A trade agreement with China could bring big rewards for Australia

Getting these trade barriers to zero, either immediately or on a faster track than would be the case under China's WTO commitments, would give Australian exporters of services and manufacturers very real competitive advantages.

The Trade and Economic Framework Agreement, adopted by the Australian and Chinese governments last week, should provide a useful platform for the broader FTA negotiations.

Other useful sources of information would, of course, include the database on trade barriers around the world maintained by the Market Access Taskforce within the Department of Foreign Affairs and Trade, and the experiences of the great many Australian firms already on the ground in China.

An important priority for Australian negotiators of an FTA with China must be more liberal access to China's services sector.

While much was achieved during the WTO accession negotiations, further improvements should be pursued in areas such as business and financial services, education and training, information and communication technology, legal and transport services (especially distribution services to China's massive manufacturing sector).

As with the other FTAs that Australia has concluded - with New Zealand, Singapore and most recently Thailand, and prospectively with the United States - an agreement with China must be bold and comprehensive.

It must also cover substantially all trade between the two countries, a requirement imposed upon Australia and China as members of the WTO. And, the third test of the adequacy, or otherwise, of an ACFTA must be that it is "WTO-plus".

Quite simply, it must deliver trade liberalisation outcomes for Australia and China beyond those that would have come from ordinary negotiations within the mainstream of the WTO system.

Absent these three tests - bold and comprehensive; covering substantially all trade; and WTO-plus; - any final agreement will be window-dressing. Of great assistance in the FTA negotiations will be the substantial degree of complementary trade between the two countries, which is fairly typical of the Australia-North East Asia trade profile over the past 50 years.

That is, Australia's competitive advantages as an exporter of agricultural and mineral commodities (evident in the massive liquefied natural gas contract), and potentially in services, match those of China as a manufacturing powerhouse.

In this regard, the Australian Chamber of Commerce and Industry is planning to undertake a major econometric modelling project over the coming year, looking at the trade competitiveness and complementarity between Australia and China.

Where we have done these projects in the past, for example for Japan, Latin America and the Middle East, such modelling has provided a fascinating insight into potential opportunities for Australian exporters.

Two-way trade between China and Australia is estimated to have reached $21 billion per year. An FTA will greatly expand that to the benefit of all Australians.