China Slaps Tariff on Coal Import, Aussies Miffed

Just one month before the planned completion of the long-awaited Sino-Australian free trade negotiations, Beijing announced a new tariff on coal imports that experts say could potentially have significant implications for the trade talks, which have been underway since 2005.

The regulation, which went into effect on 8 October, would raise import tariffs on non-coking coal to 6 percent, and on coking coal and anthracite coal to 3 percent.

The announcement comes just weeks ahead of a looming, self-imposed November deadline to clinch a trade deal. The planned conclusion of negotiations has been set to coincide with pre-G20 meetings in Brisbane that are being hosted by Australian Prime Minister Tony Abbott, with Chinese President Xi Jinping expected to attend.

Although the tariff is not specific to the resource-rich Oceanic nation, it will likely have its greatest impact there, given that coal is Australia’s single largest export to China.

Speaking from a meeting of G-20 finance ministers on the sidelines of the International Monetary Fund Annual Meetings, Australian Treasurer Joe Hockey said he was “surprised” at China’s “unilateral” and “harm[ful]” decision.

Australia has a “right to respond” during trade negotiations, he added.

China Protects Domestic Mining

The move comes as China’s domestic miners struggle to adjust to price drops and cost increases, and the decision has been read by analysts as an effort to help the industry.

Whereas years of explosive growth fueled a coal boom both domestically and in countries such as Australia, a slowing in the Chinese growth rate and an increased emphasis on renewables has seen the global coal supply overtaking demand.

In recent months, coal prices have plummeted, hitting Chinese producers particularly hard; estimates suggest that more than two-thirds of Chinese coal operations are currently unprofitable.

Having tied his first term inextricably to the success of the coal industry and enhanced trade with Asia, Prime Minister Abbott could face a significant setback if FTA talks sour.

Abbott, who famously led the first successful effort to repeal a national carbon tax earlier this year, called the Chinese coal tax a “hiccup” on Friday, before assuring media that negotiations would continue on schedule.

On Monday, Abbott remained upbeat as he attended a mine opening in Queensland. “Coal is good for humanity,” Abbott proclaimed, adding that he believed coal would be the world’s principal energy source “for many decades to come.”

Last year, China imported over 61 million tonnes of Australian coal. Meanwhile, the total value of trade between Australia and China stood at US$120.2 billion, making Australia China’s second-largest trading partner.