The video investigates the evolving diplomatic and trade relationship between Australia and China, highlighting the significant deterioration over the years despite extensive economic ties. Starting with the politically charged trade restrictions imposed by China on Australian exports, the video delves into how these actions underscore a broader strategic contest between Western nations and China. Australia finds itself reliant on trade with China, especially in resources such as iron ore, while facing political challenges of maintaining autonomy and addressing issues like human rights.

This video is crucial as it underscores the balancing act Australia must perform to sustain both economic benefits and international relations. It explores how previous efforts to separate economic and political discussions have become increasingly difficult, and the impact of diplomatic breakdowns, which have differentiated economic outcomes for various Australian industries. Furthermore, the video contextualizes Australia's stance on human rights and political autonomy against a backdrop of rising Chinese influence in the Indo-Pacific region.

Main takeaways from the video:

Please remember to turn on the CC button to view the subtitles.

Key Vocabularies and Common Phrases:

1. belligerent [bəˈlɪdʒərənt] - (adjective) - Hostile and aggressive. - Synonyms: (hostile, aggressive, combative)

One of China's government sponsored schools describe australian foreign policy as being bizarre, immature, belligerent, juvenile and mindless every time.

2. juvenile [ˈdʒuːvəˌnaɪl] - (adjective) - Immature or childish. - Synonyms: (childish, immature, adolescent)

One of China's government sponsored schools describe australian foreign policy as being bizarre, immature, belligerent, juvenile and mindless every time.

3. coercion [koʊˈɜrʒən] - (noun) - The practice of persuading someone to do something by using force or threats. - Synonyms: (compulsion, force, duress)

But both of those things refer to the same point a process of coercion to try and change Australia's political settings.

4. blueprint [ˈbluːˌprɪnt] - (noun) - A detailed plan or scheme. - Synonyms: (plan, design, scheme)

Australia is really the canary and the coal mine. What happens in Australia in relation to China over the next decade will be a blueprint for how the rest of the world will handle China in coming years.

5. crippling [ˈkrɪpəlɪŋ] - (adjective) - Causing severe damage or harm. - Synonyms: (devastating, damaging, incapacitating)

A series of disputes between the two nations has led China to introduce crippling trade bans on some of Australia's biggest exports.

6. diplomatic row [ˌdɪpləˈmætɪk raʊ] - (noun) - A serious disagreement or dispute between countries. - Synonyms: (conflict, dispute, argument)

This isn't any old diplomatic row. It's about how the west handles a chinese government that not only wants to be a major player in this political game, but wants to decide the rules as well.

7. metallurgical [ˌmɛtəˈlɜrdʒɪkəl] - (adjective) - Relating to the science of metals and their properties. - Synonyms: (metal-processing, metallurgic)

And to make steel, you need two ingredients iron ore for the iron content and metallurgical coal to provide the energy in the blast furnace.

8. vectors [ˈvɛktərz] - (noun) - Agents or bringers of an influence or change. - Synonyms: (carriers, conveyors, transmitters)

People with those kind of connections were really seen as vectors of Chinese Communist Party influence.

9. escalating [ˈɛskəˌleɪtɪŋ] - (verb) - Increasing or rising, typically in an undesirable or intense way. - Synonyms: (rising, mounting, intensifying)

Today, the PM hit back at China's escalating rhetoric after Beijing said Hong Kong protesters were showing signs of.

10. bluster [ˈblʌstər] - (noun) - Aggressive or indignant talk with little effect. - Synonyms: (bravado, rant, swagger)

For all the diplomatic bluster and the trade coercion, Australia and China were still held together deep beneath all the noise and the fury by this tight link of iron ore.

Why Australia And China Can't Quite Get Along

2022 marks 50 years since formal relations began between Australia and China. But it's an anniversary neither side seemed to be celebrating. We start with the significant worsening of relations between China and Australia. Beijing is waging a politically charged trade war down under.

