China and Australia, after years of delay, are now moving to finalise a Free Trade Agreement (FTA). There is a silent partner at the table. Both countries are confident a deal can and will be done, with a wide range of beneficiaries. On the Australian side, it is wool, dairy and meat producers who hope to gain the most.

The invisible presence at the negotiating table is the indigenous wool and dairy producers of China’s far inland, whose traditional pastoral livestock economy is being wound down and excluded, at the very time urban China’s demand for dairy, wool and meat is booming.

Not so long ago, it seemed improbable that China would take to dairy products. It was often said the Chinese are lactose intolerant. Not so. The hippest health food of the new rich in China’s cities is yoghurt. Dairy demand is booming so much that supply struggles to keep pace, especially in Inner Mongolia’s China’s main domestic source, its industrial reputation badly damaged by the deliberate addition of melamine powdered plastic to powdered infant formula, ruining the kidneys of hundreds of thousands of Chinese babies. China’s new middle class want not only milk, but safe milk, and Australia looks on while New Zealand exports boom. Hence the urgency of an FTA.

Australia rode to prosperity over the past 30 years on the back of a simple concept: complementarity. What China needs is what Australia has, in abundance. They can’t get enough of our coal, iron and many other minerals, wool, cotton, maybe soon natural gas. Our prosperity is the result, almost the only developed economy to have avoided a recession for over two decades.

But the neatness of complementarity isn’t the whole story. In some ways, Australian and China are competitors, not at all complementary, especially when it comes to the economies of the poor provinces of far inland China. Australia and China are the world’s two biggest grasslands, and in China, that means the grasslands are in troubled minority ethnicity areas including Inner Mongolia, the Tibetan Plateau and Xinjiang. These are the pastoral regions, vast pasture lands where sheep, cattle, yaks, goats and sturdy horses thrive. For thousands of years they have produced wool, butter and much more, in abundance, while maintaining sustainable grasslands by always moving on well before exhausting the grasses.

In 2006 the first railway line across the Tibetan Plateau opened for business. China’s official media featured stories of the opportunities for Tibetan nomads to make their fortunes selling their surpluses to distant urban markets. It didn’t happen. No entrepreneurs came forward to process, value add, package and market Tibetan dairy products, not even after the Inner Mongolia dairy factories ruined their reputations in 2008 by adding melamine to milk powder. To this day Chinese mothers anxious for the health of their babies try to source tins of safe infant formula in Hong Kong, even in London or on visits to Australia. Little wonder the dairy industry, in Tasmania and Victoria, are keen on an FTA, as soon as possible.

Even though long life milk could easily get from Tibet to the urban markets of China, many of the most productive Tibetan pastures are actually being depopulated, by official decree, of both people and animals. Since 2003 a policy of “closing pastures to grow more grass” has been in place in the Tibetan upper watersheds of the Yangtze and Yellow Rivers.  Hundreds of thousands of skilled pastoralists are now semi-urban fringe dwellers, their livelihoods and rangeland management expertise made redundant by the grazing bans. For China, watershed protection for downstream lowlanders comes first; the pastoral nomads are surplus to requirements.

This is not the first time Tibetans have missed out on adding value to their traditional economy. Back in the 1980s, when China first opened up, wool scouring plants were built by every county government in China’s vast grassland. The idea was good. Instead of greasy, unsorted wool going to market, with semifine fibres mixed in with coarser grades, wool would be treated with respect, as in Australia, to be sorted, washed, carded and combed, a new industry that could supply China’s coastal woollen mills with a high grade product.

But the local government cadres who built and ran the wool scours were greedy, too keen to get rich quick. They built too big, borrowed too much, competed with each other for raw materials, drove profit margins down and down and finally went broke after trying to fool the woollen mills into paying for heavier bales by adding stones. Not only did the local governments lose the wool war they started, but ever since Tibetan wool has languished, deemed irredeemably low grade, suitable only for beating into felt.

The integration of Tibet into the Chinese economy could be highly beneficial for all concerned, as the Dalai Lama has said. The complementarities exist. But it hasn’t worked out that way. Development in Tibet has ignored the traditional pastoral economy, failed to invest in it, focussing instead on enclaves of mineral extraction, urban hubs, highways, power stations and now a mass tourism industry, none of which do much for Tibetan employment, incomes, poverty alleviation, or even creating much by way of linkages between the Tibetan economy and the infrastructure-driven modern economy imposed from above.

