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A trade agreement with China could bring big rewards for Australia

By Peter Hendy - posted Monday, 17 November 2003

Australia's current trade negotiations could place us in a unique position - and be the envy of our trading competitors - as the only country with bold and comprehensive free-trade agreements with China and the United States.

It would be a twin triumph to have agreements with the current economic giant and the coming one.

Australia is forging ahead with negotiations for an FTA with the US. The Australian government should push with hard resolve for a full-blown FTA with China. Such an agreement would have major economic, trade and foreign relations benefits for Australia.


On the trade and economic front, an FTA with China would provide Australian manufacturers, services exporters, farmers and investors, with access to one of the largest and most dynamic markets in the world economy.

Actions speak louder than words. Along with our FTAs with Singapore and Thailand, negotiation with China demonstrate that the claims of those who say that Australia is an outsider and not effectively engaged in the Asian region are wrong.

Indeed, few know that Australia is one of only a handful of countries in the world with formal recognition by China as an officially designated tourist destination - a tangible form of Australia's special standing with the Middle Kingdom.

While reaching an agreement will not be without its challenges, the commercial and economic dividends are likely to be massive.

As with similar exercises in the past, the proposed scoping study to be undertaken by officials from Australia and China should include sound econometric estimates of these likely gains.

China has come a long way over the past 25 years since the then Chinese leader, Deng Xiaoping, launched his program of "capitalism with Chinese characteristics" - replacing the failed central planning model with market economics.


China's accession to membership of the World Trade Organisation in December 2001 was another bold step by the Middle Kingdom, and one that will help cement domestic reforms and improve its foreign trade and investment performance.

While China's trade barriers are trending down under its WTO obligations, it still has some way to go and this distance is an indication of the commercial and trade gains available to Australia from a bilateral FTA.

The Australian government reports China's (unweighted) average tariff is still around 12 per cent, while for industrial products it is just under 11 per cent and for agricultural products it is more than 17 per cent.

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This article was first published in The Australian Financial Review on 28 October 2003.

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About the Author

Peter Hendy is the MHR for Eden-Monaro.

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