03/06/2020 - 10:06

Tariffs spark diversity push

03/06/2020 - 10:06

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OPINION: Trade threats from China are forcing a rethink for WA’s exporters and the McGowan government.

Tariffs spark diversity push
Peter Tinley says the government is seeking to broaden WA’s involvement throughout Asia. Photo: Gabriel Oliveira

OPINION: Trade threats from China are forcing a rethink for WA’s exporters and the McGowan government.

China’s decision to impose an 80 per cent tariff on Australian barley imports has been a body blow for growers in Western Australia, who have come to rely on sales to the world’s most populous country.

But it could also be a timely wake-up call for a state that has been a major beneficiary of China’s spectacular economic growth over the past 20 years.

Accordingly, the WA government is already stepping up the search for new markets.

There’s optimism barley producers will be able to find other buyers, although they might have to accept lower prices.

Instead of their high-grade product being used in the brewing of quality Chinese beers, for example, it might be sold as feed.

The lesson from China’s decision on tariffs, plus its move to upgrade the inspection of imported iron ore – the vast bulk of which is from the Pilbara – is that nothing can ever be taken for granted.

China became WA’s dominant trading partner through iron ore sales.

The state’s exports to China last year were valued at $96.1 billion.

The next best customer was Japan on $24 billion, with the UK well back on just $12.4 billion (see table).

Successive state governments have warned of the risks associated with putting all WA’s export eggs in the one basket.

However, the spectacular success of iron ore sales and liquefied natural gas provided a false sense of security.

It’s not the first time the heavy reliance on a major customer has caused nervousness in the local market.

Turn the clock back 45 years when the dominant destination for Pilbara iron ore was Japan.

After a promising start in the 1960s, the industry was plagued by industrial lawlessness. Union shop stewards enjoyed flexing their muscles on the various sites.

Many seemed hell bent on renewing the class struggle they had left behind in Britain. Disruption was at such a level that the Pilbara’s reputation as a reliable supplier was being questioned.

Enter Bob Hawke, then president of the Australian Council of Trade Unions.

In early 1977, he travelled to Japan with Peter Cook, the secretary of the WA Trades and Labor Council (and later trade minister), and Labor’s candidate for the state seat of Pilbara, Norm Marlborough, to reassure the steel mills their ore would arrive on time.

The aim to retain Japan as the major buyer succeeded but the secondary goal, to boost Labor’s state election chances, flopped.

Sir Charles Court’s coalition government won a second term and Mr Marlborough did not enter the Legislative Assembly until 1986.

But it did highlight the need to broaden WA’s export commodities and markets, a point reinforced in a 2018 report for the Perth USAsia Centre by research analyst Hugo Seymour.

https://perthusasia.edu.au/our-work/the-state-government-and-wa-s-economic-future-in-t

Mr Seymour noted that WA’s reliance on the Chinese market was both risky and economically unsustainable.

Steel production was expected to plateau over the next few years, as were sales of liquefied natural gas.

But he pointed to India, Indonesia, and Vietnam as growth markets with great potential for WA producers.

Minister for Asian Engagement Peter Tinley agrees, saying: “We are moving from rocks and crops to genuine diversification.”

Mr Tinley says important opportunities will emerge when the Indonesian-Australian Comprehensive Economic Partnership Agreement comes into force on July 5.

He said WA’s 30-year sister-state relationship with East Java would be an asset in seeking to boost sales in the fast-growing Indonesian market.

And there would be more openings for enterprising local exporters as other countries emerged from the COVID-19 shutdown.

A sister-state relationship is also planned in Vietnam with the industrious Ba Ria Vung Tau area, south of Ho Chi Minh City, where major WA companies such as shipbuilder Austal, and grain handler CBH, are already well established.

“We are aiming to build on the good work that these companies are doing, and broadening the involvement to include education, both at the secondary and trade training levels,” Mr Tinley said.

With WA trade offices strategically placed to assist in other key centres such as Singapore and Seoul in South Korea, the economic challenge for local producers is clear.

The question is: will they rise to the occasion this time?

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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