A new trade deal between the US and China signed over the weekend will rapidly intensify the competition for key Australian exports into our biggest market.
This comprises the surprisingly rapid conclusion of the agreement — forged during the summit of Presidents Donald Trump and Xi Jinping in Florida last month — to agree within 100 days on concrete measures to resolve trade issues between the countries, including the $470 billion imbalance in China’s favour.
The headline concessions by China all affect major Australian products.
The 14-year ban on US beef, introduced after a mad-cow outbreak in 2003, will now end — while Chinese cooked chicken will be admitted to the American market.
Australia sells about $1bn of beef a year to China, with expectations of a rapid rise following the relaxation of the limits on Australian producers accessing the Chinese market, agreed during the recent visit of Chinese Premier Li Keqiang — including a commitment to buying another $400 million of chilled beef.
The US has agreed to ship liquefied natural gas to China, a market dominated to date by Qatar, Malaysia and Australia.
For Australia’s LNG industry, China represents the biggest growth market, while the US is increasingly becoming a key rival.
Until the recent energy revolution in the US, the federal government insisted that gas production be sold domestically.
China imported 26 million tonnes of LNG in 2016, 33 per cent more than in 2015.
Expansion last year of the Panama Canal will enable shipments to be carried to China from new LNG projects on the US east coast.
China has also held back on signing long-term commitments with US producers, because of concerns over political tensions between the two countries, the untested nature of the US export market and higher prices for US energy.
In the current financial year, production of LNG in Australia, set to become the world’s biggest producer by 2020, is expected to rise by 40 per cent over the previous year to 51 million tonnes, driven by increased sales to Japan, South Korea and China.
The US government has also opened the door for its biotech products to be sold to China — another area where Australia has been building sales.
US Commerce Secretary Wilbur Ross said the trade deal was “a Herculean accomplishment”.
Normally, he said, such agreements “are denominated in multiple years, not tens of days”.
Beijing agreed to allow US card payment services to begin applying for licences to operate in China, whose UnionPay system has enjoyed a virtual monopoly.
It will also allow US finance houses to underwrite bonds.
By ROWAN CALLICK