Separate administrations conducted investigations into the feasibility of ‘diversifying’ import-export relationship, all resolved such a decoupling would be unmanageable
Current relations came after years of networking by exporters and cannot be replicated elsewhere, analysts say
By Kandy Wong
October 5, 2023
The Australian government has concluded a full-scale diversification from China to be “impossible” after a series of internal, classified studies. Photo: EPA-EFE
Australian authorities conducted three separate internal studies in the past eight years to determine whether the commodity-exporting nation could completely diversify its supply chains from China – but all said the task was impossible, according to two sources with knowledge of the matter.
The unanimous and non-partisan judgment helped to justify Canberra’s renewed trade engagement with Beijing late last year despite obstacles such as Aukus, a regional security pact between Australia, the United Kingdom and the United States.
Australia’s Department of Foreign Affairs and Trade (DFAT) and its treasury department jointly administered two studies, one in 2015 and another in 2020, both of which concluded “no other markets could replace China as a market for Australian commodity exports”, one source said. Both spoke on the condition of anonymity due to the sensitive nature of the topic.
“DFAT and Treasury studies have made it clear that Australia cannot successfully diversify trade away from China,” the person said. “Diversification to Southeast Asia is really China plus.”
The first study was ordered by Prime Minister Tony Abbott, as his cabinet decided to act on a US warning in 2012 that growing economic and trade dependence would make Australia vulnerable to Chinese pressure.
“Abbott was always suspicious of the motives of Communist China,” the person said. “He is famous for describing the Australian relationship with China as based on ‘fear and greed’.”
China is a major buyer of Australian iron ore, liquefied natural gas and agricultural products. Bilateral trade, which totalled US$152.9 billion last year, is widely believed to be a bedrock in relations and a means of avoiding total breakdown.
That breakdown appeared more imminent than ever in 2020, when the Scott Morrison administration called for an international investigation into the origins of Covid-19. After China responded with a series of official and unofficial trade sanctions, the concept of diversification started to gain more attention.
Australia’s former treasurer Josh Frydenberg “vetoed” the release of a public version of either report because “it did not fit in with the China narrative of the Morrison government”, according to the source.