(Bloomberg) — China’s trade restrictions on Australian wine, lobsters and other commodities could be the next to ease amid a warming of diplomatic ties and expectations that Beijing will soon resume imports of coal.
(Bloomberg) — China’s trade restrictions on Australian wine, lobsters and other commodities could be the next to ease amid a warming of diplomatic ties and expectations that Beijing will soon resume imports of coal.
Curbs on commodity imports will probably be eased gradually and in an unofficial manner, said Hans Hendrischke, professor of Chinese Business and Management at the University of Sydney. While there’s some confidence that restrictions will be lifted, there’s currently no indication of timing, he said.
“Nobody could tell you whether it will start with barley, wine producers or lobsters for Chinese New Year,” Hendrischke said.
China, which accounts for about 40% of Australian exports, has imposed a raft of trade measures since 2020, blocking billions of dollars of trade after placing curbs on everything from beef, barley and coal to lobsters, wine and timber.
The restrictions have been largely brushed off by investors. Since China started imposing curbs in mid 2020, the share price of Graincorp Ltd., one of the country’s largest grain exporters, has surged more than 60%. Meanwhile, Treasury Wine Estates Ltd.’s stock has risen by a third. United Malt Group Ltd., however, which exports ingredients used to make craft beer, has struggled to climb.
The trade barriers appear to be easing as relations improve.
Australian Foreign Minister Penny Wong visited Beijing last month to celebrate 50 years of bilateral diplomatic ties. Chinese officials are now discussing plans to allow four major importers to resume purchases of Australian coal as early as April 1, Bloomberg reported this week.
Economists at Goldman Sachs Group Inc. expect any easing to have modest implications for Australia’s economy, with the country’s two-way trade balance with China jumping to a record high in 2022 thanks to surging prices of key export iron ore.
“An easing in trade restrictions would be positive news for the Australian economy directionally and meaningfully positive news for some hard-hit sectors” such as agriculture, economists led by Andrew Boak wrote in a research note Friday. “But we assess the near-term macro impact of such changes to be small.”
What Bloomberg Economics Says…
“The boost to Australia’s economy from improving ties is unlikely to be noticeable at the macro level. The ongoing recovery in Australians holidaying overseas will offset the boost from education exports returning to pre-pandemic levels”
James McIntyre, Economist
While China never officially acknowledged the curbs on lobsters, a recent social media post from customs stoked expectations that the crustacean would once again be welcome. In a report on the benefits of the Regional Comprehensive Economic Partnership, customs listed a range of Australian products that it said were attractive for consumers to purchase, including rock lobsters.
The wine industry will be very cautious before entering what was once its most lucrative export market, said Lee McLean, chief of industry association Australian Grape & Wine. In the two years that China imposed tariffs of about 200% on Australian wine, producers sought alternative markets, including the US and UK.
“Market diversification needs to continue,” said McLean. “We don’t want to get into a situation where we are too reliant on one market.”
A spokesperson for Seafood Industry Australia said the group welcomes the positive sentiment from Beijing and Canberra, but declined to comment on prospects for lobster exports to China.
Even if all the commodity curbs are lifted, trade flows will probably remain subdued, said Deborah Elms, executive director at the Asian Trade Centre in Singapore. “It’s not the government that trades, it’s individual firms. For companies, switching markets is not easy, fast or cost-free.”
–With assistance from Sybilla Gross, Swati Pandey and Chris Bourke.
(Adds economist comments from 8th paragraph)
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