In June last year, Sydney residents woke up to the unexpected sight of the Chinese Navy at the harbor. For some, it is a worrying sign that the Morrison government may allow Australia to be pulled too far into Beijing’s orbit.
At that time the Prime Minister Scott Morrison said an unannounced warship arrival had been planned for some time and it was a “reciprocal visit” after an Australian naval vessel visited China.
Now, less than 18 months later, things are very different between Canberra and Beijing, with diplomatic and trade relations seemingly deteriorating with each passing day.
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And it’s not just relations between Australia and China that have changed dramatically since the COVID-19 pandemic began in Wuhan, China in January.
India, Japan and the United States have all pressed for increased cooperation with Australia on everything from supply chain security to cementing a potential alliance such as NATO in the Indo-Pacific.
The ongoing transformation of the Indo-Pacific geo-strategic balance is likely to have played a role in further accelerating Canberra’s deterioration in trade relations with Beijing.
To date Beijing has chosen to target a number of Australian exports to China, including but not limited to, barley, wine, wheat and beef.
This trade action undoubtedly damaged the affected industries and businesses, but at the same time when compared to the large volume of Australian exports to China, it is actually relatively small.
However, in recent weeks, there have been worrying signs that Beijing may add a much larger and economically vital industry to its list of targets, our coal exports.
According to a report from shipping news website Splash, in late September, there were more than 20 large bulk carriers with cargo spaces filled with Australian coal waiting to be unloaded at Tangshan Jingtang Port in Northeast China.
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Delays in loading and unloading goods are not uncommon at Chinese ports, either because of the monthly import quotas imposed by the Chinese Communist Party or simply because of logistical challenges due to heavy traffic volume.
But this time was different. Instead of a delay of up to 45 days, a shipment of Australian coal exports was forced to take place last year, in which case most of these ships have been waiting to unload for more than three months.
This problem is not limited to Jingtang port, there are many other ships experiencing the same problem at several other ports in the industrial heart of Northeast China.
In recent days the possible reasons for this delay have become clear, Chinese authorities have reportedly banned imports of Australian coal indefinitely.
Amid the backdrop of the ongoing unilateral trade war between Beijing and Canberra, Australia’s coal import ban will mark the biggest escalation in the conflict so far.
By banning Australian coal imports, Beijing will effectively spend $ 15 billion annually in the Australian economy, just as it is trying to recover from the COVID-19 pandemic.
According to analysts, the ban could be imposed for the long term.
“China is less dependent on Australian coal imports than it is to, say, iron ore, therefore we have little reason to doubt that this oral warning can last indefinitely as an act of potential retaliation for recent political tensions, “Navigate Commodities managing director Atilla said Widnell.
Although there has been no official written notification of the ban, Beijing has already passed word of the ban verbally across China’s shipping industry, possibly to avoid potential complaints by Australia to the World Trade Organization (WTO).
Outside of China, worldwide demand for coal is still not recovering to pre-pandemic levels. As the global economic recovery is progressing more slowly than economists anticipated, it is now also facing further challenges in the form of second and third waves of the virus in much of the world.
Unfortunately for Australia in today’s global economic environment, its influence on the coal trade with Beijing has effectively evaporated.
Global steel production has collapsed, with Japanese steel manufacturing dropping to its lowest level in 52 years and European unions warning 50 percent of European steelmaking capacity could be lost by the time the pandemic ends.
With demand for thermal and metallurgical coal (steelmaking) likely to remain well below pre-pandemic levels for years to come, Beijing has chosen the right time to strike.
With the global economy set to remain weak for years to come, it is very likely that China’s ban on Australian coal exports will be enforced in the future.
While exporting coal may be viewed by some as an insignificant relic of the past, for our economy the reality is a little different. China currently consumes about $ 15 billion worth of Australian coal exports a year.
As the country struggles to recover from the pandemic and the ensuing recession, the potential loss of coal exports to China in the current economic environment could add months or even a year to the length of the country’s economic recovery.
With Beijing pledging to become carbon neutral by 2060 and renewable energy gaining popularity, the decline in coal exports is a reality Australia will have to face sooner or later.
But as the pandemic continues to wreak havoc abroad and at home, many never imagined that China’s thirst for Australian coal could effectively stop overnight.
The Morrison government reserves the right to assert Australia’s sovereignty and freedom from Beijing’s growing influence. However, it should also be acknowledged that this independence has a significant cost.
Ultimately, this is one we as a nation should be willing to pay for, but the frustrated Chinese Communist Party has ensured that Australia can pay the hefty costs of its defiance far faster than many thought.
Tarric Brooker is a freelance journalist and social commentator @Avidator