Australia cannot win its trade war with China. The only question is how much it will lose, and what that might mean for New Zealand.

In case anyone in New Zealand has missed it, Australia is now under sustained attack from China.

That attack takes two forms – trade sanctions and rhetorical threats.

The trade sanctions kicked off in May when China accused Australia of dumping barley on the Chinese market and imposed an 80 percent tariff. Since then, China, alleging various problems, has restricted imports from Australia of beef, lobster, and timber. There have also been reports of Chinese customs officials telling importers not to buy Australian sugar and copper.

More than 80 ships carrying Australian coal worth more than a billion dollars are now lying off Chinese ports, held up by purported concerns about “environmental standards”. In the latest development, China claims Australia has been dumping wine and is imposing tariffs of 107 percent to 200 percent on Australian wine imports. That will effectively close a $1.2 billion market for Australian wine producers.

One sanction is chance, two is coincidence, three is an orchestrated campaign.

China has at least pretended there is some legitimate basis for its various trade sanctions. There has been no such pretence with the threats. They have been overt and unequivocal.

In April, the editor of the Global Times, the Chinese government’s English language forum, said: “Australia is always there, making trouble. It is a bit like chewing gum stuck on the sole of China’s shoes. Sometimes you have to find a stone to rub it off.” An editorial in the Global Times in June warned that “Australia will pay an unbearable price” if it hews too closely to US foreign policy.

Last month a Chinese government official said in a briefing with an Australian reporter – “China is angry. If you make China the enemy, China will be the enemy.”

Australia is being used as an example to show other countries that there is a high price to be paid for disrespecting China.

This week the Chinese foreign affairs spokesman Zhao Lijian shared a tweet showing a fake image of an Australian soldier slitting the throat of an Afghan child. Australian PM Scott Morrison called for China to apologise. On Tuesday China responded via an excoriating editorial in the Global Times entitled “China’s goodwill futile with evil Australia”.

How has it come this?

Relations have been sliding for several years. In 2018, Australia passed legislation aimed at preventing foreign interference in the country’s domestic affairs. This was interpreted by many as aimed at China. The same year Australia banned the Chinese company Huawei from participating in its 5G market. There have been incidents involving raids on Chinese journalists in Australia and the blocking of Chinese investment. 

Along with many other countries, Australia has also been a vocal critic of China’s treatment of the Uighurs in Xinjiang, its suppression of democracy in Hong Kong, and its military activities in the South China Sea.

The tipping point came in April when the Australian Prime Minister took the international lead in calling for a thorough investigation into the source of the coronavirus. He went so far as to propose the use of independent investigators with powers similar to “weapons inspectors”. This incensed China. From a diplomatic perspective at least, it was a catastrophic blunder on Morrison’s part. Since then, the deterioration of the China/Australia relationship has been swift. 

What can Australia do now? Not much.

Without strong alliances, the moral high ground can be a lonely and dangerous place. 

In the 2019-2020 period, 39 percent of Australia’s exported goods (more than $150 billion) went to China but just 1.9 percent of China’s goods came to Australia. Approximately 12 percent of tourists to Australia came from China but Australians made up only 1 percent of China’s tourists. There were 260,000 Chinese student enrolments in Australia in 2019; just a handful of students went in the other direction.   

This is a trade war Australia cannot win. The only question is how much it will lose.  

Of course, the purpose of China’s attack is not just to send a message to Australia. There are two other intended audiences – the Chinese people and other governments around the world.

China is the coming superpower. It sees itself as exercising its natural role as the ‘Middle Kingdom’. This is just the latest stage in a long restoration following the Century of Humiliation from the mid-1800s to the mid-1900s when China was subjugated by the western powers and Japan.

This restoration is vital to the Chinese Communist Party’s retention of control. For many years, political scientists have predicted that as the Chinese people become richer, the CCP will struggle to suppress the demand for democracy. The CCP has succeeded to date by delivering a dramatic rise in living standards. As the rate of rise inevitably slows, the CCP is now using nationalism to maintain unity and subdue political discontent. Retaliating against Australia must be seen in that wider context.

By punishing Australia, China is also warning other governments around the world not to meddle in its affairs; not to challenge its sovereignty. Australia is being used as an example to show other countries that there is a high price to be paid for disrespecting China.

This is ‘realpolitik’ in action. As the Greek historian Thucydides explained more than two thousand years ago, ‘the strong do what they can, the weak suffer what they must’.

What does all this mean for New Zealand?

It would be surprising if some kiwi opportunists were not salivating at the prospect of an economic upside for NZ in Australia’s misfortune. Indeed, in the short-term NZ could see increased demand for many of its products, particularly timber, wool, beef, and wine. There could also be a significant boost for the education and tourism sectors.

But there is a warning here for the land of the long white cloud. China is New Zealand’s largest trading partner and in 2019 it imported kiwi goods and services worth more than NZ$20 billion. As Australia is learning, that level of reliance carries substantial risk.

If there is ever a dispute between Middle Earth and the Middle Kingdom, there will only be one winner.

New Zealand had a taste of China’s displeasure recently when a senior spokesman cautioned the members of the Five Eyes intelligence partnership (of which NZ is a member) that “if they dare to harm China’s sovereignty, security and development interests, they should beware of their eyes being poked and blinded”.

Beijing’s growing ‘wolf warrior diplomacy’ means that the potential for disputes is rising. As China becomes more assertive on the world stage, it may be less tolerant of any perceived disrespect from its trading ‘partners’. It may apply more pressure to prevent criticism of, or interference in, its actions at home and abroad. What will New Zealand do when it is faced with a serious conflict between its liberal democratic values and its economic interests?

Much of China’s antipathy to Australia is driven by the close ties – military, economic, and cultural – between Australia and the US. However, that relationship also provides significant comfort to Australia. Unsurprisingly, recent events indicate that it is becoming increasingly difficult for Australia to maintain a happy balance between its largest trading partner and its greatest ally.   

That raises a major question for New Zealand. As a new Cold War emerges between China and America, what does the future hold for the NZ/US relationship?

Without strong alliances, the moral high ground can be a lonely and dangerous place. 

Ross Stitt is a freelance writer based in Sydney with a PhD in political science.

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