China Trade War Turns to Cotton

16 Oct 2020
China Trade War Turns to Cotton
China’s strategy of threatening Australia with trade sanctions is no longer working, based on government and industry response to a recent threat against the cotton industry, according to one of Australia’s leading trade experts, and Research Director at the Perth USAsia Centre, Dr Jeffrey Wilson.
“In response to yet another round of Chinese trade sanctions, government and industry have clearly indicated they do not intend to respond to these pressures. Instead, they intend to diversify to new markets, such as Indonesia and Vietnam”. Dr Wilson said.
“There is no doubt that Australia would prefer a fair trading relationship with China, based on international trade rules the Chinese government claims to uphold. However, this appears to be drifting further and further out of reach.  It leaves Australia with no choice but to diversify, reducing our over-reliance on politically-risky markets, and building on the positive trade relationships we already have in place,” Dr Wilson said.
The comments come following reports that mills in China are being told to cease buying Australian cotton, with speculation that tariffs imposed by China could increase to as high as 40 per cent, making trade between Australia and China unviable.
Currently, China represents 71% of the exports coming out of the Australian cotton industry.  However, recently Australia and Indonesia has signed and enforced the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which applies no tariff to the export of cotton.  
“Indonesia is our nearest neighbour, and IA-CEPA has strengthened our connection with the country, making the way for increased trade across many industries, including agriculture. Indonesia represents a very real alternative to China when it comes to bolstering our cotton and other agricultural industries,” Dr Wilson said.
Vietnam also potentially holds the key to diversification for the industry, with Australia currently exporting to the market, with potential to increase the current value of just over $80 million to a more substantial chunk of the trade pie.
Trade Minister Simon Birmingham has said in recent report that impeding the ability of producers to compete on a level playing field could constitute a potential breach of China's international undertakings and would be taken seriously by Australia.
Dr Wilson co-authored an analysis report Political risks for the Australia-China agriculture trade, exploring the agricultural industry and the Australia-China trade relationship. The report, published in August this year, identified cotton exports to China as facing significant political risks.
Perth USAsia Centre is a foreign policy think-tank based at The University of Western Australia, established to strengthen relationships between Australia and the Indo-Pacific.

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