The case for a China trade deal
The Australian, Canberra
The case for a China trade deal
Steve Lewis
14 February 2005
THE Howard Government is moving inevitably towards a free trade agreement with China. That is no bad thing. In the absence of any meaningful progress at the World Trade Organisation, a medium-sized economy such as Australia has few options but to pursue bilateral pacts with powerhouse economies such as China.
In his most upbeat remarks to date, Trade Minister Mark Vaile has even suggested a deal could be consummated by the 2007 election. No disrespect minister, but that appears a brief time frame for what will be the most complex set of trade negotiations ever undertaken by an Australian government. Marrying our two economies, with their divergent financial, industrial, legal and political systems, will probably take much longer to formalise. Five years? A decade?
The Government must drop any temptation to fast track a trade deal for the sake of political expediency. Instead, it should focus on getting the settings right and taking the Australian people along with it as it embarks on this momentous task. Vaile and John Howard, who will travel to Beijing in three weeks’ time, seem intent on pursuing formal FTA talks despite the concerns of some ministers. Senior Government figures such as John Anderson worry about the sheer task of selling this trade deal to a wary public. Other cabinet figures, including Finance Minister Nick Minchin and Industry Minister Ian Macfarlane, are worried that it will open the floodgates to cheap Chinese imports being "dumped" into Australia. These are legitimate concerns and must be dealt with in formal negotiations. But they can be overcome.
China’s ascension as an economic superpower is unavoidable. Its massive requirements for resources and its capacity to pump out manufacturing goods at a mind-blowing rate (Volkswagen’s plant in Shanghai alone produces nearly the annual output of Australia’s car industry) gives Canberra no choice but to work out how best to leverage trade opportunities.
The Government should heed some lessons from the US trade deal. First, it must avoid perceptions it is pursuing a China deal for some starry-eyed, politically driven motive. Instead, an FTA has to be driven by a hard-nosed assessment that it is in Australia’s longer-term interests.
Second, consultations - even at this early stage - must be transparent and inclusive. Vaile says he is willing to provide Labor’s trade spokesman Simon Crean with proper briefings on the progress of talks. That is a positive step and should be embraced by the Opposition. The US trade deal was cloaked in secrecy from an early stage, frustrating many in the business world who wanted information rather than Howard bravado. Bipartisan support towards a China free trade deal is quite possible. Even likely. A suite of senior Labor figures has visited China in recent months and Crean will lead a small ALP delegation to Beijing next week.
The emergence of in-principle support for a China FTA is already evident within the caucus. But Labor - rightly - will want to ensure any such deal is comprehensive with none of the "carve-outs" contained in the US trade deal. There will also be pressure on the ALP from the union movement to incorporate declarations on issues such as workers’ entitlements, human rights and environmental matters. A two-day forum, being convened by the ACTU in Melbourne, is likely to resolve to lobby Canberra on these very issues.
ACTU president Sharan Burrow is adamant that a binding agreement with China will be second-rate unless these issues are addressed. As she bluntly says: "You cannot make our companies richer at the expense of Australian and Chinese workers." That poses a problem for the ALP. These sorts of issues are unlikely to be incorporated when the Government releases its scoping study, towards the end of March.
Kim Beazley can’t afford to say "no deal" to the Government but he will be sensitive to suggestions that he’s turning his back on the ACTU. Howard will have no such qualms. The Prime Minister obviously wants to have something positive to announce on the FTA when he visits China in April.
He is scheduled to meet Chinese President Hu Jintao in Beijing and it is odds-on they’ll announce the start of formal FTA talks. Then the hard work begins. It will be an extraordinary achievement to cement a deal given the gulf in our political and social cultures. But, as Howard told a high-level Chinese business audience in Sydney just before Christmas, there are compelling geo-political reasons to forge ever closer ties.
Australia should latch itself to this emerging world power. But equally, the onus on the Government is to get it right.