One of China's government sponsored schools describe australian foreign policy as being bizarre, immature, belligerent, juvenile and mindless every time. Now there is a headline with Australia and China relations. We almost know immediately it's going to be bad news. A series of disputes between the two nations has led China to introduce crippling trade bans on some of Australia's biggest exports.

Almost a dozen australian commodities are still subject to official and in many cases, unofficial sanctions by the chinese government, depriving australian exporters access to billions of dollars worth of a market. Because Australia is so closely tied to China economically, it means that China has a lot of trade leverage over Australia that it can use.

If Australia does things that it doesn't approve of, you can use the word sanction or you can use the word trade friction for that. But both of those things refer to the same point a process of coercion to try and change Australia's political settings. This isn't any old diplomatic row. It's about how the west handles a chinese government that not only wants to be a major player in this political game, but wants to decide the rules as well.

Australia is really the canary and the coal mine. What happens in Australia in relation to China over the next decade will be a blueprint for how the rest of the world will handle China in coming years. Much of China's economic miracle since the 1980s has been driven by industrialisation building roads, buildings, machinery and factories, all of which requires steel.

And to make steel, you need two ingredients iron ore for the iron content and metallurgical coal to provide the energy in the blast furnace. Australia is the world's preeminent export supplier of both of those commodities. This was initially the basis for the relationship starting in the 1980s, but really gathered steam during the mid two thousands. As China's heavier stage of industrialisation took off, Australia began to experience what was known as the mining boom.

And the mining boom was a time of enormous wealth in Australia. So billions and billions and billions of dollars of income flowed into the country and Australia became enormously rich and comfortable. And that mining boom was thanks entirely to China. Mineral resources became the foundation of the relationship. But as China's wealth grew, so did its demand for luxury goods.

Wine and rock lobster became popular among China's burgeoning middle and upper classes, which provided australian exporters even more opportunities and cemented trade ties. Two way trade grew from $86 million in the early years of our diplomatic relations to $136.4 billion in 2013, and China has been Australia's biggest trading partner for five consecutive years.

Australia also developed a number of other export industries, which China was in need of as its development level rose. Probably the most famous is international education, where tens, and in some cases hundreds of thousands of chinese students came to australian universities to study degrees. In 2019, the income raised from chinese students studying in Australia was valued at around 12 billion australian dollars.

That same year, 1.4 million chinese tourists spent over $12 billion, contributing to more than one quarter of Australia's entire international tourism spend. But while trade relations have thrived politically, the two nations have kept their distance for most of the last 30 years. The way that that circle has been squared is attempt to keep the two things in separate discussions.

We'll have a discussion about the political, where we'll be able to disagree and have disputes at times, whereas on the economic, we can have a discussion solely about the economic and where those mutual benefits lie. The challenge we've had over the last five years is that kind of firewall between the two sides has become harder and harder to sustain, as many of those political difficulties have become stronger and stronger.

Is he on the side of the agencies that keep us safe? Or is he on the side of a foreign government? In 2017, australian labor senator Sam Dastyari resigned from parliament after allegations that he'd received money from chinese donors affiliated with the Chinese Communist Party. Shortly after, former prime minister Malcolm Turnbull passed foreign interference laws that targeted cases of espionage and required people acting in the interest of overseas powers to register and disclose their ties.

Malcolm Turnbull, at the time, while professing that the legislation was not targeted at China, said that the australian people have now stood up in his introduction for it, which echoed what Mao Zedong said when he started the Chinese People's Republic. Modern China was founded in 1949 with these words. Zhongwarun min zanxi lai. The chinese people have stood up. That was considered very insulting and pretty much laid out exactly who this legislation was designed to target.

A lot of chinese Australians in the community who had connections with China, whether it be through trade, whether it be personal network connections, they felt they were targets of that foreign interference law ten years ago or more. Those connections were really prized. And these people, those who had connections with the mainland, whether through business, personal or political, were really valuable for Australia. China relations, you know, at the end of 2016.

People with those kind of connections were really seen as vectors of Chinese Communist Party influence. The Foreign Interference act came amid mounting concern about China's influence over australian politics. What followed were a number of political disputes that eroded bilateral relations even further.

