Experts say China trade sanctions over AUKUS deal unlikely, but flag long-term concerns

© ASSOCIATED PRESS Experts say China trade sanctions over AUKUS deal unlikely, but flag long-term concerns (Mass Communication Specialist 1st Class Michael B. Zingaro/U.S. Navy via AP)

China’s scathing reaction to Australia’s nuclear submarine deal is unlikely to translate into trade sanctions in the short term, according to experts.

A day after Australia, the US and the UK unveiled a newly-formed trilateral security partnership called AUKUS, China lambasted the alliance, labelling it an “extremely irresponsible” threat that “seriously undermines regional peace and stability and intensifies the arms race”.

It is the latest incident in a deteriorating relationship between Australia and its biggest trading partner.

Previous tensions have resulted in China slapping trade restrictions and sanctions on industries including lobster, barley, wine and beef.

Perth US-Asia Centre research director Dr Jeffrey Wilson said the latest spat was unlikely to lead to further action.

“Most of the ammunition has already been fired [because] China has applied trade sanctions to nearly all of Australia’s major exports where it is able to,” he said.

“In many of the [impacted] industries, particularly here in Western Australia, trade is effectively suspended [so] it’s not likely to get much worse than that.”

The remaining potential targets for sanctions could include international students and tourism, Dr Wilson said, but iron ore was likely off the table for now.

“The iron ore trade … has been unaffected largely because of its systemic importance to China,” he said.

“Its steel industry, its construction industry and its heavy industry can’t operate without WA iron ore.

“It would require an extraordinarily poor deterioration in relations — to a ‘brink of war’ kind of scenario — before that would start being changed.”

Relationship repair won’t be easy

China’s previous trade punishments were mostly in response to unilateral decisions, such as Australia’s push for an independent inquiry into the origins of COVID-19.

Lowy Institute China expert Natasha Kassam said this time, there was strength in numbers.

“China will be reluctant to single out one of those [AUKUS] partners for retribution and so perhaps it will hold its powder until another unilateral decision,” she said.

Potential future issues in the Australia-China relationship may include the upcoming review into Chinese ownership of the Port of Darwin.

China would also be angered if new Commonwealth powers were used to close Confucius Institutes at Australian universities.

In the meantime, Ms Kassam said there was not much Australia could do to repair the frosty relationship.

“The best-case scenario here is that Canberra and Beijing find a way to put a floor on this spiralling relationship and to stop this kind of tit-for-tat behaviour,” she said.

“Australia would argue that it has only been responding to China’s coercive actions but it’s clearly not in both countries’ interests to have this level of animosity.”

That was partly because while Australia’s iron ore industry appeared untouchable for now, that would not be the case forever, Ms Kassam said.

“It’s very clear that Beijing is planning to wean itself off iron ore in the long term,” she said.

“There’s very little incentive from the Beijing side to try to improve the relationship.”

Future changes to China’s demand for iron ore is not the only issue affecting the future of Australia’s economy.

“So much of Australia’s coal and gas exports go to countries that have set net zero [targets] for 2050 or 2060,” Ms Kassam said.

“The iron ore industry has to be worried about China as a market, but it also has to be worried about climate change, carbon taxes and other restrictions.

“Ultimately, a sustainable approach is going to require significant change in Australia and China is only a part of that story.”

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