China-Australia relations: US exports ease the pain of China trade reduction, but not enough
- Australia is seeing growth in its exports to the US, totalling US$1 billion a month, but that is not enough to offset the drop of trade with China
- Yellow Tail wine sends half of its global trade to the US, other US imports from Australia include beef, grain, metals and medical instruments
Ralph Jennings in San Francisco
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Published: 4:30am, 9 Apr, 2022
Updated: 9:18am, 9 Apr, 2022
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China and Australia’s political tensions have resulted in increased Australian exports to the US, but not enough to cover the loss of trade with China. Photo: David Gray/Bloomberg
Growth in exports to the United States has eased the pain of Australia’s drop in trade with China – the fallout from years of political disputes – but comes up far short of backfilling it.
Since 2020, Chinese traders have stopped importing Australian coal, sugar, barley, lobsters, wine, copper and timber because of political tensions between the two countries.
That followed Australian foreign minister Marise Payne’s call for a global inquiry into the origins of the coronavirus pandemic and China’s handling of the initial outbreak.
Last year, China was angry again after Australia, the UK and the US signed Aukus, a deal to share military technology including the possibility of nuclear-powered submarines.
The Australian government’s international trade promotion department Austrade calls the US “one of Australia’s most important trade and investment partners”.
“Unquestionably, trade increased with the US, especially in products such as coal and wine, which had previously been more biased towards China, as a result of the decline in trade ties between Australia and China,” said Stuart Orr, head of the School of Business at Melbourne Institute of Technology.
Australia exported US$1.13 billion worth of goods to the United States in January, up from US$945.7 million in January 2021, US$927.3 million during the same month of 2020 and US$881.3 million a year before that, US Census Bureau data showed.
Exports totalled just over US$1 billion in February, up US$29 million from the same month in 2021.
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Annual totals have risen steadily over the past 30 years to a peak of US$14.4 billion in 2020 and US$12.5 billion last year.Chinese-Australian relations brightened when former Australian Prime Minister Kevin Rudd, a Mandarin speaker, took office in 2007.
But two years later, Chinese aluminium corporation Chinalco failed to acquire Australian-based mining giant Rio Tinto. The relationship cooled further when Australia allowed Rebiya Kadeer, leader of the World Uygur Congress, to visit in 2009.
“Underlying the increase in exports to the US, I think, is increased Australian government support for trade with the US as a result of the strengthening political ties between Australia and the US at present,” Orr said.
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The Department of Foreign Affairs and Trade in Canberra said other countries were offsetting the Chinese market. “Australian exports of goods impacted by China’s trade actions have had success in a range of alternative markets,” it said in a statement.Yellow Tail winery counts itself as a beneficiary of US trade. The Australian brand entered the US market in 2001 expecting to sell 25,000 cases of wine that year.
It actually sold half a million cases, and four times that in 2022, said Frankie Harding, corporate affairs manager for the wine’s creator Casella Family Brands.
Sales were stable up to the pandemic and then surged again, Harding said. The US market made up slightly more than 50 per cent of the brand’s global sales volume as of February and Yellow Tail accounted for about half the Australian wine segment in value sales as of March.
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“The wine style suits the palate of many American consumers as they are crafted to express vibrant fruit flavours on the palate, making them approachable and suitable for any occasion with family and friends,” Harding said.Other major US-bound Australian exports include beef, grains, metals and medical instruments. Food products were the top broad category last year, worth US$2.6 billion in 2021. Machinery and transport equipment followed, valued at US$2.2 billion.
Australia’s merchandise export values worldwide including the US have risen briskly since 2020, pacing rises in the prices of commodities on which the nation depends for overseas income, Fitch Ratings found.
But the swing toward the US market has not come close to making up for the loss of trade with China, analysts said.
Australia hasn’t been fully able to make up the lost sales [to China] and it will take a long time Jayant Menon, ISEAS-Yusof Ishak Institute
Australian trade with the world’s biggest consumer market is also rebounding. The US was Australia’s fifth largest export destination last year, while China was first.
Australian goods exported to China increased 21 per cent to US$133 billion last year. Shipments to the US made up a “small share” of Australia’s total exports at about 3.5 per cent in 2021, said Maxime Darmet, a director for enhanced analytics with Fitch Ratings. China’s share was about 40 per cent, Darmet said.
“Australia hasn’t been fully able to make up the lost sales [to China] and it will take a long time,” said Jayant Menon, visiting senior fellow with the ISEAS-Yusof Ishak Institute’s Regional Economic Studies Programme in Singapore.
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In Alameda, a typical upmarket city near San Francisco, one or two Australian wines sell in the mainstream supermarkets, but shopkeepers said they are not actively looking for more brands. Most wines on the city’s shelves come from vintners in California, which includes several world-renowned winemaking regions.Australian exporters will probably turn increasingly to Asian markets excluding China as “protectionist” US leaders push for more “self-sufficiency” and the reshoring of supply chains, Menon said.
Australia’s coal exports have found “some success” already in India, South Korea and Japan, said Katrina Ell, senior economist with Moody’s Analytics in Australia.
But high-end wines have not come up with an alternative to China, she said.
Ell said the US falls short of an “important alternative market for Australian goods” against friction with China.
‘Not enough’: Australia’s US exports can’t cover trade loss with China
With Australia’s reduced trade with China, exports to the US have increased, but the US$1billion a month of trade isn’t enough to offset the loss.
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It seemed the trade war has not gone well for Australia despite some posters on this forum claimed last year.
