Karma for the Beijing Leadership

Three years ago, Beijing’s leadership decided to teach Australia a lesson—now it has come back to bite them.
Karma for the Beijing Leadership
People taste red wine from Australia at the Food and Agricultural Products exhibition in Shanghai on Nov. 5, 2020. (STR/AFP via Getty Images)
Milton Ezrati

Karma often tastes bitter in the mouth of the recipient but always warms the onlooker’s heart. It’s the stuff of countless short stories, movies, and television plots. A selfish person—a bully, a thief, a brute—takes unfair advantage of another only to discover at some later date when he or she needs help that people remember and repay past bad behavior in kind and in full.

While this karma-inflected plot works well in melodrama, it, alas, seldom occurs in international relations. That’s why the recent news on Sino–Australian relations is so gratifying.

The story begins in the decade leading up to the great pandemic of 2020. During that time, trade relations between China and Australia became ever closer. It was a natural trading relationship. Australia had powerful agriculture and mining sectors, and China needed what Australia had to offer. Australian coal and iron ore went to China’s booming steel industry. Australian cotton fed China’s burgeoning textile industry. Australian wine graced the tables of China’s ever-richer household sector. In return, Australians bought the products of Chinese manufacturing, from toys to smartphones to computer assemblies.

By 2020, the relationship had grown tremendously important to Australia. China took almost half of all Australian exports. It was fair to describe the Australian economy as dependent on China sales.

The relationship suddenly fell apart in 2020 when Australia’s then-Prime Minister Scott Morrison called for an international investigation of the origins of COVID-19. China’s leadership took umbrage at the prime minister’s proposal. Whether offended by the suggestion or threatened by it, the crowd in Beijing decided to force Canberra to back down. Following the usual command-and-control approach Beijing uses to order its economy and govern its people, orders came down to put Canberra in its place by imposing onerous tariffs of between 100 and 200 percent or more on Australian imports. Australian businesses suddenly found themselves in a tough spot—they had to find new markets quickly.

Whether involved in agriculture, iron ore, or vinting wine, the recovery for Australian business was painful and expensive. In the words of Lee McLean, CEO of Australian Grape and Wine, the industry’s national association, people were “knocking on doors, wearing out the soles of their shoes” to build new markets and relationships.

In the months following Beijing’s high-handed action, Australian businesses suffered losses but eventually found alternatives to Chinese buyers. Australian coal and iron ore went to India’s growing steel industry. Australian cotton supplied Vietnam’s impressive clothing and textile effort. Grain producers sent their products further afield and even found lucrative contracts in Saudi Arabia. Vintners found substitutes in North America and Japan so effectively that at last count, wine shipments to China had fallen to $5 million in the past year, well down from the $770 million high in 2020.

But now, China’s economy is no longer as powerful or prominent as Beijing thought it was three years ago when it set out to punish Australia. With declining Chinese exports to North America, Europe, and Japan, the nation’s leadership has become positively eager to cultivate new trade relationships and rejuvenate old ones.

Accordingly, in preparation for a visit from Australian Prime Minister Anthony Albanese, Beijing is talking about easing the tariffs it had imposed in 2020. Mr. Albanese is delighted, but to the chagrin of all the government men and women involved, Australian business will have none of it. Its managers remember the tough times when China first cut them off. They have little desire to queer their new trade relationships and return to a country that so readily resorted to coercion.

No doubt, trade between Australia and China will grow, especially if Beijing follows through and eases the tariffs it imposed three years ago. China is a rich market, and even the bitterest of Australian businesspeople will have a hard time resisting the lure of that much money. But unless all of Australia’s managers suffer severe memory loss, they will take a long time to return to China and likely never reach the relative dependence of 2020.

This isn’t the first time that high-handed bullying by Beijing has redounded to China’s detriment. By pushing the Philippines out of areas of the South China Sea, Beijing ensured that a reluctant government in Manila cooperated more with the United States on security than it otherwise would have.

No doubt, the Chinese tariffs of 2020 helped persuade Australia to cooperate more on defense with the United States and the UK. Beijing’s reluctance to compromise on trade conditions turned American and European governments from largely sympathetic onlookers into what now can only be described as hostile players where China is concerned. One would think after all this that Xi and his colleagues in Zhongnanhai would rethink their approach, but they seem unable to help themselves.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY), and chief economist for Vested, a New York-based communications firm. Before joining Vested, he served as chief market strategist and economist for Lord, Abbett & Co. He also writes frequently for City Journal and blogs regularly for Forbes. His latest book is "Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live."