CQ economist explains implications of China’s beef dispute

CHINA'S decision to suspend beef imports from four Australian abattoirs could be politically motivated, not trade motivated according to a CQ economist.

Australia's beef trade has boomed in recent years, based largely on Chinese demand which last year was worth $2.87 billion, double the value of imports in 2018, with China accounting for 24 per cent of total Australian beef exports according to Meat and Livestock Australia figures.

HIGHLY PRIZED: Cattle sales at the Gracemere’s RLX yards could be impacted if a trade war escalates between China and Australia.
HIGHLY PRIZED: Cattle sales at the Gracemere’s RLX yards could be impacted if a trade war escalates between China and Australia.

But Australia's delicate relationship with its largest trading partner was tested after leaders called for China to participate in an inquiry into the origins of the COVID-19 pandemic.

China was angered and Australian beef and barley was consequently hit by bans and tariffs in recent days, stoking fears the two countries could be on the brink of a trade war.

CQUniversity Resource Economist Professor John Rolfe believed it was "convenient" for China to take issue with Australian trading practices "at a time when the relationship wasn't as strong to make a fuss about them".

"Normally Australia is good at separating out our foreign affairs issues from trade," Prof Rolfe said.

"Even though we've had disputes with China in the past, normally they don't flow over into trade issues but this is a flow over. It's happened before. Last year there was a slow down of coal imports into China that appeared to be a reaction to some of the diplomacy issues at the time.

"China never comes out and says 'we're retaliating because we don't agree with you' - they come out with some small reason for it, but the fact that it is focused on Australia each time suggests that it's definitely a diplomacy issue rather than a quality issue."

Chinese customs and border authorities are some of the strictest in the world operating with zero tolerance for breaches on labelling and documentation, a highly manual process prone to errors.

CQUniversity Professor John Rolfe is convinced that China needs Australia’s beef.
CQUniversity Professor John Rolfe is convinced that China needs Australia’s beef.

If there was substance behind China's allegations against Australia of highly technical labelling and certification breaches recorded last year, Mr Rolfe said it would need to be addressed to restore the lucrative trade relations between the countries.

"I think it's likely a short to medium term problem. I don't think it will be a long term problem because China has a protein deficit," he said.

This was due to its pork industry being devastated by African Swine Fever.

"Their pork production is way down, that's why they are so reliant on imports and they've been increasing imports of beef," he said.

"But even their increased imports are not enough to meet their population needs for meat."

While Australia had a 20 per cent foothold in the Chinese beef market, he said the market was growing rapidly and we were now losing ground to other nations including Argentina, Uruguay, Brazil and to some extent, New Zealand.

"There's been about 60 per cent growth in the market in the last couple of years in China and we've captured a very small proportion relative to our South American colleagues," he said.

 

RLX (was CQLX) cattle sales yards at Gracemere QLD.
RLX (was CQLX) cattle sales yards at Gracemere QLD.


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