Chapter 12 - Attitudes to the proposed FTA
The Department of Foreign Affairs and Trade (DFAT) FTA joint
feasibility study highlighted the benefits to be gained from the proposed FTA
This chapter looks at the response to this proposal from the various sectors of
the Australian economy.
Support for the FTA
A November 2004 'DHL Export Barometer' survey of
Australian exporters found strong support for an FTA with China. Almost 45 per cent of exporters
surveyed thought an agreement with China
would be positive—with 20 per cent of these very positive—while 45 per cent
were neutral and only 10 per cent were negative. Austrade's chief economist, Mr
Tim Harcourt, noted that support for an FTA with China was considerably
stronger than for the agreement with the US (25 per cent positive) and Thailand
(21 per cent positive). He added:
Generally speaking, in these
surveys exporters usually take time to warm to the free-trade agreements, but
in the case of China
they took to it positively in terms of the potential business opportunities
almost straight away.
A May 2005 'DHL Export Barometer' survey (Table 12.1) also
supported this observation, although the Thailand
and US FTAs had increased in popularity.
Forty-one per cent of respondents were positive about an FTA with China,
compared with 37 per cent for the Australia–US FTA and only 31 per cent for the
FTA currently operating with Thailand.
Table 12.1: Australian exporters' attitudes to the FTAs
Source: DHL Export Barometer: Australian
Export Trends, May 2005, Issue 4, p. 4.
The National Farmers Federation
agricultural representatives are generally supportive of an FTA with China.
The committee received evidence from the National Farmers' Federation (NFF). It
was unequivocal: an FTA must give Australian agriculture entirely free access,
on the basis of a single undertaking, over the shortest timeframe possible. Moreover, it insisted that the
agreement must not only reduce tariff barriers and quotas, but also promote a
'more transparent and predictable Chinese import system'. The NFF also stressed the importance
of reducing non-tariff barriers. It viewed the FTA as an avenue to:
improve transparency of China's sanitary and
phytosanitary (SPS) standards;
seek Chinese recognition of Australian
quarantine and SPS regulations;
negotiate further improvements in China's
customs procedures; and
remove investment barriers in China to enable
The NFF's enthusiasm for an FTA with China
stems from 'the impressive growth of the Chinese economy, strong population
growth...the rapid urbanisation of the population and westernisation of the
Chinese diet'. It also noted that China
is an important supplier of pesticides, herbicides and fertilizers to Australia,
[I]t is important that Australian farmers continue to have
access to these competitively priced products to ensure that we are not placed
at a global disadvantage compared to producers in other countries with which we
compete on the global market.
The NFF argued that Australian agricultural exports to China
would increase with or without an FTA. It acknowledged that the Australian
agricultural sector was eager to secure an FTA with China,
but not at the expense of a comprehensive agreement.
The Department of Agriculture, Fisheries and Forestry's
(DAFF) submission to the committee was based on very similar lines. It maintained
that the FTA 'has the potential to deliver great benefits for the Australian
agriculture, fisheries and forestry industries', provided it is comprehensive
in abolishing tariff and addressing non-tariff issues. The department also viewed non-tariff
issues as important, particularly import licensing and labelling and import
This is consistent with the attitude of various
Australian agricultural industries to the FTA. Table 12.2 shows that all five
of these key export industries have expressed concern that the FTA must address
Table 12.2: Agricultural industries' attitudes to the FTA
'We want to see the tariffs and quotas removed, but the key with China
is the post-border issues.' '...a comprehensive FTA will clear obstacles
along the wool supply chain that restrain export growth to this $1 billion
annual wool export market. The FTA should increase capacity for real export
growth through the liberalisation of not only tariffs and quotas, but also by
addressing beyond the border issues such as quota administration and the
mandatory re-testing of Australian wool.'
'Australian Pork Limited supports efforts by the Australian government
aimed at establishing a free trade agreement between Australia and China...To
lay the platform for the Australian pork industry's long term expansion into
the high value end of the Chinese pork market, there should be an emphasis on
reducing tariffs, reducing red tape in China, ensuring China adopts
international standards for food production and residue levels such as
defined by CODEX.'
