Rules for the West but not the rest
Daryl Guppy
Chinese and Australian national flags are seen at an event in Sydney, Australia, September 8, 2019. /Xinhua

Chinese and Australian national flags are seen at an event in Sydney, Australia, September 8, 2019. /Xinhua

Editor's note: Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for Chinese mainland media for more than a decade. Guppy appears regularly on CNBC Asia and is known as "The Chart Man." He is a national board member of the Australia China Business Council. The article reflects the author's opinion, and not necessarily the views of CGTN.

Lord MacCartney was infamously told by Emperor Qianlong that China had no need of the inferior trade goods offered by the English delegation. More than 200 years later, it seems that some Western countries continue to make the same mistakes as MacCartney, believing that they and their goods are indispensable to China.

Australia is the latest example of this attitude so it's useful to examine this from a broader perspective because it provides an insight into developing trade environments where attitudes have been hardened by COVID-19 responses.

At the foundation of these attitudes is the idea that a country like Australia is indispensable to China's prosperity. This indispensability means it's OK to ignore Chinese laws and to scold China safely on the assumption that it will not react.

Duplicating the behavior of the Western powers in the mid-19th century, Australia is surprised, even shocked, when China dares to show its independence.

This independence is interpreted by some Western media as a "punishment," but it is more likely to be a dismissive move by China that recognizes the real, rather than imagined, status of Australia in the relationship.

The first example of these attitudes is the use of the WTO dumping provisions. Australia is one of the world's largest users of WTO anti-dumping measures.

Australia uses a "constructed costs" calculation to determine if the goods are "dumped" or sold below production cost.

The Australian Productivity Commission has regularly chastised the Australian government for imposing anti-dumping duties of up to 144 percent on Chinese steel and aluminum, saying last month there was "no convincing justifications for these measures."

Now China has applied a similar yardstick to its WTO complaint about Australian barley producers "dumping" barley in the Chinese market. China applied its own "constructed costs" formula to determine if barley had been sold below production cost.

Australia has been hoisted by its own petard – damaged by its own attack – and it's an uncomfortable feeling.

The second example comes from the reaction to China's suspension of imports from four major Australian beef suppliers over what the Australian trade minister called "minor technical" breaches related to Chinese health and labeling certificate requirements which in some cases, date back more than a year.

Chinese Ministry of Foreign Affairs spokesman Zhao Lijian said China imposed the ban when state customs authorities found products exported by Australian companies continued to violate quarantine and customs requirements jointly agreed to by Australia and China.

Australian Prime Minister Scott Morrison (R) and Chief Medical Officer Brendan Murphy attend a press conference at the Parliament House in Canberra, Australia, May 8, 2020. /Xinhua

Australian Prime Minister Scott Morrison (R) and Chief Medical Officer Brendan Murphy attend a press conference at the Parliament House in Canberra, Australia, May 8, 2020. /Xinhua

Australia, with perhaps the toughest quarantine country in the world, is no stranger to reacting strongly to even "minor technical" breaches of quarantine and food labeling laws but is reluctant to acknowledge that others have the same concerns.

Food safety, food standards and incorrect or counterfeit labeling are also hot-button topics in China, so a strong reaction is not unexpected. 

The Australian Agriculture Minister said the beef suspension was a lesson for exporters about meeting other countries' import standards but his was a lonely voice buried under the media and political outcry at this unfair Chinese "punishment" of Australia.

The myth of indispensability is dispelled by anyone who has attended the China International Import Expo in Shanghai.

They are acutely aware of the many competitors for every single commodity, service and item that, in this case, Australia wishes to export to China. Just a few Australian politicians have attended these trade fairs, so they incorrectly believe the myth that China is desperate for Australian goods and services.

The decision, after 12 months, to foreshadow anti-dumping tariffs on Australian barley is a reminder that China is not dependent on Australia.

It's a reminder that WTO rules apply to all and can be used by all. It is a reminder that for 5,000 years China managed its land and sea borders by using trade (often termed "tribute") in a sophisticated global diplomacy and trade network.

Australia is but a current example of this particular attitude that China has an obligation to trade with others. So what do we learn from this situation that smacks of one rule for the West and another rule for the rest?

We learn that China has trade choices and the sovereign right to exercise those choices. We learn that China works within the WTO framework to resolve trade disputes and that it uses the same methods and processes as used by Western member countries. We learn that China is not dependent upon a single source of supply and that like the United States and others, it seeks to diversify its trade and supply chains to reduce its dependency on a single source. 

Most disappointingly, we learn that for many Westerners, attitudes towards China have not fundamentally changed in 200 years.

Changing these outdated attitudes starts at business level by sending clear and effective messages to government about trade in a China environment.

Business must also work with local business associations and international associations like the Silk Road Chamber of International Commerce to educate others about appropriate practices and attitudes.

Disrespectful megaphone diplomacy cannot be allowed to override quieter and more effective diplomacy based on mutual respect that delivers reasonable benefits for all.

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