Week of 26 July to 1 August 2021

Wine wars

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) modelling on the costs of China’s anti-dumping and countervailing duties on Australian wine:

“In 2025, 60% of Australia’s wine exports originally destined for China will be diverted to alternative markets; the equivalent of $720 million in 2020 dollars. The negative impact on export earnings is likely to be more significant than on the volume of exports. The combined effect of lower prices and export diversion is estimated to result in a $480 million decline in total Australian wine export value in 2025 (in 2020 dollars) compared to what would otherwise be the case without the duties. Ignoring discount factors and assuming no activities to stimulate demand in alternative markets, the cost of the AD [anti-dumping] duties to the Australian wine industry are likely to be at least $2.4 billion over the 5-year period.”

Quick take:

This modelling paints a sobering picture. China accounted for 33% of the export revenue for Australian wine in 2020 and Australian exports of bottled wine to China are expected to cease under average anti-dumping duties imposed by Beijing. With the projected $2.4 billion loss over five years, this modelling drives home the case for the industry to seek new markets and for government to support these diversification efforts.

Of course, the Chinese market is uniquely large and lucrative and export diversification in a long and hard process. But the political headwinds in the Australia-China relationship have only picked up and more storms are on the horizon. So, there’s no compelling reason to expect these trade restrictions on wine to be unwound, meaning that the case for trade diversification only grows stronger, notwithstanding its difficulty.

Australian alcohol to the world

The monthly value of Australia’s alcoholic beverage exports to China, the rest of the world, and the total value, June 2019 to May 2021:

Quick take:

This graph doesn’t tell the story of what the value of Australia’s alcoholic beverage exports (which are primarily wine) would have been without China’s trade restrictions. But it seems to suggest that a significant amount of export redirection has already occurred since wine exports to China collapsed after Beijing’s November/December 2020 introduction of anti-dumping and countervailing duties. Although the total value of Australia’s alcoholic beverage exports dips deeply after November 2020 as the value of exports to China collapses, it has since climbed while exports to China have flatlined.

With wine presumably a big focus of the Australian government’s Agri-Business Expansion Initiative, an ongoing redirection of Australia’s wine exports seems achievable. Whether new export markets can fully offset the loss of the Chinese market remains to be seen. But given that the grim ABARES modelling assumes no activities to stimulate demand in alternative markets, the combination of new short-term Agricultural Counsellors at Australian diplomatic posts and various forms of additional support for exporters should at least avoid some portion of the modelled losses.

Wrestling with whataboutism

Secretary of Defense Lloyd J. Austin III delivering the Fullerton Lecture at the International Institute for Strategic Studies in Singapore on 27 July:

“Our partnerships draw strength from our shared belief in greater openness… and our belief that people live best when they govern themselves. Now, our democratic values aren’t always easy to reach. And the United States doesn’t always get it right. We’ve seen some painful lapses, like the unacceptable and frankly un-American discrimination that some Asian Americans and Pacific Islanders have endured in my country in recent months.”

“I believe that we’re better than that. Far better. But we aren’t trying to hide our mistakes. When a democracy stumbles, everyone can see and hear it. It’s broadcast in loud and living color, and not hushed up by the state.”

Quick take:

At the risk of overinterpretation, it seems noteworthy that senior US officials, such as Secretary of Defense Austin and Secretary of State Antony Blinken, are increasingly open about US failings. As well as speaking to the domestic political priorities of the Biden administration, is this newfound frankness partly motivated by the goal of taking the wind out of China’s concerted diplomatic efforts to discredit the United States? If so, and by extension, would more openly acknowledging Australia’s periodic difficulties living up to the principles it espouses be an effective means for Canberra to pre-empt and blunt the power of Beijing’s regular diplomatic attacks?

China’s efforts to discredit Australia span official diplomatic messaging and both the authoritative and nationalistic press. China’s diplomats and the country’s media often quickly pivot from Australian criticisms of China to Beijing accusing Canberra of similar malfeasance. So, when Canberra raises concerns about human rights abuses in Xinjiang, Beijing will respond by highlighting Canberra’s mixed human rights record, including alleged war crimes in Afghanistan and the long and painful history of violence, cultural destruction, and family separation inflicted on Indigenous Australians.

This whataboutist manoeuvre is a striking feature of China’s contemporary diplomacy. If the United States and its allies and partners criticise China’s espionage, then part of the response is to highlight the intrusive and large-scale espionage of the accusers. If the United States and its allies and partners raise concerns about China’s legally untenable maritime claims in the South China Sea, then part of the response is to lambast their patchy record on the United Nations Convention on the Law of the Sea and international law more broadly. Other examples abound.

As I’ve argued elsewhere, there’s a strong case for Australia to ensure that its policies align with the standards to which it holds China. As well as the clear moral imperative to be consistent, there’s a strategic rationale for such consistency. Without it, Australia leaves itself wide open to China levelling yet more whataboutist attacks the next time Canberra calls on Beijing to behave better.

In addition to this pragmatic case for consistency, Secretary of Defense Austin’s candour makes me wonder whether there’s also a rationale for being more open and honest about times when gaps emerge between policies and principles. To take just one example, wouldn’t the power and persuasiveness of Australian criticisms of China’s legally untenable maritime claims in the South China Sea and espionage activities be increased if they were combined with a much fuller acknowledgement of Canberra’s poor form on both counts against Timor-Leste?

This is not to draw a simple moral or empirical equivalence between Australia’s past actions towards Timor-Leste and China’s current behaviour in the South China Sea and cyberspace. But it is to raise the question of whether Australia’s diplomatic messaging on China would be more persuasive if Canberra was proactive about openly recognising the times when it failed to live up to the standards to which it holds Beijing.

To be sure, these kinds of frank acknowledgements of past failings won’t stop Beijing’s efforts to tarnish Canberra. But it seems at least prima facie plausible that such honesty would be a net positive. First, it would increase the credibility and moral force of Australia’s criticisms of China. Second, it would pre-empt and partially respond to the often-unspoken view among Australian partners in the Pacific and South-East Asia that the case for Canberra taking the moral high ground on international rules and norms isn’t always especially compelling. Freely acknowledging past transgressions would be a powerful way for Australia to convince the region that it wasn’t a bad faith actor on the standards to which it seeks to hold China.

Of course, there’s the possibility that a more honest appraisal of Australia’s failings would only give China more material to work with. (I’m doubtful of this though given that Beijing’s propaganda apparatus is already masterful at seizing on examples of past instances in which Canberra’s adherence to its own principles erred.) But regardless, one thing is sure, Beijing’s whataboutist diplomatic attacks on Canberra are likely to intensify given the current state of international politics and the parlous state of the bilateral relationship. In that context, there’s a case for Canberra to at least consider the benefits of more of the kind of candour that Secretary of Defense Austin displayed in Singapore last week.

As always, thank you for reading and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections very much appreciated.