'There are considerable benefits to the wine industry from commencing
negotiations with China on a Free Trade Agreement...Clearly it will be
difficult for China to accept a rapid reduction in tariff
barriers...[T]herefore, while we should seek elimination of tariffs over the
longer term, the major benefits to the Australian wine industry will come
from liberalising technical regulations. In particular, these include
labelling, certification procedures...and food standards inconsistencies.'
'An open market and no tariffs and quotas will give us much greater
access to an extremely significant customer and this is great news for our
industry that exports over 95% of its crop. However, we are concerned about
some of China's spinning mills honouring contracts, due to their
ability to selectively choose between domestic supplies and imports,
depending on the better price. We consider it vitally important that sanctity
of contract be addressed in these negotiations.'
removal of all tariffs on dairy product lines' or 'a maximum of three years
to phase the tariffs to zero'.
that Australia will have no worse treatment for dairy imports than is
negotiated between China and any other country (particularly New Zealand).
detailed harmonisation provisions on dairy SPS, animal welfare and residue
levels for food imports.
Australian mining representatives
The committee heard that the strength of current and
projected Australian mineral exports to China
principally reflects the unprecedented demand for energy and strategic
minerals. Chapter 4 noted that the general tariff rate on iron ore is zero:
chapter 7 highlighted China's
increased need for various Australian mining exports.
In this context, an FTA is not a necessity for the
Australian mining sector. The head of government and corporate relations at Rio
Tinto, Mr Lyall
Howard, told the committee:
We have no need of an FTA to sell iron ore, but there are small
trade issues that can be dealt with in the context of an FTA. DFAT has cast the
net around, in the industry, to find out what issues to take to the table, and
we have come up with a long list of issues. If any of them can be resolved, that
will be good news for us, but the fact that there is not an FTA at the moment
is not a barrier to the growth of our business.
However, Rio Tinto representatives did indicate that an
FTA could address quarantine and non-tariff barrier issues. Under Chinese law,
iron ore is listed for compulsory examination under import. Mr
from Rio Tinto Iron Ore told the
committee, '[w]e have the right processes in place here in Australia
to manage our products there, so we see it as an unnecessary impediment'. Rio Tinto's submission to the
inquiry indicated that an FTA might also lift current restrictions on the
transportation—by rail and water—of iron ore imports to inland locations. Other
issues of concern for the company are the Chinese law prohibiting a wholly
owned foreign enterprise from obtaining a full import–export licence, and the
need for enforceable competition laws and contracts in China
to attract Australian joint ventures.
While Rio Tinto's interest in an FTA is directed at non-tariff
barriers, the Minerals Council of Australia noted that China
retains 'commercially significant' tariff barriers on a number of products. The Council insisted that these
tariffs 'serve no apparent industry policy purpose and appear to have been
retained solely as revenue raising measures'.
It also believed that China's
recent imposition of import licences on iron ore should be reconsidered, given
that the recent increase in iron ore prices was a reflection of the increased
demand for the product.
Opposition to the FTA
The horticultural industry
agricultural sector, the horticultural industry has expressed strongest concern
about the prospect of free trade with China.
Representatives of this industry claim that horticulture is the one area of
agricultural production in which China
has a competitive advantage. They fear that free trade with China
will mean cheap imported food will 'flood' into Australia. One analyst has claimed that Australia
could become a net importer of vegetables within three to five years.
The horticulture industry's peak body, Ausveg,
estimated that the influx of Chinese fruits and vegetables will cost 5,000 jobs
and lose the industry $500 million a year.
Ausveg chief executive, Mr Euan
Laird, claimed the existing five per cent
tariff on some vegetable imports was the difference between commercial
viability and bankruptcy. Mr
Laird was among several in the Australian
horticultural industry who have accused the NFF of trading off horticulture to
aid broadacre industries such as wool and grain.
The prospect of an FTA with China
has reignited arguments in Australia
about the need for more comprehensive and prominent country-of-origin food
labelling laws. Ausveg, representing Australian fruit and vegetable growers,
strongly supported the need for improved food labelling laws for agricultural
goods sold in Australia.
