Why this is important to Wisconsin businesses: Particularly in light of the pandemic, companies are looking to move beyond dependence on Chinese suppliers.

Many companies in Australia are reexamining their supply chains. The recent global economic shutdown has highlighted Australia’s dependence on a single source of supply across many import categories, some of which are in industries which support critical infrastructure.

A report published by the UK-based Henry Jackson Society in May 2020 revealed that Australia is strategically dependent on China for 595 categories of goods, of which 167 have applications in critical national infrastructure. That is, more than 50% of Australia’s imports in these specific categories are sourced from China.

In recent months, Australia has experienced shortages of supplies in a variety of areas, including personal protective equipment, medical products, fertilizers for the agricultural sector, construction materials and more.

In response to the impact of COVID-19 on the economy, the Australian Government released the largest stimulus package in the country’s history, totaling $320 billion AUD ($ 219 billion USD), and extra funding is currently being injected into the construction industry to fast-track shovel-ready projects. Most recently, the New South Wales state government announced a $3 billion AUD ($2 billion USD) infrastructure and job acceleration fund, creating a $100 billion AUD ($68 billion USD) infrastructure and jobs pipeline in the state. Australian companies that hope to participate in these types of projects in the future are looking to shore up their sources for supplies of vital inputs to ensure they can deliver on project commitments.

An April 2020 EY article noted that Australian company boards and management are now actively looking to practical, near-term solutions to guarantee vital inputs, with a focus on identifying multiple sources of supply for key items.

Australian industries are specifically looking to move away from depending on China as the single major source of supply for many categories. As they seek greater geographical diversification in their supply chains, they are seeking to solidify relationships with secondary and tertiary supply sources for the same materials from different countries.

U.S. companies in particular may be well suited to meeting this need, as historically the U.S. has been a trusted source for Australian companies, and the Australia-U.S. Free Trade Agreement (AUSFTA) has helped to reduce trade barriers between the two nations.

According to the Henry Jackson Society report and data published by Trading Economics, import categories where Australia is particularly vulnerable to supply interruptions include but are not limited to:

  • Construction supplies such as glass, furniture, nuts, screws and bolts
  • Plastics and plastic articles
  • Medical equipment and pharmaceutical goods
  • Articles of iron and steel
  • Products used in the mining and metal production industries, such as bucket-type elevators, conveyers and ingot molds for metallurgy
  • Chemicals and fertilizers such as magnesium of greater than 99.8% purity, 1-cyanoguanidine, tributylin compounds and manganese

Data published by the U.S. Department of Commerce’s International Trade Administration shows that Wisconsin’s top exports to Australia in 2019 were non-electrical machinery, chemicals and electrical equipment. These are areas where Australia has historically depended on China, and Wisconsin exporters may be poised to take advantage of a expected gradual shift in Australia’s supply chains.