Canberra’s cold feet risk lukewarm FTA
The Australian, Canberra
Canberra’s cold feet risk lukewarm FTA
Rowan Callick, China correspondent
14 August 2006
How is the debate inside cabinet about what should be put on the table for the free trade agreement with China and what should be kept in the cupboard, playing in Beijing’s secretive pagodas of power?
We can’t know for sure. But it’s a fair guess that Labor’s foreign affairs spokesman - and fluent Mandarin speaker - Kevin Rudd is near the mark.
He told ABC radio last week: "If you’ve got a public rift between ministers on our negotiating strategy with China, it undermines our negotiating strategy. That’s the bottom line.
"Australia has to be a hard-line, hard-nosed negotiator with the Chinese, just as the Chinese are hard-line negotiators with us."
Australia’s negotiating team, intelligently marshalled by experienced trade diplomat Ric Wells, was given clear instructions from Trade Minister Mark Vaile and from business community feedback in the couple of years’ consultations that preceded the start of negotiations, which began in earnest three months ago.
At the top of those instructions, was that the country wanted a truly comprehensive deal. It wanted to bring in from the cold, through preferential arrangements, those many sectors that have high aspirations for access to the world’s fastest-growing economy but that have so far felt thwarted, overshadowed by the natural complementarity of sales of resources to China and imports of manufactures from China.
This has comprised the dominant message from Australian ministers, such as Julie Bishop, the keynote speaker at an FTA seminar in Beijing in April on the services sector, attended by many of China’s trade heavy-hitters.
She said then, in the prestigious setting of the Diaoyutai, the state guest house: "The importance of services is one of the reasons that China and Australia have agreed that the FTA should be comprehensive, and that it should be completed on the basis of what is called a single undertaking.
"That is, all parts of the agreement must be completed in order to reach overall agreement. This means that the negotiation of outcomes for major sectors, such as services, cannot be postponed."
Mr Vaile said in his Sir Alan Westerman Lecture last week: "The Australia-China FTA is an historic opportunity to set the terms of a more diversified trade relationship with China. FTAs can cover important areas beyond the World Trade Organisation, such as investment, competition policy and regulatory issues."
Now, however, just as the talks are about to reach the nitty-gritty stage of quantities and dollars and time scales, it appears that areas of obvious interest to the Chinese may be crossed off the list by Canberra.
These include the garment industry, in which China already dominates Australian markets, and the car industry, in which it has export ambitions but in which the key strategic decisions will be made by the global players including Toyota, General Motors and Ford.
Foreign Minister Alexander Downer was of course right when he said that Australia has car plans and TCF (textiles, clothing and footwear) plans in place, and that industry has been investing on the basis of those plans.
Another senior Coalition figure told my colleague Steve Lewis: "We should adopt a very conservative and cautious approach." And Opposition Leader Kim Beazley said: "I would hasten very slowly, because I don’t think we’re in a position to handle it."
But now that the WTO’s Doha round is dead - despite claims that it is clinging to life, it certainly resembles John Cleese’s parrot - this is the very time to hasten less slowly, especially in capitalising on those bilateral and regional deals already under way. They are essentially preferential deals, certainly inferior to the multilateral alternative but if that’s no longer available, we need to deploy them to cement our links with our strongest trading partners, of which Japan and China are first and second.
It was obvious from the time, two years ago, when Prime Minister John Howard sought to investigate an FTA with China, that Australia too would have to make some concessions.
If now, perhaps as a result of voter surveys or of sectoral lobbying, the Government is getting cold feet and only wants a deal in which Australia makes no concessions and avoids opening its markets where there are any protests, then China’s negotiators will be breathing a sigh of relief.
This will prove, they may already be thinking, a much smoother and quicker process than they had started to anticipate.
At the beginning, much was rightly being made in Canberra of the epochal nature of China’s first truly comprehensive FTA negotiation with a significant developed economy.
But if all that’s really expected, behind that rhetoric, is another painless photo opportunity for the political leaderships, that’s fine as well, Beijing may be muttering quietly.
China has already done its share of those sorts of deals, and knows the ropes well enough.
Last Wednesday, Chile’s Senate approved an FTA with China that excluded China’s exports of textiles, light engineering products, flour and sugar, and held back tariff-free access to a further 26 per cent of China’s exports, for 10 years. The unambitious deal was passed unanimously.
Reciprocally, China is holding back for 10 years, tariff reductions on 8 per cent of the current imports from Chile. And despite good intentions at the start - as with Australia - services and investment are entirely left out, maybe to be covered down the track after a review.
The Australia-China FTA is likely to be concluded in time for President Hu Jintao to sign it when he comes to Sydney in September next year to pose with his fellow leaders of the Asia Pacific Economic Co-operation forum in their akubras.
Mr Howard, who said earlier this month "there is probably no country in the world that is benefiting more from China’s expansion", may be feeling that signing a truly comprehensive and ambitious FTA with China a month or two before he leads his party into another election, may be unnecessarily brave.
What, then, is Beijing likely to hold back in return, if Canberra decides to keep protecting its vulnerable sectors? Maybe agriculture, services, investment. All three promise to cause China’s negotiators big trouble to win approval from their key constituents.
Take any two of those out of the FTA, and you’ve got a pretty skimpy agreement, even compared with the US deal. We’ll know within a couple of months if that’s the best we can expect.
What began as a win-win project is now, in these more protectionist times, starting to look more like no lose-no lose.