The Minister for Agriculture, the Hon. Peter
McGauran, agreed. As Chapter 5 noted,
in October 2005, the Australian government strengthened food labelling laws by
requiring unpackaged fruit, vegetables, seafood, pork and pork products to
display a specific country-of-origin label. It is anticipated that
country-of-origin labelling laws for packaged foods with mixed ingredients will
be introduced in 2006. The Australian
government has also initiated a $4 million HomeGrown program to encourage
Australian consumers to buy Australian food.
However, the Australian Food and Grocery Council warned
that an onerous labelling system would be costly to Australian industry. Moreover, survey evidence suggested
that Australian consumers would—among products of similar quality—often choose
the cheaper product. In other
words, better country-of-origin labelling is not in itself a solution.
Financial Review argued that the solution is not 'protection by stealth',
but rather 'has a lot to do with consistency on trade policy'. It claimed that the Australian Trade
...should urge vegetable growers to consolidate to lower costs—and
that's already happening. Then the consolidated industry must leverage off
niche markets. Australian producers can deliver competitively priced product in
certain seasonal windows...Those are the types of products and markets to target.
The NFF President, Mr
the Federation's Trade Chairman, Mr Allan
Burgess, and the Australian Trade Minister,
the Hon. Mark Vaile,
all agreed that China
is a challenge for horticulture producers with or without an FTA. Mr Burgess maintained
that given there are no trade barriers now to Chinese produce, 'a free trade
agreement with China
will make no difference to whether that country's fruit and vegetables come
noted that horticultural production in Australia
and China 'is
largely counter-seasonal'. He cited the DFAT FTA joint feasibility study (see
chapter 11) which argued that 'there is scope for the development of a
complementary trade that would benefit both Australian and Chinese producers by
ensuring year-round availability of product'.
In similar vein, Mr Frank
Costa, executive chairman of a large
Geelong-based vegetable company, argued of China:
They've got a population of around 1.3 billion and ours is 20
million. They're in the northern hemisphere and we're in the southern
hemisphere so there are times in the year, if the borders can be opened into China,
can get direct access...with our fresh produce. There's a much bigger chance of
us selling more fresh produce into China
than there is of China
selling it to us.
Australian manufacturing representatives
The Australian manufacturing sector is apprehensive
about the prospect of an FTA with China.
In its July 2004 submission to the DFAT FTA joint feasibility study, which was
also submitted to the committee, the Australian Industry Group (AiG) claimed
...a large proportion of this [the manufacturing] sector is not
convinced that an FTA with China
would be advantageous. Further, manufacturers are deeply concerned about the
level of transparency and compliance that China
could deliver under any proposed FTA.
This finding was based on AiG's survey of 848
manufacturers. To the question, 'Would an Australia–China Free Trade Agreement
be beneficial to your firm?', 45.2 per cent answered 'no', 41.7 per cent
answered 'don't know' and only 13.2 per cent answered 'yes'. A slightly higher proportion of
exporting firms (16.8 per cent) believed an FTA would be beneficial. Sixty-eight
per cent of those surveyed claim that China
affects either their customer or supplier markets. Based on its survey, the AiG
estimated that over the past year (2003–04), trade with China
cost Australian manufacturers $560 million in turnover.
The AiG's submission to the committee—and to DFAT
previously—made several recommendations to assist Australian manufacturers
should an FTA with China
proceed. These include that:
the agreement is comprehensive—covering all
sectors of trade, services and investment—and fast, with any phased tariff
reductions achieved within ten years;
China is required to 'implement and enforce
effective and commercially realistic penalties' to protect intellectual
the FTA uses the product-specific 'rules of
origin' employed in the Australia–Thailand FTA.
The Australia–China Business Council (ACBC) told the
...the challenge that the growth of Chinese productive capacity
will pose for Australia's
manufacturing sector highlights the need for a clear articulation in Australia
of an overarching national policy and framework in support of manufacturing.
This is something that the country's manufacturing sector considers is
The AiG also urged the Australian government to adopt
several measures to support the manufacturing sector more broadly. These
acknowledging the strategic importance of
Australia's manufacturing sector within the proposed FTA framework;
introducing a forward-looking 'Advance
Manufacturing Program' to enhance the competitiveness of Australian industry—it
should include the encouragement of research and development, the diffusion of
new technologies and manufacturing strategies, export development and skills
abolishing the three per cent tariff applying
under the Tariff Concession Scheme, imposed on imported business inputs from
all countries; and
the immediate establishment of a 'China Help
Desk' to allow industry to address any issues relating to Australian companies'
involvement with China.
