A slow boat to Chinese access at FTA talks
The Australian
A slow boat to Chinese access at FTA talks
China wants Australian resources and freedom to export here first, report China correspondent Rowan Callick
March 13, 2006
AUSTRALIAN negotiators face an uphill battle persuading China to grant special access to its service industries or farmers, in free trade agreement negotiations now in full swing.
A leading Chinese trade expert, Commerce Ministry researcher Mei Xinyu, stresses that China’s major interest is to deepen the economic meshing between the countries where it is patently complementary: importing Australian resources and selling manufactured goods in return.
China appears to be, above all, seeking to involve the two governments in supervising more favourable pricing and supply guarantees for the crucial resources trade than corporate negotiations are likely to achieve.
Dr Mei says: "We can’t expect completely free entry to all markets through the World Trade Organisation. That’s why we are working towards regional trade agreements, choosing partners that are especially complementary, with less competition and less likely trade friction."
He says a deal with Australia offers several advantages, including that "among Western countries, the Australian Government has a stronger willingness to co-operate with East Asian countries".
Australian people appeared receptive to Chinese manufactured goods, he says. "But having few barriers doesn’t mean no barriers. We hope that those barriers can get less and less, and even disappear, not only for products but also for Chinese capital and human resources."
Australia, he says, is China’s priority market in the bilateral trade talks.
"When our goods enter other markets, we meet more and more trade barriers and friction. We can’t hope that all countries will reduce their barriers simultaneously. So we are looking for partners ... to reduce barriers, country by country."
China, which Dr Mei says is now the largest buyer of natural resources, is seeking stable and reliable supply of those that it needs to drive its growth, targeted at 8 per cent in 2006.
"We are looking to set up long-term relations with suppliers (for) quantity and more stable pricing.
"Even though long-term contracts would be signed between companies, we believe an FTA between the two Governments could help to create an atmosphere or situation for the signing of those contracts."
He says the iron ore price is "a hot issue" now. "We understand the Australian suppliers want a higher price, but China’s steel industry is facing a plight where the cost of materials, labour and environmental protection are all increasing, but the market price for steel is falling."
The industry is "like a camel under a heavy burden. Even a light fur loaded on top could cause it to collapse". Its cash flow, he says, is very erratic.
The central Government has also refined assessment criteria for officials, he says, giving them less motivation to push higher steel production. "And the price should be set by China, as the largest buyer."
Dr Mei says: "We would like to see, after the signing of the FTA, that Chinese companies could go to Australia to invest in natural resources, including in exploration. We don’t want our companies to encounter in Australia" the hostility that prevented the China National Offshore Oil Corporation from buying Californian oil corporation Unocal last year.
In return, he says, Australian companies could enjoy easier market entry for their commodities into China, for example through lower Customs clearance and import tax charges. Australian and Chinese companies could be encouraged by the FTA "to get closer and set up longer-term buying relations".
But Dr Mei, who works at the Chinese Academy of International Trade & Economic Co-operation, run by the Commerce Ministry, says it is unlikely an FTA will concede special access to Australian financial institutions, beyond their involvement in the resources trade.
He says: "They will have to rely on their own capacity to compete" in the Chinese market.
Australian banks are seeking to be able to issue credit cards in China, but Dr Mei says that has "recently become a focus for Chinese banks. For foreign institutions to issue cards without the co-operation of Chinese banks would be very difficult".
China’s barriers to agricultural products are already the lowest in the world, he claims.
And "China and Australia share a common opinion on the need for Europe and the US to cut their farming subsidies".
Australia has been hoping that China will be prepared to open up preferentially. Dr Mei says: "It is not in the plan to open on a trial basis with certain countries. We want (Chinese companies) to become more competitive on their own. That’s why we reduced our tariffs, to allow them to improve their competitiveness."
Another Australian hope is to reduce non-tariff barriers. But, he says: "I don’t see the Australian service industries facing such barriers when they come into China. China has restricted the import of some other products, but not from Australia. The challenge to Australian enterprises is not market entrance, but whether they can be competitive here."
The overall FTA process has been "quite smooth", he says.
