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Chinese sanctions having 'limited' impact, think-tank claims

The impact of myriad Chinese trade sanctions on Australian goods in the past year has been "quite limited", with most exporters managing to find other markets, according to a new report.

China has targeted Australian beef, barley, coal, copper, cotton, seafood, sugar, timber and wine.

Before the sanctions, these exports were worth about $25 billion in 2019, or 1.3 per cent of gross domestic product.

As of end-January, the value of these exports to China had dropped to about $5 billion a year, the analysis by Lowy Institute chief economist Roland Rajah shows.

But most exporters - barring wine and beef producers - appear to have managed to shift their goods to markets other than China.

Mr Rajah explained:

"Looking at exports of barley, copper, cotton, seafood and timber, sales of these products to other markets rose sharply, but only after China's sanctions intensified in late 2020 - with the stark shift signalling this was indeed mostly a result of trade diversion."
"However, Australia's wine industry has struggled to make up for the loss of the premium China market.
"Total beef exports are also down, though this is more a reflection of supply-side issues after years of drought."

On the FlowFM Morning Show, host Rikki Lambert analysed the data more closely, saying there might not be as good a picture for farmers as the report suggests. The full segment can be viewed in the FlowNews24 podcast player at the end of this article.

The effect of China's trade sanctions on Australia's exports "has been completely swamped by the booming iron ore trade - which China hasn't been game enough to touch".

"Hence, the total economic impact of China's trade coercion against Australia seems to have been quite limited thus far," Mr Rajah said.

Mr Rajah argues while China had targeted products for which it had alternative suppliers, there were also alternative buyers for Australian goods.

"And this shuffling of global trade is precisely the reason the damage inflicted on Australia has been limited," he said.

The research published on Thursday comes after the federal government urged exporters to look for new Asian markets to combat the economic fal lout of coronavirus and strained relations with China .

Trade Minister Dan Tehan on Wednesday released the final report of the Asia Taskforce - a joint project between the Asia Society and Business Council of Australia.

It provides a blueprint for Australia to compete more successfully in the region.

Mr Tehan said business and government needed to work together in order to keep trade with Asia moving:

"The Asia Taskforce does more than make the argument that businesses should expand into diverse markets across Asia.
"It advocates a 'Team Australia' approach and identifies practical, specific actions that business and governments can take to strengthen the presence of Australia, and our businesses, in Asia."

The report proposes focusing on markets and sectors where Australia has competitive advantages, such as healthcare in Indonesia and financial services in Japan, as well as India, Vietnam and Korea.

However, also it found diversification does not replace the need to adjust to Australia's complex relationship with China.

Business Council chief Jennifer Westacott said the rise of Asian economies and their growing middle classes presented strong opportunities for Australian companies:

"But only if we grasp the opportunity.
"If we succeed, Australians will have the best standards of living in the world but if we fail, we run the risk of becoming a second-order economy in a thriving region."

-- with AAP


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