5, 6 and 7 of this report respond to these proposals.
The submission to this inquiry from the Australian
Manufacturing Workers' Union (AMWU) firmly opposed an Australia–China FTA. It
Australia not enter into a free trade agreement with China [and that] the
Australian Government abandon its strategy to negotiate bilateral free trade
agreements and instead seek to... reinvigorate multilateral negotiations.
The AMWU expressed concern that an FTA with China
would exacerbate Australia's
reliance on imported Chinese manufactures and China's
reliance on Australia's
primary produce. This situation 'would have significant (and negative) consequences
particularly those communities who rely on manufacturing'. The Union's
submission emphasised the importance of manufacturing to the Australian
economy, given its status as the largest employer of full-time permanent
workers and its high share of national exports. It described the manufacturing
sector as 'vastly more important to the Australian economy in terms of jobs and
contribution to GDP than the mining, agriculture, forestry and fishing sectors
Plastics and chemicals
The Plastics and Chemicals Industries Association's
(PCIA) submission to the DFAT FTA joint feasibility study found 'little support
for an FTA' with China
among its members. It identified a
number of concerns about access to the Chinese market, including restrictions
on foreign enterprises operating in China,
higher supply costs for foreign enterprises, lack of intellectual property
protection, and collusion with the domestic Chinese market.
With regard to its members competing with Chinese
imports, the PCIA favoured phased tariff reductions. Its submission to DFAT noted
that the chemicals and plastics industries are 'import replacement industries
and thus price takers', which made the existing five per cent tariff 'vital to
profitability'. The submission
claimed that the Australia–Singapore FTA's failure to phase out tariffs had
cost domestic chemicals and plastics suppliers their price margin over imports. The PCIA claimed an FTA with China
must phase out assistance to allow local manufacturers the time to make the
investment and structural adjustment necessary to survive.
Automotive and tyre industries
The Department of Industry, Tourism and Resources' (DITR)
submission to the committee noted that an FTA offered opportunities for Australian
automotive component producers to increase their role in China's
supply chains, and their own foreign direct investment in China.
These are also key expectations of the Federation of
Automotive Products Manufacturers. It argued that an FTA with China
should focus on lifting foreign investment restrictions, rather than
eliminating tariff barriers. It claimed that the 'structural impediments' to
foreign investment in China are the 'most significant practical constraints on
Australian companies gaining a bigger share of the booming Chinese market'. The abolition of the already 'low
rate' of tariff, by contrast, 'is unlikely to have any significant impact on
potential exports of automotive components from Australia to China'. The Federation did concede that the
removal of duty on Chinese imports is likely to hurt Australian production.
However, it argued that an FTA could be of most assistance to the industry if
it could identify suitable joint venture partners for Australian automotive
component companies in China.
The Australian Tyre Manufacturers' Association (ATMA) argued
that even if an FTA eliminates tariff barriers, there would remain many
'indirect barriers to trade and cultural and economic impediments'. These indirect barriers enable China
to produce large volumes of tyres at a low unit cost, which outprices
Australian tyre exports. The Association noted that Australian tyre
manufacturers were not expecting that an FTA with China
would lead to any significant increase in the export of Australian cars to China.
It surmised that export opportunities for Australian tyre manufacturers would
Under the current Automotive Plan established in 1996,
tariffs on imported passenger car tyres are levied at 10 per cent until 1 January 2010. The ATMA argued that
an FTA with China
would probably cut this protection entirely at an earlier date. It feared that
this 'may mean a substantial increase in the volume of [Chinese tyre] importation...at
very competitive prices'. This 'may render tyre manufacture in Australia
uneconomic and may force the closure of existing plants'. Most of the anticipated increase in
passenger vehicle imports from China
will not have tyres sourced from Australian manufacturers. The ATMA also noted
that an FTA with China
may compel Australia
to grant similar concessions to other importers such as Japan
The committee urges Australia's
trade negotiators to address both tariff and non-tariff issues facing
Australian car components and tyre exporters to China.
