30th July 2021
I’m an Australian and glad of it, but this week I want to spend some time criticising my home government for its silly approach to China over the last several years. Personally, I don’t believe in appeasement for appeasement’s sake, and I certainly think a nation like Australia, which supplies so much of the raw material for the Chinese economic powerhouse, needs to stand up to China when it is required. But the Australian federal government under Scott Morrison has been pointlessly needling China for months now, and all it has done is cause inconvenience and sometimes downturns for Australian trade sectors such as wine, thermal coal and copper.
Morrison and his government have been blundering around antagonising China for some time now (see here or here for a couple of representative examples), most frequently not over serious diplomatic issues like human rights in Hong Kong, adventurism in the South China Sea, Taiwanese independence or Uyghur internment camps, but instead over deliberately provocative posts on Twitter and speculative theories like the lab leak hypothesis for the origins of the pandemic. And China has retaliated.
Australia’s biggest resource export to China, iron ore, is probably insulated from all but the most extreme political stoush between the two countries, since there is an interdependence between Australian exporters and Chinese steel mills that rely on high quality Australian product to fuel China’s never-ending construction and manufacturing boom. But there are other sectors in Australia who rely on exporting to China, but whose products China can just as well get elsewhere or even do without. One such sector is thermal coal, which China quietly stopped buying from Australia in late 2020. This is more than likely a discriminatory trade practice under World Trade Organisation rules and Australia could take China to the WTO over it, but the idea of Morrison actually standing up to China for Australian trade interests instead of beating his chest and then whinging when China retaliates seems laughable.
Also late last year, China stopped buying Australian copper concentrates altogether, still in response to snide comments from Canberra. Luckily for Australian copper producers, supply has been tight and smelters in other countries, especially Japan and South Korea, were happy to get the additional feedstock. But the copper market being what it is right now is pure luck for Australian producers. Next time China decides to shadow ban imports of an Australian commodity, it might be one struggling to find buyers overseas, or whose sole major market is China itself.
Now, don’t get me wrong – these are discriminatory trade practices on the part of China and they’re almost certainly illegal under WTO rules. By no means do I support China lashing out at Australian industry this way, nor do I think it’s helpful or justified. I also think the original insult to China that kicked off the deterioration of relations, the Australian government’s banning of Huawei from the 5G communications network, was at least arguably a good idea from an Australian perspective. But these were predictable responses from China, as any competent government would know, and since the Huawei incident the antagonism from the Morrison government has been nothing but posturing for a domestic audience. They have already hurt the resource industry, to say nothing of industries like barley, wine and other agricultural products, in return for absolutely no change of policy or special consideration for Australia from the Chinese government. Bickering with China over nasty but ultimately trivial Twitter posts and entertaining conspiracy theories about the origin of the pandemic is not just a bad look for the Australian government, it is having a real and measurable financial impact on the Australian economy, including the resource sector. If Morrison and his government want to blow up our relationship with China, I wish they’d do it over something that actually mattered.
Around the Traps
Sun Summit Minerals (TSXV:SMN, OTCQB:SMREF) have announced the closing of a private placement valued at CAD $5 million, which it will spend on exploration at its Buck Property, an epithermal gold exploration project in British Columbia.
Anaconda Mining (TSX:ANX) has released its Q2 2021 results, with highlights including gold sales and a private placement with proceeds of $8.5 million. You can see the overview and report here.
Mountain Boy Minerals (TSXV:MTB) has reported up to 949 g/t silver in their assays of samples from the American Creek project!
Have a great weekend everyone!
- Jane Lockwood