One of the world’s most influential international organizations has issued a grim warning to Australia about relying on trade with China.
Australia has been issued a grave warning about the actual economic impacts of China’s volatile behavior by one of the most influential international organizations in the world.
The Organisation for Economic Co-operation and Development released a report on Wednesday urging the Australian government to pivot away from our largest trading partner and find new countries to ramp up trade with.
“Over the past two decades, the share of Australia’s merchandise exports destined for China has increased from 10 percent to around 40 percent and now surpasses Australia’s total merchandise exports to all OECD countries combined,” the report said.
“The increased concentration of export flows makes Australia more vulnerable to a future shock in the Chinese economy or import restrictions being imposed on additional commodities, such as iron ore.”
The OECD stressed that while a strengthened trade relationship with China had brought benefits for Australian businesses, households, and government incomes over recent years, relying on this relationship in the future is a dangerous move.
China has already weaponized trade to coerce Australia to alter its strategic behavior, imposing destructively high tariffs on vital Aussie exports such as wine, beef, and barley.
The OECD warned that if this spread to other vital industries, the impacts could be devastating for Australia’s economic future.
“The further imposition of trade restrictions by China, in areas such as iron ore and education, would substantially dent the pace of economic recovery,” the report said.
“(Australia should) explore the potential for trade diversion to other export markets and provide targeted support to the impacted industries as they transition to new markets.”
While the report noted that resolving trade tensions with China could potentially boost Australia’s export growth, diplomatic relations with our increasingly volatile neighbor would always have the potential to get even worse. Published initially as Australia urged to find new trading markets in the face of China’s aggressive behavior.