China's ambassador on the attack renewing criticism of Australia's ban on Huawei, preventing the chinese telco from participating in Australia's 5g rollouts. As I see it, it's basically politically motivated. China says Australia's decision to offer safe haven to Hong Kong residents is a serious violation of international law. Today, the PM hit back at China's escalating rhetoric after Beijing said Hong Kong protesters were showing signs of.

China has rejected suggestions it's behind a large scale cyber attack on Australia. No one was ever arguing that there shouldn't be an independent investigation into the origins of the virus, but it's curious, why did Canberra have to take the lead on this? There's been a number of key points along the bilateral timeline where we can sort of pinpoint that spiraling downward of relationship. And then when Australia called for international investigation into the origins of the coronavirus, that really put China on attention.

We will need an independent inquiry that looks at what has occurred here so we can learn the lessons. Many, I guess, on the China side felt like issues which are difficult to navigate shouldn't be broadcasted by megaphone. They should be addressed quietly behind doors. Now, that inquiry was ultimately supported and conducted by the World Health assembly in that year, but the chinese government was extremely upset about

Australia's going forward and going first in terms of that international call. And the result was a series of trade sanctions applied to nearly a dozen strained commodities over the latter part of 2020. In May 2020, an 80% tariff was put on imports of barley and restrictions were placed on imports of beef, which had brought in nearly $3 billion for australian farmers the year before.

China announced an investigation into australian wine imports, claiming that Australia was dumping excess wine on the market. Eventually, that led to tariffs in excess of 200% being put on australian wine, effectively killing the trade almost entirely. Some of these chinese sanctions have been put on in an official manner, particularly for barley and wine and coal. But in some other agricultural products, they've used grey zone tactics.

So these aren't official bans, but unofficially, these products don't get passed through chinese customs and therefore can't be sold in the country. And it's very hard to be able to get traction on them using international trade law, because you would first have to prove that it's even occurring before these recent tariffs were placed on Australia. China purchased around a third of all exports worth more than 150 billion australian dollars.

Now, with restrictions in place, some industries have fared better than others. Cole provides an illustrative example, as the effect of that sanction was just a musical chairs arrangement. Different people were selling to different people, but not really any overall loss for any players in the market.

An alternate example would be for some of the exporters who don't have alternate viable markets available to them. In most years China would buy over 90% of Australia's rock lobster exports and having that market shut down overnight, there was not really any other deep markets in Asia where you could place that many rock lobsters. Wine suffered a similar fate as did australian timber products, so the effects ranged from mild to negligible to very catastrophic for other small industries as well.

While China is economically critical for Australia, the reverse is less true. Some 70% of Australia's exports are resources for which there are alternative suppliers. However, theres one australian export which can equate to up to 10% of the countrys GDP and it remains critical to China. China keeps buying australian iron ore. When he signed that could change, although quite frankly China needs it. China is the worlds largest buyer of iron ore, not just in Asia, but in the world.

And Australia, for its part, is the worlds largest exporter of iron ore, about 80% of which goes to China. So when you have the world's largest buyer and the world's largest seller in the same region for both sides, there's not really any other alternative. At the height of the trade dispute between Australia and China, there were all these questions about why doesn't China just get its iron ore from somewhere else? And certainly they've tried. They've tried to get iron ore from Brazil, they've tried to get iron ore from Africa, but the deposits in Africa aren't developed enough and the ones in Brazil are famously unreliable.

China couldn't cut off the iron ore trade with Australia and because of that, China's coercive trade measures could not be as effective as they would otherwise be. For all the diplomatic bluster and the trade coercion, Australia and China were still held together deep beneath all the noise and the fury by this tight link of iron ore. While the iron ore sector kept some form of trade ties intact, the diplomatic side of the relationship broke down.

For two years there were no high level discussions between the countries. Australia said it tried to reach out to its ministerial counterparts in China and it just wouldn't get a response, which at some levels is frustrating, for instance, on trade relations, on foreign relations, and in some cases is dangerous when it comes to things like defence and military, especially as Australia was still running operations in the South China Sea and in waters not too far away from China itself.

