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US-China trade deal threatens Australian exporters

“How can the US pursue another $US32 billion of American beef, wheat, cotton and seafood – all listed in the agreement – without Australian exporters becoming collateral damage? It’s a similar story for energy.

“This is particularly pressing given we have zero political and diplomatic relationship with Beijing at the moment.”

Scott Morrison with Chinese Premier Li Keqiang ahead of the ASEAN Summit in Bangkok in November 2019.

Scott Morrison with Chinese Premier Li Keqiang ahead of the ASEAN Summit in Bangkok in November 2019.Credit:AAP

Prime Minister Morrison was invited to a state dinner at the White House in September, but the government has been largely frozen out by the Chinese Communist Party following rising concerns over political interference and national security.

Trade Minister Simon Birmingham said the deal was a truce rather than a complete elimination of trade tensions. The dispute had threatened to explode into an all-out trade war over allegations of intellectual property theft and frustration from US President Donald Trump over persistent trade deficits with China.

“There’s more likely to be movement from the US side in areas such as pork, poultry, and soybeans that are much smaller commodities for Australia, compared with the ones that we’ve seen such huge growth in our Chinese exports in recent years,” Senator Birmingham said.

Australia’s LNG industry is the most exposed to the agreement. Chinese authorities have been increasingly looking to gas to offset coal-fired power and reduce emissions. China’s coal imports plunged from 21 million tonnes in November to 2.8 million tonnes in December.

Former Australia prime minister Kevin Rudd.

Former Australia prime minister Kevin Rudd. Credit:Alex Ellinghausen

Phase one of the deal will force China to buy at least $US18.5 billion more in energy products from the US than it did in 2017. That is double the record high of total energy exports from the US to China.

“That’s bad news for Australia – the world’s current largest LNG exporter,” said Commonwealth Bank commodity analyst Vivek Dhar.

He said LNG exports sold under long‑term contracts from Australia to China are less likely to be impacted.


Industry leaders warned the one-on-one negotiations, which will continue to sideline the World Trade Organisation, still posed a threat to multilateral deals that have balanced the interests of superpowers and smaller economies like Australia.

“This deal will undermine the principles of free trade which have underpinned Australia’s bipartisan approach to trade policy for many decades,” acting Minerals Council of Australia chief executive Gavin Lind said.

Markets took little notice of the long-term implications. Buoyed by the prospect of more than two years of destabilising global tensions drawing to a close, the ASX index soared past 7000 points within 20 minutes of opening and held the record-high for the rest of Thursday.

Newfound consumer and business confidence drove the bourse up by 47 points after news of the deal broke.


China’s Vice-Premier Liu He said phase one was a “mutually beneficial and win-win agreement”.

“It will bring about stable economic growth, promote world peace and prosperity, and is in the interest of the producers, consumers, investors in both countries,” he said.

Australia’s ambassador to Washington Joe Hockey urged caution.

“It’s written on rice paper: anyone can tear it up at any moment,” he said. “It’s a step in the right direction. If it’s just about purchasing more goods then that’s not a solution.”

Mr Trump said he would travel to Beijing later in the year to begin talks on the next stage of the deal. The second phase is expected to deliver more tariff relief for China in exchange for tighter restrictions on intellectual property.

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