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Abbott’s line in sand on China FTA

The Land | 03 Oct 2014

Abbott’s line in sand on China FTA


AUSTRALIA is prepared to walk away from a much touted free trade agreement (FTA) with China unless there are major last-minute concessions on farm products, according to well-placed government sources.

Prime Minister Tony Abbott hopes to end a negotiating marathon now into its ninth year by signing an agreement with China’s President Xi Jinping in November. That is when Mr Xi is expected to make a state visit following the G20 summit in Brisbane.

A successful deal could help define Mr Abbott as a prime minister who can do business with China while deepening security ties with China’s rivals, much as former prime minister John Howard was able to do by signing a huge LNG export deal with China in 2002.

But sources familiar with recent negotiations say the biggest obstacles that have prevented agreement since 2005 are still firmly in place and they can only be removed at the highest political level.

Ultimately, they say, any deal will hinge on China’s willingness to radically improve market access for beef, lamb, dairy, horticulture, wine and other farm products to at least match the access that China gave New Zealand farmers in a free trade agreement signed in 2008.

"We have to get an agriculture deal that we can sell," one source involved in the process said.

China’s ’last minute’ approach

While some are pessimistic, others point out that China has traditionally made concessions at the last minute and may do so when Mr Abbott and Mr Xi meet at consecutive leaders’ summits in Shanghai, Naypyidaw (Myanmar) and Brisbane in November.

"You can’t cook anything until the oven’s hot," one close observer said.

Officials say the 21st round of negotiations, which took place in Beijing last month, achieved important progress in filling out the detail of a document that will extend to well over a thousand pages.

Trade Minister Andrew Robb, fresh from sealing deals with both Korea and Japan, told Fairfax Media that he will continue to negotiate in good faith and has no intention of abandoning years of effort.

"We are not for walking away. Too much work has been done and we are too far down the track to a very good agreement," Mr Robb said, speaking from Seoul.

"I will keep negotiating until we can conclude such an agreement."

But Fairfax Media understands that Mr Abbott was serious about a self-imposed 12-month deadline and cabinet colleagues will be loathe to extend Mr Robb’s negotiating licence beyond this year.

The sticking points

Aside from farm exports, Australian officials are hopeful they can overcome other key sticking points.

They hope to satisfy Chinese demands to waive Foreign Investment Review Board requirements by enlarging a private investment exemption threshold to $1 billion, in line with provisions in similar agreements with the US, Korea and Japan.

They could also introduce a more streamlined process for state-owned companies, which account for the vast majority of Chinese investment in Australia.

The 457 visa regime could be extended for select infrastructure and resource projects to partially satisfy China’s persistent demands to import thousands of lower-wage Chinese workers.

And there remains hope that China will make concessions that will create a more level playing field for financial conglomerates and other service sector firms seeking access to the Chinese marketplace.

Negotiating progress has been made in some farm sectors, notably dairy and wine, but not enough to put Australian farmers on a level footing with competitors in New Zealand.

And there is no way for bilateral negotiations to overcome less visible barriers to the Chinese market, such as the absence of rule of law, which can see tenders given on the basis of guanxi relationships and bribes, foreign companies selectively targeted by competition laws, executives arrested on flimsy allegations and assets arbitrarily appropriated.

Some sources emphasise that even a successful agreement will not radically improve Australia’s $150 billion trade relationship with China, as Australia has already eliminated most import barriers and China does not impose border restrictions on commodities imports.

 source: The Land