All of this is known to Australian agricultural economists who have worked in China over several decades. Although Australia  has provided some technical assistance to Tibetan pastoralism, it is Australia that has benefitted enormously as the source of almost all of China’s wool. Any qualms about Australia trumping the under-invested Tibetans is set aside by claiming that the fine wool Australia produces, and the coarse wool Tibet produces are two quite separate industries, that don’t compete. Complementarity yet again.

And yet again, that’s a tad too simplistic. Even with almost no assistance in breeding low-micron fine wool sheep, Tibet has plenty if semi-fine wool. As the World Bank said a decade ago: “China’s past initiatives to develop a fine wool industry have succeeded in developing a livestock resource and advancing skills in animal husbandry. However, the product has not been able to compete with imported wool because herders have had no proper incentive to present the product for sale correctly. Therefore, the incentives faced by herders needs to be made the central focus of fine wool activities….. Wool of medium fineness (23-25 microns), is often referred to in China as “unsellable”, but in fact makes up a large proportion of Chinese wool imports. Similarly, China has a well established carpet industry that needs supplies of white strong (27-40 micron) wools: several Chinese breeds can and do produce such wools, for which prices are currently very low…..  The current wool prices received by herders are so far below national and international levels (adjusted for transport and quality considerations) due to the shearing, grading and baling practices.”[1]

Tibetans wish the China-Australia FTA well. But not everything is win-win. The excluded Tibetans fall further behind. Australian  dairy exports will boom, as Australian wool into China did decades ago. At the same time, there is much Australia could do to help the pastoralists of Tibet.

It might seem strange that the dairy farmers of Australia and New Zealand compete with the pastoral nomads of Tibet for the health-food fashionistas of China’s cities. That is no more strange than recognizing that Tibetan depoits of copper, gold, silver, lithium and many other metals compete with Australian mines to supply the world’s factory, now shifting inland from coastal China, moving closer to Tibet. Since Tibetans gain nothing from mining other than toxic environmental legacies, that’s a competition Tibetans are happy to lose. But Tibetans do want a chance to enter the modern economy, on their own terms, making maximum use of their comparative advantage in livestock production. They have not been given that chance, and are now excluded not only from urban markets but from their own pasture lands, deemed surplus to China’s requirements.

Yet China is not always insensitive to minority ethnicities.  China’s resistance, in the current FTA negotiations, to increasing access to the Chinese market for Australian sugar, is on the grounds that sugar in China is grown in minority areas, and they deserve special protection. So far, no-one is helping the Tibetans, who are being integrated into the global economy, but in ways that make their traditional strengths redundant. When the Dalai Lama speaks of the potential for Tibet to benefit from integration with China, it’s not what is actually happening that he had in mind. We can all do better.

Do the Tibetan pastoralists, starved of investment and marketing help, shut out of China’s domestic markets, now want a say in the terms of the China-Australia Free Trade Agreement? No. But now we know this FTA disadvantages Tibetans further, Australia could invest modestly in exporting our successful Landcare model to China, so Tibetan pastoralists can work, with government help, on their pasture lands, to repair degrading areas. In Australia we don’t impose grazing bans and put graziers on the dole if the land they lease deteriorates. We work together to solve problems of watershed protection and land management. Let’s help China regain the trust of the Tibetans, by helping them all to be more productive.



[1] World Bank, Gansu and Xinjiang Pastoral Development Project Appraisal Document, Report #25703-CHA, 2003, 23, 42, 44

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1 Comment

  1. None of us can tell who is lie who is not, u r considering peploe in Tibet, I am considering the peploe as well, what can bring them a better life?what they want?Peace and development.Don’t talk about the human rights so loud here, think about what the western done in middle east first!!! Also, does the Tibet issue really have a matter to the Olympic? Stop it then what can those Chinese get for all their effort? Do u know how many ppl r expeccting the Beijing2008? Who will stand out for them? we don’t know politics, we just want peace and a success Olympic, why we can’t stay where we r and do our own stuff instead of creating a new war in words?

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