China Ups Protectionist Ante With Coal Tariffs

First the economic angle: straight up protectionism.
China's push for coal import tariff could cost Australian mining jobs
Independent analyst and author of StockAnalysis Peter Strachan said a price increase of 3 per cent on coking coal and 6 per cent on thermal coal, due to begin on October 15, would render many marginal coal mines in Australia unprofitable.

...China's coal producers had been lobbying the Beijing government for protection since July, saying more than 70 per cent of China's miners were unprofitable, with about half of them delaying or cutting wage payments.

The diplomatic angle: China is playing Australia like a fiddle.
Shock China coal tariff decision throws Australian free trade talks into turmoilThis is not surprising as a Chinese negotiating tactic. Chinese strategy sometimes calls for initiating a conflict in order to bring an issue to the table. This can backfire if the other side sees a conflict as escalation, rather than an opportunity to negotiate. In the island disputes, it makes China appear aggressive. Here, it could make China appear as an economic threat that isn't going to change its behavior even though it is becoming a large economy. Australia's best move here would be to have the loyal opposition scream for retaliatory tariffs and get the ruling party's more nationalist members to make public statements that retaliation is an option. China loses the most of any nation on Earth if protectionism increases and this move gives moral authority to nations seeking to hobble trade with China.

Retaliation might be be the best option if the long-term goal is restraining China's power. China's rapid economic growth is its key strength and with a major credit bubble on the verge of deflating, economic policies designed to slow the regional economy would have a much bigger impact. The main issue is whether national security concerns are starting to outweigh profits or not, but the trend globally is away from free trade and towards national interests. Many nations in the region are concerned about China's aggressive behavior in the South China Sea. This is covered from a different angle in The Logic of Strategy: Yuan Devaluation and the Road to Trade War.

Australia Group Calls for Talks on China Coal Tariffs
“The full impact of this on Australia will also depend on whether exporters can switch to other markets such as Korea, Japan and India,” said Rohan Kendall, an analyst in Beijing for the consulting firm Wood Mackenzie. “So this is likely going to be a modest impact on Australia and not a huge one on miners.”
Exports to Japan and India, two Chinese rivals in Asia......

No comments:

Post a Comment