It is encouraged by the ATMA's assessment that if Australia had free access to
the tyre markets of Taiwan, Malaysia, Thailand, Korea and 'particularly' China,
Australian tyre manufacturers 'may be able to increase their export effort
substantially'. However, given the
high level of tyre overproduction and entrenched non-tariff barriers in China,
the ATMA is 'yet to be convinced' that an FTA is in the best interests of the
In the committee's opinion, if China
does not agree to remove all tariffs on tyres and substantially address
non-tariff issues, the Australian government has strong grounds for retaining
the terms of the current Automotive Plan. If an FTA proceeds with China's
agreement to cut tariff and non-tariff barriers substantially, the Australian government
must intensify its efforts to encourage the local industry's investment in
technology, equipment and skills. There is also a need for smaller car
component manufacturers to form alliances and research and development networks
to enable these companies to share costs and develop economies of scale.
Textile, clothing and footwear
The Textiles, Clothing and Footwear Union of Australia
(TCFUA) was also apprehensive about the prospect of an FTA with China.
clothing imports account for 75 per cent of all Australian clothing imports.
Chinese footwear imports account for 63 per cent of all Australian footwear
imports. In its June 2004
submission to DFAT, the TCFUA's warnings were dire for the industry:
[the] scale of the Chinese TCF industry is so great that
differential tariff arrangements with China
could see what has been a flood of imports turn into something that will
completely obliterate the Australian TCF industry.
The Council of Textile and Fashion Industries of
Australia (TFIA) was similarly apprehensive. Its submission to the DFAT FTA joint
feasibility study recommended that the Australian government oppose an FTA with
Australian industry 'considers that there is a level playing field between the
two economies'. It insisted that
any FTA must force China
to reduce its non-tariff barriers, contain specific safeguard measures for the
TCF sector, and follow the rules of origin adopted in the Australia–Singapore
FTA. It also argued that the phase-out
of Chinese tariffs on Australian imports must be at a faster rate than
Australian tariffs on Chinese imports.
TFIA supports the current Australian government policy on TCF tariffs, which
will reduce the rate across the industry to five per cent by 2015 (see chapter
In 2003, TFIA conducted a survey of industry attitudes
to the proposed Australia–China FTA.
The respondents included textile and clothing manufacturers, retailers,
distributors and exporters, who collectively employ 10,263 people.
A majority of respondents (54 per cent) indicated that
duty-free access to China
would not increase their export sales. A further 20 per cent believed the
increase in sales would be less than $A500,000. TFIA claimed that this result
reflects the large number of non-tariff barriers applying in China.
In terms of the impact of Chinese imports on the Australian textile and
clothing industry, 54 per cent of respondents believed an FTA would have at
least a 20 per cent net negative impact on their company. The TFIA submission noted that all
but one respondent indicated that an FTA with China
would have a negative impact on their employment decisions.
The TFIA survey also found that:
69 per cent agreed that TFIA remain opposed to
the FTA until 'there is a level playing field between the two countries'; (see
69 per cent supported a phased reduction in TCF
tariffs 'such that zero tariffs are not reached until 2015'; and
62 per cent agreed that Chinese TCF tariffs
should be abolished immediately and Australian tariffs should be phased.
The committee notes the concerns of the TCF sector and
agrees that the FTA must address China's
non-tariff barriers in TCF trade. This should be a priority of Australia's
trade negotiators (see recommendation 13). However, there should be no
'carve-outs' to protect Australian industry. The committee also foresees that
the Australian government may have to revise its current policy on TCF tariff
reductions if the FTA is to secure Chinese concessions on agriculture. As
chapter 6 noted, the federal government must continue to develop and refine the
assistance package for the industry and encourage a more strategic mindset.
reservations on the FTA and the Australian trade relationship
section looks at two Chinese reservations about an FTA with Australia, prior to negotiations commencing. The first is the effect
of cheap imports on China's agricultural sector: the second is Australia's treatment of imports.
The main area of concern for China
in an FTA with Australia
is the impact of lifting agricultural tariff barriers on its poor rural
regions. Over one billion Chinese people (79 per cent of the population) live
outside urban areas: 270 million people (21 per cent of the population) live
below the poverty line on less than $US1 a day.
