Breaking Down the Walls: Institutional Change and the History of Australia-China Trade

Eric Jones’ influential works, The European Miracle and Growth Recurring, remind us that while there is a propensity for intensive economic growth, it is not guaranteed. Looking across the globe and historical periods, Jones observed that such growth often results from reshaping institutions to enhance the effectiveness of market forces. The trade history between China and Australia exemplifies this, showing how institutional reforms facilitated the rapid growth in trade. After 1972, pragmatic political relations and market-oriented reforms in both countries expanded trade complementarities, stimulating trade growth. However, recent geopolitical tensions and China's trade bans strained political relations. Although China subsequently removed these trade restrictions, leading to a resumption of trade, the experience raises questions about the future. Will the political relationship normalise, allowing trade to continue to flourish; or will broader geopolitical developments lead to the reconstruction of the walls that previously divided the two countries. Even if the current stable political relationship is maintained, will trade complementarity between the two countries expand or contract in future?