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China trade plan wins few friends

The Age, Melbourne

China trade plan wins few friends

Michelle Grattan, Shenzhen, Southern China

29 June 2006

Fewer than a quarter of Australian manufacturing companies support a free trade agreement with China, according a survey by the Australian Industry Group.

The study of more than 700 companies, with a total turnover of $24.5 billion, found support had risen from 13 per cent in 2004 to 24 per cent now.

But AiG chief executive Heather Ridout told a conference in Shenzhen on the proposed FTA that the result underlined "a substantial degree of ambivalence" that was caused by issues that must be tackled.

"Australian manufacturers will only support an FTA with China if it provides tangible benefits to their businesses and their future prospects," she said, adding that the case for Australian manufacturing to back an FTA "is still to be demonstrated".

The study found Australian manufacturers were encountering significant non-tariff barriers in the Chinese market.

Several companies listed one or more issues, including lack of intellectual property protection, lack of transparency in legal and financial systems, inconsistent enforcement of import duties, inconsistent interpretation of provincial laws, different customs requirements, difficulties with technical standards and restrictions on foreign investment.

Australian consumer goods companies reported that on average 15-20 per cent of their products on the Chinese market were counterfeit.

"Many of our members see enforcement of their intellectual property rights in China as a futile endeavour and intentionally withhold innovative designs or products from the Chinese market," Mrs Ridout said.

She said China’s IP enforcement problems were also being exported. More than one in five companies in the AiG study said they had experienced IP infringements from Chinese goods in the Australian market.

"So it is central to the FTA that it delivers substantial improvements in the protection of IP rights for Australian companies doing business with and in China," she said.

The AiG believed that any FTA with China must be comprehensive, covering both tariff and non-tariff issues, and genuinely liberalising across all sectors of the economies.

The survey showed that, for Australian industry, China was now a competitor of near-equal importance to domestic competitors. More than four in 10 companies cited competition from China as an issue of concern. Forty per cent said China had caused a negative impact on profits, with the low value of China’s currency an important factor.

Prime Minister John Howard has seized on the start of Australia’s $25 billion LNG exports to China to warn that Opposition Leader Kim Beazley’s scrapping of Australian Workplace Agreements would be "a dagger at the throat" of the resource sector.

He called a brief news conference before his meeting with Chinese Premier Wen to re-enter the industrial relations debate. He had just come from a ceremony marking the arrival of the first shipment of LNG from the North-West Shelf to Dapeng’s purpose-built terminal, China’s first LNG project.

Mr Howard said the LNG sales represented huge potential for Australia’s economic future. "I asked the rhetorical question: Why put this at risk?" He said 43 per cent of all workers in the West Australian resource sector were employed under AWAs.

"If AWAs are swept away, it will affect the competitiveness of the greatest export industry this country has."

Mr Howard said there had been a sharp drop in the number of working days lost in the WA resource sector since AWAs were adopted in 1996.

"Labor and the unions’ industrial relations changes are a dagger at the throat of the successful resource sector in this country," he said.