China trading... here we go again

If something seems too good to be true, it more than likely is. That is how I see China as a trading partner.

And before you think I’m about to go on a xenophobic rant, it’s not just ‘China beware!’. It’s more a case of putting all our trading eggs in one basket, an inherently dangerous practice.

Let’s go back a decade or four. It was the late 1980s and wool was booming.

The Australian Wool Corporation as it was then, was banking on China growing to be our largest wool customer.

“Imagine if every man in China bought a pair of woollen socks,” they said. Yes, they did.

While that hasn’t happened, China has emerged as the super power it is today and by far the largest buyer of our wool, which incidentally fell to its lowest price in five years last week.

But because they are the major buyer, they call the market shots.

Being the largest supplier of wool in the world doesn’t seem to give Australia much power.

Fast forward 20 years or so, and the struggling Murray Goulburn Milk Co-operative, dogged by poor performance and allegations of nepotism, appointed a new young gun as chief executive – former Sunrice CEO Gary Helou.

He was a man of bold visions, thinking Australia could corner the newcomer in the global dairy market – you guessed it, China.

Not traditionally big consumers of dairy products, the growing middle class in China was developing a taste for Australian wine and for our milk.

Helou saw China as the key to MG success. He was also responsible for the first discounted milk contract with the supermarkets.

He might be gone, but the contract isn’t and dairy farmers continue to rue the day that was signed. Thanks for that, Mr Helou.

Now, there is the barley disaster, with China supposedly suddenly putting a massive 80 percent tariff on Australian barley imports.

Well, firstly, it wasn’t sudden. China had taken 18 months to investigate the alleged dumping of barley by Australia. Conveniently procrastinating on a determination until an opportune moment more like it.

Secondly, the recent Us-china trade deal means China has to import $200-billion of produce from the US, including dairy infant formula, barley and corn. The US gain is more than likely much to do with our loss.

Already I’ve heard some commentators suggesting we instead look to that other mega-economy, India.

Lest we forget, India still has tariffs of 60 percent on our chickpeas and just as China was our largest barley market, India was our largest chickpea market.

So what do we conclude? There is no such thing as an open global market.

Not even with the champion of the free market, the US.

If we want to trade globally, we do so in the knowledge that another black swan event might turn our trade into another ugly duckling.

It has, and always will, be thus.