen as a ‘no-go’ and ‘no future’ location.”

Tehan suggested the government understands the concerns of businesses and is taking a “team approach” to work through them.

“All our businesses and companies have worked with the Australian government to try and solve these difficulties that we’re currently facing with China,” he said. “So for instance, we’ve taken a decision with wine and with barley to go to the World Trade Organization to try and settle these disputes, and our grains industry and our wine industry have fully supported the action.”

He also said the government is working with states to make sure they understand “how important it is that we take a unified position.”

In the meantime, he said, “We’ll continue developing and diversifying all our other trading relationships while we continue to seek to engage constructively with China.”

The diplomatic divide with China is yawning just as the Quadrilateral Security Dialogue, or Quad, becomes more tightly knit. The alliance between Australia, the U.S., Japan and India has become a strategic tool for pushing back against Beijing’s growing assertiveness toward not only Australia but in the Indo-Pacific region as a whole.

“One of the most important things is that all countries, especially in the Indo-Pacific, continue to work to make sure that we’ve got a free, open, resilient Indo-Pacific,” Tehan said. “That’ll be what will continue to drive our foreign policy,” he added, saying Canberra will “work through the Quad” and other organisations like the Asia Pacific Economic Cooperation forum.

Some have suggested the Quad’s scope could be expanded into a free trade alliance. Noting existing trade deals with Japan and the U.S., and hopes for one with India as an “ultimate goal,” Tehan said a free trade agreement within the Quad structure is “not something being looked at.”

He did, however, highlight the grouping’s role in shoring up supply chains and vaccine distribution.

In March, the four countries agreed to produce and deliver at least 1 billion coronavirus vaccines for Asia by the end of 2022, with Australia supporting logistics and last-mile distribution. This comes as China accelerates its so-called vaccine diplomacy.

With New Delhi and Tokyo, Canberra also formed the Supply Chain Resilience Initiative in April. The Australian government’s website says that under this program, up to 2 million Australian dollars ($1.5 million) in funding is available “to establish or scale a manufacturing capability or a related activity to address supply chain vulnerabilities.”

Tehan said there is room for “wide cooperation” on health products, vaccines, critical minerals and rare earths to “enable all countries to benefit.”

Australia itself has struggled to vaccinate its population against COVID-19, however. Only about 10% of Australians are fully inoculated with two doses, putting the country at the back of the Organisation for Economic Cooperation and Development pack. Despite the nation’s early success at containing the virus, the slow progress is raising concerns about the economic outlook, particularly for the battered travel industry.

“We will have as many Australians fully vaccinated as possible by the end of the year, so that should then allow us to open up,” Tehan said, voicing optimism about a broader reopening next year.

Australia earlier this month unveiled a four-phase plan for restarting international travel; currently, arrivals are mostly limited to returning nationals and residents, as well as travellers from New Zealand.

“Our next aim is to expand [travel bubbles] to Singapore, seen as the next priority destination, and then after that we’re very keen to look at what we can do with Japan, South Korea and the Pacific, and with regards to vaccination passports,” he added.

While Australia has pursued a “COVID Zero” suppression strategy, Tehan indicated it may be only a matter of time before the country shifts toward managing the risks, once more of the population is immunised.

“We, like the rest of the world, will need to begin living with the virus,” he said. “I think that that’s something we’re all going to have to come to terms with.”

Author: ERI Sugiura