Should China be cowed by the blitz of lobbying about to descend on the Middle Kingdom from the angry ants of Australia in the shape of the Abbott government? According to our national media, Prime Minister Tony Abbott and Treasurer Joe Hockey are going to raise the question of the coal import duties, which suddenly became an issue late last week when the Chinese announced October 15 as the start date for the reimposition of the duties after they were stopped more than a year ago.

The sudden move by China to levy import tariffs of between 3% and 6% from Wednesday, October 15, will hit miners in Australia and Russia — among the top coal exporters to China. But Indonesia, the second-biggest coal exporter to China, will be exempt from the tariffs since a free trade agreement between China and the Association of Southeast Asian Nations (ASEAN) means Beijing has promised the signatory nations zero import tariffs for some resources. A 3% import tariff imposed on lignite (the lowest quality of all coal types) last year did not include Indonesia.

The import restrictions were first revealed in mid-September and were supposed to start at the beginning of 2015. But last week the Chinese revealed that the restrictions would begin this week, taking the Abbott government completely by surprise and throwing the free trade agreement with the country into doubt.

The Australian has reported that Hockey will raise the matter when he is in Beijing next week (he’s in London this week after Washington last week), while Abbott slammed the move in The Australian Financial Review:

“‘This is the kind of hiccup in our ­biggest and most important trading relationship that we just don’t want or need,’ the Prime Minister said. ‘We’ll work with the Chinese to get to the bottom of what seems to have happened.'”

China has shown what it really thinks of future trade relations with Australia by levying these tariffs in the full knowledge Australia will be hit hardest. China could remove those if it really wants a free trade agreement, but there has already been reports of a hold up on the question of access to Chinese markets for Australian agricultural products, such as beef.

But is there another, more pressing issue here. The New York Times reported on Saturday that the push from China for a rival to the World Bank is reaching a crucial stage, and Australia is in China’s sights.

“Beijing has asked dozens of nations to contribute funds to the bank, which it calls the Asian Infrastructure Investment Bank, and hopes it will become a global institution that rivals the World Bank. To give it broader scope, the Chinese have invited and won the support of some wealthy Middle East nations, including Qatar and Saudi Arabia. But if Washington persuades South Korea and Australia to abstain, it would all but ensure membership in the bank would be limited to smaller countries, depriving it of the prestige and respectability the Chinese seek.

“Australia, which depends on China for its economic well-being and on the United States for its security, has not announced if it will support the Chinese proposal. But the government was ready to sign up if China meets its conditions on how the bank will be governed, said Peter Drysdale, a professor of economics at Australian National University who has advised Australian governments.”

Will Australia risk alienating China by saying no, or will it risk alienating the US by saying yes to the Chinese idea? Now that’s a real quandary for the Abbott government. Or have the coal duties changed the game?

Peter Fray

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