"The world's most important bilateral relationship, the US-China relationship, is clearly strained - trade tensions have escalated, the collateral damage is spreading, the global trading system is under real pressure," Scott Morrison said in a speech in Sydney, reported Efe news.
With a few days to go before the G20 summit in Japan - which will bring together leaders of China, US and other countries - Morrison urged the world's two largest economies to resolve their trade dispute in accordance with the World Trade Organization and without undermining the interests of other parties, including those of Australia.
The US believes that the regulated trading system in its current form does not have the capacity to cope with China's policy practices and economic structure, Morrison said.
"Many of these concerns are legitimate. Forced technology transfer is unfair. Intellectual property theft cannot be justified. Industrial subsidies are promoting over-production," he added.
The rules-based system needs to be reformed to meet new challenges, including the emergence of large developing economies, changes in trade patterns, and new technologies, Morrison said.
US and Chinese Presidents Donald Trump and Xi Jinping, respectively, are expected to address the bilateral trade dispute during Friday's summit in Osaka which has led them to impose mutual tariffs on many products over the past year.
( With inputs from IANS )