It is reported that Chinese officials fear that cheap
Australian agricultural imports will increase the pressure on the population in
rural areas to move to the urban areas. For example, in March 2005, during a
two–day symposium between Australian and Chinese government officials in Beijing,
several Chinese officials expressed concern that a large quantity of cheap
Australian agricultural imports would hurt China's
poor western provinces.
Officials from the Chinese Ministry of Agriculture
noted that Australian agricultural products already have a significant niche in
marketplace. Ms Mu Jingjun, the Vice President of the China Dairy Industry
Association, argued that domestic producers should accommodate the anticipated
increase in demand for dairy products in China. Mr Pan Wenbo,
a deputy director of the Ministry of Agriculture, noted that Australia
exported 20 times more agricultural produce to China
than it imported. He expressed
particular concern that Australian grain exports—a major component in an FTA
Ministry of Commerce (MOFCOM) reinforced these sentiments. The Vice–Minister of
Commerce, Ms Ma Xiuhong, argued:
If we start the talks for an FTA, I personally believe...we should
be aware of the sensitivity of China's
agriculture sector and do special studies on the agricultural trade and
consider the issue flexibly. Australia
should be fully aware of the sensitive nature of the agricultural issue and
give special consideration and thought to the liberalisation of agriculture.
Vice–Minister Ma expressed strong concern at the effect
of trade liberalisation on social cohesion.
Many have speculated that the continuing pressure of trade liberalisation on China's
agricultural sector will accelerate the shift in population from rural to urban
regions. Chinese authorities are understandably concerned that the pace of this
transition is sustainable and that rural workers find work in urban industries.
Premier Wen Jiabao
has also made several recent statements emphasising the challenge and
importance of increasing rural incomes.
However, the Australian government and the NFF, among
others, insist that these fears are unfounded given the small size of the Australian
agricultural sector. Dr
Geoff Raby, the
Deputy Secretary of DFAT, has indicated that the disruption of Australian
agricultural imports under an FTA to poor rural regions would be minimal. He
noted that Australia's
total production of agricultural goods was small compared to China's
and that Australia's
capacity to increase this output is constrained 'by available arable land and
The NFF's Chief Executive Officer, Mr
told the committee that Australian exports of wool and milk are in fact
complements to Chinese production, and would not cause widespread job loss in China's
agricultural industries. He explained
... although we [Australia]
are an extremely big exporter of wool to China...we
will not, under an FTA or any other arrangement, become a threat to local
Chinese wool producers because we are producing a different type product, a
different micron. We would like greater access but that does not mean we are
going to displace and threaten the livelihoods of Chinese wool producers,
because of our complementary and different structure.
By and large, Australia's
agricultural exports to China
under an FTA will not compete directly with local Chinese products. Australian
agriculture has different seasonal patterns to China
and, as in the case of wool, often produces a different product type. Furthermore,
a July 2005 Australian Bureau of Agricultural and Resource Economics (ABARE)
report questioned whether Chinese farmers would be able to satisfy China's
growing and changing food demands given the country's severe land and water
degradation. The report, titled Developments
in Chinese Agriculture, identified a likely shift in China's
food consumption from traditional staples such as rice and noodles toward meat
and dairy products. It noted that these changing preferences, combined with the
anticipated growth in China's
demand for primary products, will benefit Australian exporters significantly. In particular, there is an
expectation that Australian grain exporters will benefit greatly from the
Chinese market, despite China's
official policy of promoting self-sufficiency in food grains.
opposition to aspects of Australia's
In May 2005, a report from the Chinese Ministry of
Commerce noted some of the Chinese government’s grievances with its Australian
trading relationship. The Ministry highlighted a range of market access issues,
including an Australian tax on imported wine, a 'harsh' approval and labelling
system for biotech foods, the recent increase in antibiotic limits for pig and
bovine products and the expensive registration system for imported medicines.
The report reserved strong criticism for the medicine
imports accreditation process. It
noted that only 20 Chinese businesses have passed the requisite Good
Manufacturing Practice (GMP) accreditation. The accreditation process involved
on the spot investigations by two officials from Australia
with 'all travelling expenses incurred, including first–class flight and plushy
hotel expenses...by the applicant'.
