Prime Minister Malcolm Turnbull has brushed off concerns China could use trade restrictions as leverage against the Australian government's stance on the South China Sea and foreign investment.
Mr Turnbull was speaking as world leaders at the Hangzhou G20 summit urged curbing a global steel glut and the proliferation of protectionism in populist politics.
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Huge gala thrown for G20
China puts on a extravagant gala performance for the global heads of state attending the G20 summit in Hangzhou.
The spectre of rising protectionism has emerged as a central theme of the G20, with world leaders, including summit host and Chinese President Xi Jinping, stressing favouring domestic industries by taxing or restricting imports would only further crimp sluggish global economic growth.
Mr Turnbull has been particularly active at the summit in urging world leaders to ratify and implement the World Trade Organisation's trade facilitation agreement, which would boost global GDP and create 21 million jobs, while also making it harder for countries to reinstall trade barriers when faced with domestic political or economic pressures.
In his meeting with Mr Xi, Mr Turnbull also urged China to commit to the WTO agreement while pursuing greater economic reform "behind the border", enabling more open access.
"Most countries nowadays have relatively low tariffs relative to the past but there are a lot of challenges of licensing and approvals and regulation which can nonetheless constitute very significant barriers to trade," Mr Turnbull said in Hangzhou on Sunday.
"Frankly, some countries use these non-trade barriers in order to achieve a bit of de facto protectionism; in some countries, it's just a question of bureaucracy and red tape."
With the China-Australia Free Trade Agreement having come into force, tariffs across a vast range of agricultural products have dropped, but access and customs requirements have remained tricky for Australian exporters to grapple with.
The Australian Financial Review suggested the possibility of political motivation when it reported shipments of fresh milk from Australia had been blocked from entering China, purportedly because of food safety issues. The official Xinhua news agency said Australian dairy exporters would face "strengthened supervision" as a result.
Asked on Monday whether his comments on China needing to "reform behind the border" suggested concern at the scope for it to make political retaliations through protectionist trade policy, Mr Turnbull said: "We are simply focused … on ensuring that markets are genuinely open and trade is genuinely free.
"What that means is that you need to ensure that even if you bring down a tariff, there aren't licensing and regulatory provisions that in one way or another, provide perhaps as high or even a higher trade barrier."
As diplomats thrashed out the final wording of the G20 summit official communique, pointed words were exchanged over China's steel overcapacity, which has flooded the world with cheap steel.
European Commission President Jean-Claude Juncker said it was "unacceptable" the European steel industry had lost so many jobs in recent years.
"Overcapacity is a global problem, but there is a particular Chinese element," he said.
It is not without irony that sections of the global financial press have highlighted the Australian government's decision to block Chinese bidders for electricity network Ausgrid and cattle company Kidman & Co on national security grounds as examples of rising protectionism. Mr Xi directly raised the issue of foreign investment in Australia in his meeting with Mr Turnbull on Sunday.
Mr Turnbull said on Monday that friction between Australian and China "is very modest, relative to the scale of the relationship", and rejected suggestions – including from former prime minister Paul Keating – that Australia did not have a coherent foreign policy on China.
"Australia does have a thoroughly independent foreign policy," he said. "We are a thoroughly independent nation, and we don't have to choose between China and the United States."