A vineyard in Western Australia. Many winemakers in Australia are changing the kind of wines they grow to appeal to the Chinese export market, which has grown rapidly in recent years.
SYDNEY, Australia — To understand why the Trump administration has struggled to build a global coalition of allies in its trade war with China, it helps to understand what is happening in the rolling hills and valleys of Australia’s southeast and southwest coasts.
Vineyards that once made many crisp white wines and fruity red ones popular with American buyers are now also producing more austere reds favored by a segment of a rapidly expanding market of Chinese drinkers. Since 2008, Australia’s wine exports to the United States have fallen 37 percent; exports to China have risen 959 percent.
The tension is evident in many countries with deep economic ties to the United States, including South Korea, Japan and Germany. But perhaps nowhere is the tug more vivid than in Australia, long one of America’s closest allies, which now finds itself pulled in the opposite direction by China, its largest export market.
In national elections scheduled for May 18, both major parties have called for a balanced foreign policy, aimed at maintaining the country’s longstanding national security alliance with the United States — while also looking to nurture the relationship with China.
Australia’s cultural affinity with the United States remains strong. Australian and American troops fought together in World War II, and more recently in Afghanistan and Iraq. The countries’ intelligence agencies share some of their deepest secrets. But in terms of cold hard (Australian) dollars, the nation’s business and political leaders now speak of the world’s two largest economies as equally important partners.
Australia is essentially trying to navigate the world economy as a midsize country maintaining good relations with both superpowers. It is trusting the United States as an ally on national security matters but also knows that its economic future, and present, are tied to China. Australia and China have had a trade agreement since 2015.
China’s huge population and rapid growth will inevitably pull more countries into its economic orbit. But that strong pull also reflects recent steps by the United States to undermine institutions that Americans themselves helped create to guide the global economic system.
A look at the structure of the Australian economy shows why. The most economically consequential exports are commodities, including iron ore, coal and natural gas, which have helped provide raw materials for China’s economic surge over the last three decades. But these natural resource industries are only part of the picture.
There are about 165,000 Chinese-born students in Australian universities, a crucial revenue source.
Since 2008, Australia’s wine exports to China have risen 959 percent.
The Australian wine industry was once almost entirely focused on domestic production, then expanded to exporting to Britain and then the United States. But in the last 10 years, three forces have combined to make China the largest export market for Australian wine. The ranks of the Chinese middle class have grown astronomically. A 2015 trade agreement between the two countries reduced tariffs. And an extensive marketing campaign has helped ensure that many Chinese consumers would favor Australian labels.
In 1994, Catherine Cervasio started a company, Aromababy, that makes organic skin care products in Melbourne. She soon began exporting to Hong Kong and Singapore, and since 2008 has exported to the Chinese mainland, which now accounts for about half of the company’s revenue.
The company is not yet exporting to the United States, though she hopes to develop an American business eventually. “It’s a lot further geographically,” Ms. Cervasio said. She visited China seven times last year, and has taken lessons in the language.
“There is more synergy among Asian markets and Australia,” she said, especially around personal care products.
In effect, the combination of population and geography made an Australian shift into the Chinese economic orbit inevitable once China began opening its economy in the 1980s.
By Neil Irwin
Excerpted from www.nytimes.com and abridged