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Australia at your service, but China still cagey

The Age (Australia)

Australia at your service, but China still cagey

By Mary-Anne Toy, Beijing

May 27, 2006

AFTER a year of skirmishing, Australia’s free trade discussions with China are taking shape, with China agreeing in principle to include the sensitive areas of government procurement and investment in any agreement.

But progress on the most contentious issue - opening up China’s lucrative services sector to Australian banks, insurance companies, telecommunications and transport companies - remained elusive.

The Chinese signalled they were interested in resources investment and greater temporary access to labour, and indicated they would table draft text on these topics in the next round of talks, scheduled for early September in Beijing.

At the fifth round of talks held this week in Beijing, the Australians tabled a draft template for an FTA agreement comprising 15 chapters, covering both goods and services and including all agricultural products. Officials close to the discussion described the engagement as positive and substantial.

Canberra is committed to signing a single, comprehensive free trade agreement that would give Australian farmers, service providers and investors greater access to the huge Chinese market.

But the Chinese have been pushing for "sequential" deals that would leave opening up the key services sector to a later date - which is what it is doing for its FTAs with Chile and the 10 members of the Association of South East Asian Nations.

Australian businesses have potentially the most to gain if access to the services sector is included under the FTA, but this is the most contentious area for the Chinese.

The Chinese had been hesitant to include investment for several reasons, including the difficulty of controlling provincial government activity and because of Beijing’s reliance on administrative measures to influence economic activity. Allowing greater foreign investment could reduce Beijing’s ability to rein in sectors of the economy as foreign companies would be harder to control.

Agreement by China to include government procurement is also important. After President Hu Jintao’s recent visit to the US, China agreed to begin talks on joining the WTO’s Government Procurement Agreement, which would allow foreign companies access to the lucrative area of government contracts.

But Australia is not a signatory of the GPA so it must win access to government tenders for companies under the FTA.

 source: The Age