China to Halt Key Australian Imports in Sweeping Retaliation

(Bloomberg) --

China has ordered traders to stop purchasing at least seven categories of Australian commodities, ratcheting up tensions with a key trading partner in its most sweeping retaliation yet.

Commodities traders in China won’t be able to import products including coal, barley, copper ore and concentrate, sugar, timber, wine and lobster, according to people familiar with the situation. The government has ordered the halt to begin on Friday, one of the people said, asking not to be identified as the information is sensitive.

The notice was verbally relayed to major traders in meetings in recent weeks, one of the people said. Iron ore, Australia’s biggest export to China, won’t be included in the halt, the people said.

The order represents a dramatic deterioration in ties, which have been strained since Australia barred Huawei Technologies Co. from building its 5G network in 2018 on national security grounds. Relations have been in free fall since Prime Minister Scott Morrison’s government in April called for an independent probe into the origins of the coronavirus.

“China seems determined to punish Australia and make it an example to other countries,” said Richard McGregor, a senior fellow at Sydney-based think tank the Lowy Institute. “They want to show there’s a cost for political disagreements.”

China has already barred meat imports from four Australian slaughterhouses, delayed lobster shipments from clearing customs, slapped tariffs of more than 80% on barley, and said it won’t allow timber from Queensland state because of pests. Wine is also under an anti-dumping investigation while Chinese power stations and steel mills have been told to stop using Australian coal. Cotton purchases have also been suspended.

China’s relevant departments conducted inspection and general quarantine measures on certain Australian goods according to laws and regulations, Foreign Ministry spokesman Wang Wenbin told a briefing Tuesday in Beijing. China hopes Australia will do more so that bilateral relations can get back to normal soon, he said.

China’s customs authority and Ministry of Commerce didn’t respond to faxes seeking comment.

At least one customs clearance company started halting shipments across the seven types of products on Tuesday, a person said. China will also ban shipments of Australian wheat from a yet-to-be-disclosed date, according to the South China Morning Post, which earlier reported the impending bans on other Australian commodities.

Australia’s government is working with domestic industry and making enquiries with the Chinese authorities about the reports, according to an emailed statement from Trade Minister Simon Birmingham.

“China has consistently denied any targeting of Australia and spoken about its commitment to trade rules,” the statement said. “In the spirit of their statements, we urge relevant Chinese authorities to address concerns of sectors like the seafood trade to ensure their goods can enter the Chinese market free of disruptions.”

China is Australia’s most important trading partner, with agricultural shipments alone totaling about A$16 billion ($11.3 billion) in 2018-19. With Australia in the midst of its first recession in almost 30 years, the widespread trade measures from Beijing couldn’t come at a worse time for Morrison’s government.

Australia is the world’s most China-dependent developed economy and finalized a comprehensive free-trade agreement with Beijing in 2015, a year after President Xi Jinping made a state visit. But the Huawei ban, and anti-foreign interference laws that Canberra said were designed to reduce Beijing’s “meddling” in its internal affairs, marked the end of such cordial ties.

Australia’s former treasurer Joe Hockey, who helped oversee the trade deal, on Tuesday accused Beijing of bullying and immature behavior.

“The problem is China just doesn’t want to talk,” Hockey, who until January served as Australia’s ambassador to the U.S., said in a Bloomberg Television interview from Washington. “Instead they just want to react aggressively and try to bully us. And bullying never works with Australia.”

McGregor, who said he doesn’t know the veracity or specific details of all the recent trade reprisals, called Morrison’s demand for a coronavirus probe a miscalculation.

“Australia and China were always going to be edging toward separate paths,” he said. “But the call for the inquiry quickly turned the relationship into a very ugly divorce.”

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With assistance from Bloomberg