Demystifying Australia – China Trade Tensions

Abstract

In 2020 Australia’s political relations with China plumbed new depths. Trade and other economic ties were also hit with disruption. Contributing to this deterioration, and complicating an accurate assessment of the consequences, has been a raft of misunderstandings. This paper demystifies the bilateral trade tensions by exposing the deeper drivers of political friction, providing a critical assessment of the vulnerability of the Australian economy, and placing the current state of Australia’s relations with China in a comparative regional perspective. These discussions set an important context for a detailed and critical analysis of the legal issues that Chinese trade measures have created under the rules of the World Trade Organization and the China – Australia Free Trade Agreement. We show that these legal issues have been over-simplified or even misunderstood in existing work. Overall, we believe that combined with political leadership, a clear understanding of these issues offers the best prospect for an improved relationship trajectory, serving both countries’ interests.