Australian exporters, the country’s rock lobster industry is poised to resume exports to China following a breakthrough agreement at the ASEAN summit in Laos last week. After a prolonged trade standoff, the deal, which will take several weeks to finalize, marks a moment of relief for Australian fishermen and exporters who have faced stiff restrictions for over three years. By Christmas, Australian rock lobsters could be gracing the tables of Chinese diners once again.
However, while the re-opening of this key export market is a notable achievement, it also serves as a reminder that Australia’s trade relationship with China is intricately tied to the larger geopolitical rivalry between Beijing and Washington. Despite the breakthrough, Australia’s economic ties with China remain fragile, and the broader picture of global trade suggests this win is just a temporary respite.
The rock lobster export ban was among a raft of economic measures China imposed on Australia in 2020, following a deterioration in relations. These trade barriers were part of Beijing’s retaliation for what it considered Australia’s anti-China rhetoric and policies, including Australia’s call for an independent investigation into the origins of COVID-19. As tensions flared, Beijing slapped tariffs and restrictions on various Australian products, from barley and wine to beef and coal. These punitive measures, amounting to a total value of $20 billion, sent shockwaves through Australia’s export sectors.
While the removal of the rock lobster tariffs symbolizes a thaw in relations, the Albanese government has been cautious not to claim full victory. The deal, negotiated on the sidelines of the ASEAN summit, suggests a new pragmatic chapter in Australia’s diplomacy with China, one that avoids confrontational rhetoric and seeks to rebuild economic ties. Still, Canberra has made it clear that its resolve on core issues such as national security and foreign policy remains steadfast.
Trade Minister Don Farrell, speaking after the announcement, emphasized that while the rock lobster agreement is a welcome step, Australia would continue to diversify its export markets and not become overly reliant on China. “We are happy to see progress, but we remain vigilant. Our business community must continue looking at opportunities beyond China to ensure future sustainability,” he noted.
Despite the positive outcome, there is little room for complacency. While Australia has managed to restore many of its key exports to China, including barley, wine, and now lobsters, the underlying tensions between Beijing and Washington continue to cast a long shadow over the global trade landscape. These broader dynamics suggest that Australia’s economic recovery with China is not entirely within its control.
The Biden administration has taken a more cautious approach to U.S.-China relations, seeking to stabilize ties where possible but maintaining a tough stance on trade and security. Washington has imposed a series of protectionist measures, including a 100% tariff on electric vehicles produced by Chinese-owned companies, as part of its broader strategy to curb China’s economic and technological rise. With bipartisan support for a hardline approach against Beijing, tensions are likely to escalate regardless of the outcome of the U.S. presidential election in November.
China, for its part, has shown no signs of backing down. President Xi Jinping’s government has doubled down on its “no limits” partnership with Russia and expanded its coercive tactics in regional disputes, notably in the South China Sea. As Beijing strengthens its security apparatus and tightens its grip on the private sector, concerns about the risks of doing business with China continue to mount.
These geopolitical pressures mean Australia’s trade relationship with China could once again become a pawn in a larger power struggle between Washington and Beijing. Australia, as a middle power, lacks the economic or military clout to confront China head-on. Instead, it must rely on the multilateral trading system, supported by institutions like the World Trade Organization (WTO), to protect its interests. But as global trade becomes increasingly polarized, even the multilateral system itself is coming under strain.
Since coming to power, the Albanese government has walked a fine line in its dealings with China. On the one hand, it has quietly pursued the removal of the trade barriers imposed in 2020. On the other, it has taken steps to protect Australia’s national interests, including expanding defense ties with the U.S. and maintaining a strong stance on human rights abuses and China’s regional aggression.
For instance, Australia’s decision to suspend its two WTO cases against China – over tariffs on barley and wine – was seen as a concession to smooth relations. However, these cases can be resumed if China reneges on its commitments. Similarly, while Canberra did not block China’s bid to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), it stopped short of endorsing it, maintaining a cautious approach.
This strategy reflects Australia’s broader efforts to hedge its bets in an increasingly volatile international system. With China remaining its largest trading partner, the stakes are high. Yet Australia is keenly aware of the risks of over-reliance on a single market, especially one that is prone to using economic coercion as a tool of foreign policy.
The challenges facing Australia’s trade policy are not unique. Across the world, the rules-based multilateral trading system is being tested by the rise of protectionism and economic nationalism. The U.S.-China rivalry has split the world into competing economic blocs, with countries increasingly forced to choose sides in a battle of values and strategic interests.
For Australia, this global shift toward “decoupling” – where countries seek to reduce economic dependencies on rivals – is both an opportunity and a challenge. On the one hand, it provides a strong impetus for diversification. Already, Australian exporters have started exploring new markets in Southeast Asia, India, and beyond. The success of Australian wine producers in pivoting to other markets, following the collapse of exports to China, demonstrates the resilience of Australian businesses.
However, the global retreat from free trade also poses a threat to Australia’s economic model, which has long been predicated on open markets and a strong export sector. With countries like the U.S. and Canada imposing protectionist tariffs on Chinese goods in violation of WTO rules, the system designed to ensure fair and open trade is under siege. As a supporter of the multilateral trading order, Australia finds itself in a difficult position, caught between its loyalty to the system and the need to adapt to a rapidly changing global environment.
Australia’s East Asian neighbors, particularly Japan and South Korea, have long advocated for a “China Plus One” strategy, where businesses maintain trade ties with China while diversifying into other markets. This strategy is increasingly seen as a necessity, given the unpredictable nature of China’s political and economic environment.
For Australian companies, the recent reopening of the Chinese market provides a welcome boost, but it should not overshadow the importance of long-term planning. Diversification into other fast-growing economies, such as those in Southeast Asia, India, and Latin America, will be essential to mitigate the risks of future trade disruptions with China.
Furthermore, the rapidly evolving digital economy and critical minerals sectors offer new opportunities for Australian businesses to reduce their reliance on traditional commodities and explore higher-value industries. As global demand for clean energy technologies and advanced manufacturing grows, Australia is well-placed to capitalize on these trends.
