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China FTA to boost wool sales: report

The Age

China FTA to boost wool sales: report

October 10, 2005

Australian wool producers would reap a $780 million windfall if barriers to trade with China were ripped down, a new report has found.

The Australian Wool Innovation-commissioned report into the benefits of the proposed Australia-China free trade agreement (FTA) would boost wool sales to China by more than 20 per cent over the next decade.

It also found China’s clothing and textiles industries would be $A516 million better off as exports to other nations soared.

Australia and China this year formally began FTA negotiations, although a final deal is not expected for several years.

An analysis commissioned by the two governments estimated an FTA would boost the Australian economy by up to $23 billion, and China’s economy by up to $83 billion.

The new report found Australian wool growers would benefit mostly from an end to the tariff rate quota system on greasy and lightly processed wool enforced by China.

Wool sold above the quota attracts a tariff of 38 per cent.

Wool importers also face problems with the administration of the tariff rate quota, and with a charge imposed by China on the testing of wool.

By dumping the quota and associated tariff, the report found Australian wool exports would soar more than 20 per cent than current levels.

This would add between 16 cents and 18 cents to every kilogram of greasy wool sold by Australia to China. The sheep industry’s farm cash income would grow by almost seven per cent.

Deputy chair of Australian Wool Innovation, Brian van Rooyen, said it was clear both countries stood to gain from an FTA.

"The industries in both countries have much to gain from wool’s inclusion in an Australia-China FTA," he said.

"Over the next five years China will command 62 per cent of global apparel wool demand. If Australia is to benefit from this expansion, restrictions to trade must be removed."

Around 50 per cent of Australia’s national clip goes to China, up from 20 per cent in the mid-1990s.

China is the world’s biggest importer of wool, double the size of the next largest importer, Italy.

The report found that by getting rid of its high levels of protection, China itself would be much better off under an FTA with Australia.

It found the value added to production in textiles would climb by $516 million, and that exports overall would be up $1.7 billion if China adopted free trade.

The report also found that because of the differences in the Australian and Chinese wool industries, wool production in China would actually increase under an FTA.

 source: The Age