However, the Australian reported the view
of a Ministry of Commerce official who claimed these comments were from the
China Chamber of Commerce and Medicines and Health Products Importers and
Exporters. Moreover, the Director
of the Chinese Chamber of Commerce, Mr Liu
Zhanglin, was quoted in the Australian as commending the efficiency
of the Australian audit teams and their right to the hospitality they receive.
The report cited the Holding Order that Australia
imposes on Chinese foodstuff imports because the labels attached to these goods
do not comply with the regulations of Food Standards Australia and New
Zealand. It also criticised the
inconsistency of state regulations on food safety standards in Australia,
which have caused 'a lot of trouble for Chinese enterprises, and...make Chinese
exporters more susceptible to Holding Orders'. Significantly, the report also noted
has the fifth most anti-dumping complaints against China—41
up until 2004.
The Australian Minister for Trade, Mark
Vaile, has made clear that bio-security
standards are outside the scope of any FTA with China.
However, both Australia
and China are
committed to science-based standards for the importation of food and animal
The committee notes China's
objections to these non-tariff issues and anticipates that the FTA negotiations
will incorporate their discussion.
concerns with China's
record on human rights and labour standards is dealt with in chapter 14. It
concerns about the treatment of Chinese citizens and workers and urges the Australian
government to press for change. An important avenue for this process to continue
is through the FTA negotiations.
Some witnesses called on the Australian government not
to sign an FTA with China
because of China's
poor record on the protection of human rights and the treatment of its workers.
For example, the Secretary of the Australian Council of Trade Unions (ACTU) has
From a union standpoint, it is fundamental that respect for
international labour standards form a basis for any free trade agreement.
Chinese workers must have basic rights and Australian workers should not have
to compete in a rigged market.
The AMWU reinforced this view:
It is the AMWU's position that Australia
should not enter trade agreements with countries that do not guarantee that
parties subject to the agreement must observe the core labour standards
contained in the International Labour Organisations' (ILO) Declaration of
Fundamental Principles and Rights at Work.
The committee also received a submission from the
Australian Fair Trade and Investment Network (AFTINET) that stressed an FTA
not undermine human rights, labour rights and
environmental protection, as defined by the United Nations and the
International Labour Organisation; and
be considered in the context of the likely
impact on human rights and labour conditions, employment, the environment,
particular demographic groups, particular regions and particular industries.
The committee believes that issues such as labour
standards and human rights should not be included in the proposed FTA.
Nonetheless, it is the committee's view that such matters should be raised as
part of the negotiation process. The committee accepts that there is a need for
sensitivity in the way these matters are handled. In other words, the committee
believes that labour standards and human rights should be broached with Chinese
officials as an issue of general concern in the bi-lateral relationship, not as
a bargaining tool in the FTA negotiations.
Moreover, it is unrealistic to expect that a small
economy such as Australia
could, through bilateral trade negotiations, achieve such wide ranging reforms in
the standards and conditions of tens of millions of Chinese workers. As chapter
14 explains, this is properly the role of the international community through
organisations such as the ILO. Foreign-owned companies conducting business in China
also have a role to lead by example on labour standards (see chapter 6).
The most Australia's
FTA negotiators should pursue on the issue of China's
labour standards is to continue and strengthen the existing dialogue. The
committee believes that this is a far more measured and realistic response than
using the issue to flatly reject an FTA or as a bargaining chip in the course
of negotiations. By and large, freer trade between Australia
and China will
create greater opportunities for the workers of both nations. An FTA is an
important means through which to engage China
and to strengthen the dialogue on issues of human rights and labour standards.
Will an FTA with China
work and is it in the national interest?
