China imposes an unofficial ban on imports of Australian cotton in October 2020.

Context

In October 2020, two leading Australian industry groups sounded alarm bells, with claims that Chinese firms had been unofficially warned to stop importing Australian cotton – backed up by threats of a cut in their assigned import quotas. In a joint public statement, the heads of the two industry groups said that “[i]t has become clear to our industry that the National Development Reform Commission in China has recently been discouraging their country’s spinning mills from using Australian cotton.” Notably, this measure was imposed in the broader context of deteriorating bilateral relations between Beijing and Canberra, exacerbated by Australia’s calls for an investigation into the origins of the COVID-19 pandemic.

Public information from the Chinese government relating to the ban is almost non-existent. On 16 October 2020, the spokesman of the Ministry of Foreign Affairs of the PRC was asked whether the government had discouraged domestic mills from using Australian cotton. He responded that the Ministry had never heard of such developments.

Impact

This measure impacted the cotton growers in Australia. Australian media reports suggested that prior to the imposition of this Weaponised Trade measures, around 65% of Australian cotton was exported to China.

Responses  

i) Australian government and industry responses.

According to one leading industry figure, Cotton Australia Chief Executive Adam Kay, at the outset of this issue Australian cotton firms had “been working very hard to make sure all the procedures and protocols and paperwork has been perfect because we know there’s some tension there” – which points to a strategy of to-the-letter compliance with all regulations in order to limit the ability for excuses for licenses to be suspended. Australia’s cotton industry responded through a successful trade diversification strategy that sought to identify and build relationships with new potential export markets – particularly Vietnam, which in 2023 was the destination for 39% of Australia’s cotton exports. One analysis of Australia-Vietnam trade showed that, from 2020-21, Australia’s cotton exports to Vietnam expanded by around 899%. Notably, Australia’s 2021 cotton crop rapidly sold out, earning around AU$4.5 billion in export income. 

Australia’s then agriculture minister, David Littleproud, responded cautiously to the initial reports of an informal ban, telling press that “I think it’s important we get clarification before we jump the gun on this. That’s why we are working with the industry and Beijing to make sure we get some answers.” The Australian government subsequently also provided cotton industry groups ACSA and Cotton Australia three grants totalling almost AU$3 million to help them “expand and diversify trade in agriculture sectors impacted by market disruptions.”

(ii) Other states’ responses

China’s alternative sources of cotton included domestic production, as well as imports from Brazil, the US, and India.

Status

In February 2023, signs began to indicate that this Weaponised Trade measure was likely to be imminently relaxed. In the month of August 2023, exports to China had reached US$130 million – the highest single month since 2014. The resolution to this case came in the broader context of improving bilateral relations between China and Australia under the latter’s Albanese government (2022-).

Reference list

Australian Government. 2023. “Australian cotton spins export success in Indonesia.” Australian Trade and Investment Commission. July 21. Available at: https://www. austrade.gov.au/en/news-and-analysis/news/australian-cotton-spins-export-success-in-indonesia

Bing, T. 2023. “How Vietnam Became the Biggest Importer of Australian Cotton.” Vietnam Briefing. April 12. Available at: https://www.vietnam-briefing.com/news/australian-cotton-exports-vietnam.html/

Choudhury, S.R. 2020. “Australia says it’s ready to talk to China about their trade dispute.” CNBC. October 16. Available at: https://www.cnbc.com/2020/10/16/australia-is-ready-for-dialogue-with-china-to-resolve-trade-issues-minister.html

Fillingham, Z. 2023. “Timeline: Freeze (and Thaw?) in China-Australia Relations.” Geopolitical Monitor. February 20. Available at: https://www.geopoliticalmonitor.com/ timeline-the-downward-spiral-of-china-australia-relations/

Global Times. 2021. “China scales up cotton imports amid global price rally, not a result of US ban.” Global Times. October 8. Available at: https://www.globaltimes.cn/page/ 202110/1235794.shtml?id=11

Global Times. 2021. “Australian cotton exports to China are plummeting.” Global Times. June 27. Available at: https://www.globaltimes.cn/page/202106/1227162.shtml

Hobson, P. and L. Jackson. 2023. “Australian cotton exports to China surge to nine-year high.” Reuters. October 6. Available at: https://www.reuters.com/article/markets/ currencies/australian-cotton-exports-to-china-surge-to-nine-year-high-idUSKBN3160I9/

Hughes, M. 2023. “Australian cotton finds a new home as China trade ban drags on.” ABC News. March 9. Available at: https://www.abc.net.au/news/rural/2023-03-09/australian-cotton-to-vietnam-after-china-trade-ban/102057482

Ministry of Foreign Affairs of the People’s Republic of China. 2020. ‘Spokesman for the Ministry of Foreign Affairs, Zhao Lijian, held a regular press conference on 16 October 2020’ [2020年10月16日外交部发言人赵立坚主持例行记者会] October 16. Available at: https://www.fmprc.gov.cn/web//fyrbt_673021/jzhsl_673025/202010/t20201016_5419425.shtml.

Rolfe, B. 2022. “China kicks ‘own goal’ after Australia’s strongest cotton growth in history.” ABC News. October 26. Available at: https://www.news.com.au/world/ asia/china-kicks-own-goal-after-australias-strongest-cotton-growth-in-history/news-story/3007efdd42faab6eb69408f8b4129601

Sullivan, K. and L. Barbour. 2020. “Australian cotton the latest casualty in trade tensions with China.” ABC News. October 16. Available at: https://www.abc.net.au/news/2020-10-16/china-disrupts-australian-cotton-trade/12771114