How the WTO helped Australia repair its trade ties with China

China’s ambassador to Australia, Xiao Qian, called it a “noble mission” to work with “the Australian government and friends in all sectors, to push the China-Australia relations back to the right track” a when he took up his post in January last year.

But Australian resolve only partially explains the removal of the disruptive trade measures.

What triggered Beijing’s actions in 2020 was not a particular policy by the Morrison government, but rather its diplomatic posturing. Predecessor Malcolm Turnbull had angered Beijing as early as August 2018 by banning Chinese telecoms groups from participating in Australia’s 5G rollout.

But it wasn’t until early 2020, when the Morrison government began aping the political attacks launched by former US president Donald Trump against Beijing over the COVID-19 pandemic, that Beijing took steps against Australian trade.

Beijing wasn’t alone in being taken aback by Australia’s political assault. On Morrison’s call for international health inspectors to be given powers akin to “weapons inspectors”, Martin Parkinson, the usually reserved secretary of the Department of the Prime Minister and Cabinet at the time, asked “What whizz kid dreamed up those talking points? What did they think they were going to achieve with that?”

The Albanese government came to office last year making a point of restoring “calm and consistent” diplomacy. Ministerial visits have gradually resumed, and trade disruptions have eased.

A critical ingredient in the restoration of trade ties has been the multilateral trading system, overseen by the World Trade Organisation (WTO). This system, which supports open and competitive global markets, blunted the effects of Beijing’s bans by facilitating the redirection of Australian coal, barley and other commodities previously destined for China, elsewhere.

The WTO also provided a neutral forum where Canberra and Beijing could engage on their disputes relating to barley and wine. After Washington drove the WTO’s regular appeals body into dysfunction in December 2019, Australia and China both stuck to a rules-based process by joining the workaround to the WTO dispute settlement process, the Multi-Party Interim Arrangement. This meant that neither would appeal an unfavourable WTO panel finding into a void.

In the case of barley, the timeline is telling. The WTO panel circulated its final report on Australian barley exports to both parties on March 15 – reportedly in Australia’s favour.

On April 10, Canberra and Beijing announced a deal had been struck in which Beijing would undertake an “expedited review” of the tariffs it had imposed. This led to Chinese tariffs being lifted on August 4.

Foreign Minister Penny Wong calculates that Australia “would not have been able to get this outcome without working through the WTO”. Later that month, Farrell farewelled the first shipment of 55,000 tonnes of Australian barley, at a healthy price premium, destined for China.

October brought the news that the same process was in train for wine. On the informal measures still affecting lobsters and beef, Farrell says that warming relations and the experience of the barley episode mean that Australians can “be very confident that we can resolve all of those outstanding issues”.

Australia’s resistance to Beijing’s attempts at economic coercion was undoubtedly the right response. But in celebrating the latest trade numbers, Albanese might also propose in Beijing a toast to professional diplomacy and a shared commitment to the multilateral trading system, including an independent, rules-based resolution of disputes.

Recommitment to both is the right way forward.