All a question of diplomacy

All a question of diplomacy

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PUNISHMENT: The meat processing plant suspensions seem notable for disproportionate sanction over what appears to be minor administrative shortcomings.

PUNISHMENT: The meat processing plant suspensions seem notable for disproportionate sanction over what appears to be minor administrative shortcomings.

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There are strong suspicions that China's meat plant suspensions were simply retaliation, writes Ken Wilcock.

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AFTER China's imposition of a crippling 80 per cent tariff on Australian barley and suspension of imports from four major Australian meat processing plants, there has been open but inconclusive conjecture over the real reasons behind the moves.

With barley, the tariff is supposedly a retaliatory response by China over claims of dumping on Australia's part while the beef issue is a revisitation of documentation/labelling inconsistencies that have occurred in the past.

Analysts and commentators have placed a lot of store on the timing of statements by the respective countries to draw certain inferences.

For example, in its May 14 edition, the South China Morning Post highlighted China's announcement on its customs website that it would immediately allow imports of barley from the United States, just days after it had announced plans to impose the tariff on Australian barley.

The newspaper quoted two industry analysts who saw little or no connection between the two statements with the import of barley from the US being essentially due to the US-China Phase One Economic and Trade Agreement.

However a third analyst from the London-based Economist Intelligence Unit was very much of the view that the statements were connected.

The paper emphasised his opinion that China needs to divert much of its previously agreed agricultural orders from other countries, including Australia, to the US, per agreement under the phase one trade deal.

It seems plausible enough that Australia could be collateral damage as a result of the phase one deal and also plausible that Foreign Minister Marise Payne's call for an independent coronavirus inquiry might be implicated.

But the truth of the matter is that China targeted barley in its first ever anti-dumping investigation against Australia back in November 2018.

That process just happened to conclude a couple of weeks ago, giving China the trigger to invoke tariff action if it chose to do so.

But China was never originally concerned about the dumping of Australian products or with barley per se.

Australia's call for a coronavirus investigation just four days after US President Donald Trump's similar demand was not smart. - Former diplomat John McCarthy

What it was concerned with was Australia's use of anti-dumping against China.

At the time of initiating the barley investigation, China had 18 anti-dumping actions directed at it by Australia targeted mainly at its steel industry.

China was retaliating and in that game you choose a product that will hurt your target but not yourself.

In that regard Australia depends on China for about 70pc of its barley exports while China can readily replace Australian barley with supplies from Canada, US and Europe.

The question this raises is whether China would have chosen to invoke the tariff on barley had Australia remained silent on the coronavirus issue.

Hard to know but the imperative of meeting its phase one deal commitments on top of the original retaliatory motive would seem to add weight to the affirmative.

The meat plant suspensions, on the other hand, seem free of any similar background trade action.

Rather they seem notable for disproportionate sanction over what appears to be minor administrative shortcomings.

This raises suspicion in some people's minds that China is using minor technicalities to retaliate against what it sees as offensive political positioning or outspokenness.

Alternatively it has been suggested that it could be another example of China taking trade away from Australia to allow greater imports from the US under the phase one deal but this would seem implausible.

China has placed restraint on a few players in the Australian beef export community, not on beef itself as a commodity. There are plenty of other Australian processors to continue the trade with China.

That leaves open the question of whether China would have taken action against the four plants on the non-compliance matters if Australia had remained silent or chosen its words more carefully on the coronavirus issue.

That theme was taken up in another SCMP article published on May 19 headlining the fact that New Zealand meat processors had escaped sanction for similar non-compliance issues involving substantially larger volumes of beef.

According to the article, the Australian compliance problems occurred between March 2019 and February 2020 and relate to 6000kg of beef sent mainly to Shanghai.

In contrast, similar transgressions were recorded against two NZ meat processors (with the highest volumes of beef exports and frequency of transactions to China in 2019) for over 37,000kg of beef but were not subject to suspension.

The article focused heavily on the point that NZ makes no apologies for its super-cautious approach to diplomacy in its dealings with China.

NZ Asia-Pacific Economic Cooperation Business Advisory Council chief executive Stephen Jacobi was quoted saying NZ never uses a fist, rather it matches its diplomacy to its size and influence and that approach has served NZ extremely well over the years.

Prime Minister Jacinda Ardern was also quoted as saying that while NZ supported the independent inquiry into the origins of coronavirus, it was not interested in joining a witch hunt targeted at China.

This brings the focus back to Australia and where it is at with its foreign policy settings.

One very well credentialed former diplomat believes they are not where they ought to be.

In the latest edition of former sister publication AFR Weekend, John McCarthy, a former ambassador to the US, Japan, Indonesia, Thailand, Vietnam and Mexico explains.

He argues that Australia's call for a coronavirus investigation just four days after US President Donald Trump's similar demand was not smart.

With Trump being seen as something less than a paragon of virtue and his actions driven purely by domestic political considerations, McCarthy said the immediate reaction from his Asian friends was why is Australia following Trump on this if it is looking for international recognition and respect?

Instead of playing to the home crowd, what Australia should be doing is working quietly with other nations to present a united, cogent front against China's excesses.

Australia's relationship with China will never be a comfortable one, it will always have to be carefully managed, he said.

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