So, effectively, for two years, Australia and China didn't have diplomatic relations at a high level. And that coincided with the rise of wolf warrior diplomacy in China, which meant that instead of talking, there was a lot of yelling from Beijing directed at Australia. On the other side, however, you then had the Morrison government, who were very much hyping up the threat from China. They were talking a lot about the drums of war beating in Asia and comparing the current times to the late 1930s, before World War two.

That kind of strident rhetoric under the previous government really didn't sit well with their chinese counterparts in Beijing. It didn't give them any sense of space into navigating those delicate and complex international issues. But again, I think China has some blame to bear in the state of bilateral relations. Its issuing of those 14 grievances really puts Australia in a difficult spot. One piece of paper, 14 points, a diplomatic shot from Beijing and Canberra that's been heard around the world.

In November 2020, a list was leaked to the australian media, allegedly from the chinese government, containing 14 grievances that would need to be addressed before a trading relationship could resume. The list included restricting free media and preventing parliamentarians from speaking out against China. The problem with the 14 grievances is that they put Australia and China in a very difficult position because Australia couldn't do any of them, because if it did them, it would be seen as giving up a lot of its democracy and its free speech to appease China.

And China couldn't give up on them because they presented them to Australia in the first place. It ended up being a bit of a hole which neither side could dig themselves out of. The chinese ambassador to Australia has since said the 14 points were misinterpreted. Eventually, the concerns were being reported in a twisted way, as the so called preconditions, as demands. This is natural. That's not true.

Heightened political rhetoric was amplified on both sides. The result was a polarization of public opinion and communities caught in the crossfire. The consequence of that not being specific and not being targeted in talking about, you know, what aspects of China are we talking? Are we talking about the government? Are we talking about the Communist Party?

Chinese Australians got caught in that middle of that change and that reassessment. What happens in that sort of looking top down is you miss the granular and the more complex issues that arise from community and social side of things, and that is discrimination and racism being perpetrated because of the state of bilateral relations. And I think the first and second year of the being Chinese in Australia survey really showed one of that consequences, and that was high rates of discrimination and threats to chinese Australians physical safety.

Since Anthony Albanese Labour party won a national election in May 2022, leaders from both countries have signaled that they want to ease the tensions of recent years. Since Albanese actually came to power, we've seen a far more subtle shift in how his government is handling the relationship with China. They seem to be doing two things at once. So on one hand, they are maintaining that line, they are speaking up on human rights. On the other hand, they are very carefully exploring how they can improve relations with the chinese government.

We've seen the first high level diplomatic contact between Australia and China in years. But mending relations has not been without its challenges. A new security deal signed between the Solomon Islands and China in April 2022 has officials worried that it could pave the way for a chinese naval base in the Pacific. It also raised concerns beyond just the AIPAC region. It was a shockwave to the US and Australia, and it meant that they then rushed back out to the Pacific to try and repair relations that they, I guess, hadn't really known were broken in the first place.

And so now the Pacific has become an incredibly important part of the global strategic contest between the US and I, China. The regional dynamics have shifted. China has indicated its strategic ambitions in the Indo Pacific and that really, you know, complicates a lot of things for the Australia China relations. I would suspect that you can have cordial trade relations but disagree on a lot of other international issues, whether it be security in the Indo Pacific.

But I guess it all comes back to, you know, where can the two countries find common points of agreement and work on those, and can the two countries agree to disagree on various issues? What we've seen recently is the greatest power shift in modern history across the Pacific, from the US to China. We no longer have the comfort of a world that's dominated by the US, with whose value and political system be largely shared.

Australia is often described as being on the front lines of the international debate over how to handle the rise of China. The question is whether or not Australia can have a trade relationship with China again, but a strategic relationship that's far more focused on the US. Can Australia want different things for the region that maybe go against what China wants and still live peacefully, coexist with China. These are the questions that are going to be asked for years to come.

Global, Economics, Politics, Australia-China Relations, Trade Disputes, Diplomacy, Bloomberg Originals