There are some doubts as to whether an FTA with China
will work in Australia's
First, there are questions as to whether China
will take the FTA negotiations seriously, given that greater trade and
strategic opportunities lie elsewhere. Mr Alan Oxley,
the Director of ITS Global, has argued that the case for a trade-off in
mutually beneficial interests ‘looks weak’. He notes that 'Australia
does not have that much to offer China
by way of concessions' given its open market and that it is already a preferred
supplier of strategic materials. Australia's
businesses in services are much smaller than those in the US
and the EU, which means that 'China
has less incentive to give tangible benefits to Australian businesses'. Europe and North
America are the main sources of China's
FDI, which may lead China
to sideline Australia's
concerns with non-tariff barriers. Mr Oxley
also claims that China
may not see much merit to an FTA that provides common legal frameworks for
trade but does not deliver trade concessions. Despite the complementarity of
the two economies, therefore, the disparity in their relative trading power may
efforts to gain greater export and investment access to China.
professor of economics at the Australian
has voiced similar sentiments. He argued that if political preferences rather
than competitiveness on business criteria come to dominate trade decisions, China
will favour—for foreign policy reasons—the ASEAN countries over Australia.
notes that China
has already negotiated an FTA in agriculture with ASEAN, and adds:
If trade decision-making descends into tit-for-tat bilateralism,
many developing countries will have fewer scruples than Australia
about the abandonment of sound commercial principles.
the workability of the actual agreement, a broader risk for Australia in signing an FTA with China is the geo-political dimension. Dr Alan Dupont, a senior fellow at the Lowy Institute for
International Policy, has explained this issue in the following terms:
was weak and two-way trade non-existent...the strategic choice for Australia
was relatively simple. In any contest between the US
and China, Australia
would side with the US
because it was overwhelmingly in its interests to do so. This is no longer the
today has far greater say over external policy than at any time in our history,
an influence that is likely to increase in line with economic interdependence.
argued that an Australia–China FTA has 'an overt political purpose which is to
supremacy in Asia and Japan's
position as the dominant economic power'.
An FTA with China
may pressure Australia
to recognise China
as an ally outside of the trade relationship, which could potentially strain
the US–Australia relationship.
The committee recognises that an FTA with Australia
cannot offer China
either the trade or the strategic benefits that other nations could provide.
Still, the fact that negotiations have progressed as far as they have to date
suggests that China
is enthusiastic about a free trade agreement with Australia.
The committee notes that an FTA with China
may cause some tension in Australia's
key strategic relationship with the US.
However, it is the committee's view that the economic and political benefits of
signing the FTA far outweigh these possible tensions.
This chapter has identified broad support for an immediate
and comprehensive FTA with China
exporters and the agricultural and mining sectors. On the other hand, there is
widespread apprehension among many of Australian manufacturing industries. Although
tariff levels are low, many manufacturing industries would favour the current
five to ten year timetable for tariff reduction. The agricultural, mining and
manufacturing sectors all emphasise the importance of non-tariff or 'beyond the
border' issues. It would be difficult for the Australian government to argue
for a more rapid reduction in protection if China
were unwilling to reciprocate on both tariff and non-tariff issues.
This chapter has also acknowledged China's
concerns that an FTA will lead to an influx of cheap, high-quality Australian
agricultural produce, which will in turn lead to unemployment and social
instability in China.
Chinese officials also have various concerns about Australia's
The committee recognises that a China–Australia FTA
will create winners and losers on both sides. As Chapter 11 emphasised, it is important
that the negotiations cover all sectors and all industries—the greatest
benefits to both nations will result from a rapid and complete agreement.
However, it is also important that both the Australian and Chinese governments
attend to those industries that are adversely affected. The FTA is an important
opportunity for both governments not only to provide opportunities for their
nations' exporters and investors, but also to work cooperatively to ensure that
the impact of the agreement is monitored carefully.
Finally, this chapter has responded to some broad
concerns about the merit of Australia
signing an FTA with China:
various Australian organisations object to an
FTA on the grounds of China's poor labour standards and record on human rights.
While the FTA negotiations provide an important opportunity for Australia to
continue to raise these concerns, they are not a basis upon which to reject the
agreement outright or a means to bargain.
there is a view that China's negotiators may
stall discussions given China has already been awarded MES, and that China—with
higher tariffs—will have far more concessions than Australia. The effort that
China has invested in talks since the MES decision suggests that this will not
be the case.
there is some concern that the FTA may complicate
the US–Australia alliance. Although an FTA would clearly be a significant
statement of economic cooperation between Australia and China, it is unlikely
to be a point of strategic disagreement between Australia and the US.
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