Still more people freaking out about China. When will they get it?
So it seems that China is gunning for Australia’s cotton industry now.
Australia’s cotton industry is bracing for what could be a devastating blow as it becomes the latest casualty in the escalating trade tensions with China.
Mills in China are being told to stop buying Australian cotton as speculation grows that a hefty tariff is about to be slapped on the trade.
Government sources have told the ABC the cotton industry could face tariffs as high as 40 per cent, a sanction that could make the trade with China unviable.
Under China’s current trade rules the Chinese Government determines how much cotton each mill can import through a quota system.
But the ABC understands spinning mills have been warned not to use Australian product, or risk their quotas being slashed.
Without the government endorsement, these mills could be forced to pay 40 per cent more to buy Australian cotton.
The Australian industry has become increasingly nervous about the $800 million market, which typically accounts for 65 per cent of the cotton grown nationwide.
“Devastating blow.” Get over it. Cotton should just do what coal’s doing, in light of similar attacks.
That is, shrugging it off and saying “whatever.”
BHP’s Chinese customers have asked the miner for relief from coal purchase contracts in the wake of Beijing’s move to crack down on foreign coal imports.
The requests for deferral come amid uncertainty over whether China is seeking to limit purchases of foreign coal of all origins, or whether Australian miners are being specifically targeted under an extension of geopolitical trade tensions.
BHP chairman Ken MacKenzie said he would be concerned if Australian coal was being discriminated against.
But Mr MacKenzie said he was generally “not overly concerned” about the impact that trade tensions would have on demand for BHP's products, but he was concerned about the impact on ”the economic cycle”.
”Our concern around some of these geopolitical tensions and trade wars that are going on is the impact it could have on global growth, and in a post-Covid world that probably has even more concern,” he said.
Are you catching that? BHP doesn’t care if China doesn’t buy its coal. All it cares about if total global demand for coal goes down.
Why?
Senator Matt Canavan gets it:
National Party Senator Matt Canavan said Australian exported about 20 per cent of its coal to China.
“It’s a sizeable market but it’s not our biggest market,” he told Sky News, adding the largest market for thermal coal was Japan.
“We only actually produce about 5 per cent of the world’s coal, so if China decides to buy its coal from different countries, well, those other countries will be exporting less coal and we’ll fill a market gap in those places.
If China buys Brazilian coal, we’ll just sell to whoever Brazil was selling to.
That’s the thing about commodities. It doesn’t really matter where they end up. And that’s why BHP is so relaxed.
The real madness is here is that we allowed a single market to buy up 65% of our cotton output.
That’s nuts. That’s a strategic vulnerability.
But thankfully, we’re on the slow (and noisy) road back.
So chill, everyone.
JG
ERIC says
Another great article that cuts the BS out. I like the extra economic interpretation that you give and I feel the same about all this China hysteria. For too long we have depended on China to buy our resources, but there are many other countries in this world, and we have been given a ‘wake up’ call to start looking at who else buys our resources and who else could buy them as well. Also, our supply / demand chain needs a re-think. China is doing us a favour, showing that is not worthy of our trust and they act like small kids having a tantrum.
Roger says
Good post John ! I also agree with all that Eric has said. We have just taken the easy path and flogged everything off to China, without any forethought to this exact scenario playing out. China, by behaving as the regions new bully, has done us a favour. I personally would like to see Australia import a whole lot less of the crap that China produces. I understand that China has cornered the market in supply of all sorts of electronics and technologies to the extent that there are no other suppliers around any longer. we must therefore purchase these items from them. However there are many, many items that we import from China that could be sourced from other countries. How about we stop importing their crap cars? Source our clothing, toys, furniture from other Asian manufacturing nations that do not attempt to strong arm and blackmail us. That is if we really have lost the will to revive some of our manufacturing base.
Ruth from Brisbane says
You’re right John, and I agree with the other 2 comments. It’s global demand that matters, just have to adapt, and this country will, we’re good at it. But I think China’s CCP has declared war, and that’s not something we can ignore. I read a lot of books on their history. I know everyone thinks Trump is an idiot, but I feel Biden isn’t really up to taking that issue on. I don’t want to worsen the polarisation going on, but I am concerned that if Biden wins the presidency CCP will make life even more difficult for those who will not assist in them in their grand plan. I read in China’s newspaper that Australia cannot survive without them. They’ve only been our major trading partner about 12 years. Also says India must be taught a lesson. Goodness me, I think India may have their own view on that.