Australia at risk of 'economic coercion'

Ronald Mizen, Reporter

Jul 16, 2020–5.59pm

Trade wars, the coronavirus pandemic and a global recession have exposed Australia’s
lack
of trade diversity and over-reliance on China, experts say.

Appearing before Parliament’s Foreign Affairs Defence and Trade Committee on

Thursday, USAsia Centre research director Dr Jeffrey Wilson said Australia's trade
relationships while
deep, were too narrow.

(picture)
The Perth USAsia Centre's research director Jeffrey Wilson.

“In situations where there is a significant amount of trade conflict and protectionism, it
puts a country like Australia with narrow ties at exposure to various forms of economic
coercion,"
Dr Wilson said.

He said coronavirus disruption was resulting in a trend towards more protectionism, and
trade conflicts were becoming more common.

Analysis conducted by the USAsia Centre showed the majority of Australia’s export
sectors
relied heavily on a single large market, with the average weighted market share of the
largest
buyer across each sector being about 49 per cent.

Across 13 sectors, the top export market was larger than the next four markets combined;
this was particularly prevalent in sectors exporting to China.
The analysis also showed a significant “geographic bias” in Australia’s merchandise trade,
with 82 per cent of exports going to the Indo-Pacific, including more than a third to China.

“With all our trade eggs in one basket, anything that might go wrong in that basket is
going to have an exaggerated impact at home," Dr Wilson said.

Services trade was more diversified, with 48 per cent of exports going to the Indo-Pacific,
13 per cent to the European Union, and 10 per cent to the US.

Appearing before the same committee and responding to a question from Liberal Senator
and China hawk Concetta Fierravanti-Wells, Export Council research manager Tamara
Oyarce said the approach to growing Australia's export basket was one of "China and" not
"China or".

"We need to be looking at diversifying who we do business with," Ms Oyarce said. But
"the
bottom line is, China is still a relevant trade partner for Australia. It is still our main trade
partner."

Dr Wilson said Australia should seek out like-minded governments that not only claim to
support trade rules, but also act in accordance with them, because too often the process of
seeking enforcement was too complex.

“When you see a turn towards nationalism, protectionism, and in some cases the thinly
disguised use of trade as a political sanctioned weapon, as we’ve seen from the Chinese
government towards Australia in recent months, the rules are one thing, but seeking
enforcement is another."

The committee also heard the government's International Freight Assistance Mechanism
was not supporting the full range of SME exporters.

The government announced in early July that it would continue subsidising air freight
trade
through the mechanism until the end of 2020, taking the total support for exporters to
$350
million since the pandemic hit.

The subsidy scheme was introduced to allow fresh produce to continue to be delivered to
key export markets.

But Export Council chair Dianne Tipping said its scope did not adequately capture all
exports impacted by the coronavirus.

“There are a lot of other exporters who are still doing the hard yards, paying for additional
freight and paying sometimes 40, 50 and at one point even 100 per cent higher in freight
prices,” Ms Tipping said.

“We need to look at all exporters open to having an opportunity to be fair and equal.”