China and Australia Seek an End to Bilateral Trade Rows

Australia and China have moved to patch up their differences, which spurred a ‘shadow trade war’ over the past few years that now looks to be ending.

Australian Prime Minister Anthony Albanese flew to China on Saturday for meetings with its leaders to mark the 50th anniversary of diplomatic ties.

Chinese President Xi Jinping said on Monday that a “healthy and stable” relationship with Australia served each country’s interests, and that it was important to move forward with strategic ties.

Mutual benefit is what China wants, Xi told Albanese, the first Australian leader to visit Beijing since 2016, as both men met at the Great Hall of the People in the heart of the Chinese capital.

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A strong relationship between China and Australia “will be beneficial into the future,” Albanese told Xi in their second face-to-face talks in a year.

On his visit, Albanese is seeking to mend relations between the trading partners after disputes in recent years – over issues ranging from security concerns to the origin of Covid-19 – triggered Chinese blocks on Australian products including wine, barley and beef.

Earlier on Monday, Albanese stopped by Beijing’s Temple of Heaven, following in the footsteps of the first Australian leader to visit China five decades ago as diplomatic relations were being established.

At the historic landmark, Albanese posed for a photograph at the circular Echo Wall, the spot where Australia’s then prime minister, Gough Whitlam, stood in 1973, a year after the two countries established ties.

“In China we often say that when drinking water, we should not forget those who dug the well,” Xi said. “The Chinese people will not forget Prime Minister Whitlam for digging the well for us.”

For decades, China and Australia built a relationship on trade, with Beijing becoming Canberra’s biggest commercial partner with purchases of Australian food and natural resources.

But ties soured after Australia in 2017 accused China of meddling in its politics. The following year, Australia banned equipment from Chinese tech giant Huawei Technologies for its 5G network out of national security fears.

An Australian call in 2020 for an international inquiry into the origin of the Covid pandemic, which emerged in the Chinese city of Wuhan in late 2019, infuriated Beijing, which responded with blocks on various Australian imports.

As relations deteriorated, China warned its students against studying in Australia, citing racist incidents, threatening a multi-billion-dollar education market.

Stabilizing relations

But Albanese took steps to stabilise relations after he became prime minister in May last year and met Xi on the sidelines of a G20 summit in Indonesia in November.

China soon began lowering trade barriers, allowing imports of coal in January and ending tariffs on barley in August. Last month, Beijing agreed to review dumping tariffs of 218% on Australian wine.

“I think there are promising signs,” Albanese told reporters earlier on Monday.

“We’ve already seen a number of the impediments to trade between our two nations removed and an uplift already, substantial uplift, in the trade between our two nations in issues like barley already restarting.”

China’s January-September imports from Australia increased 8% from a year earlier to $116.9 billion, Chinese customs data show. In 2022, imports plunged 12.7% to $142.1 billion.

But obstacles remain with Beijing’s projection of power among Pacific island nations alarming Australia, while its security alliance with the United States and Britain in the Indo-Pacific has stoked China’s worries about containment.

Australian backing of a UN ruling rejecting China’s territorial claims in the South China Sea has also angered Beijing, which has told Canberra the issue is not its concern.

Australia says the South China Sea is an important passageway for its trade with Japan and South Korea.

“What I’ve said is that we need to cooperate with China where we can, disagree where we must and engage in our national interest,” Albanese said.