In the shadow of the Australia-China Free Trade agreement negotiation: obstacles and suggestions

Since the 1990s, regional trade agreements have come to complement multilateral trade agreements as a major means for promoting free trade. With free trade agreements spreading across Europe, the Americas and East Asia, China and Australia entered into negotiations for an Australia – China free trade agreement (ACFTA) in 2005. So far, fourteen rounds of talks have been held. However, negotiations between the two countries seem to have come to a standstill with no substantial progress has been made since December 2008. This article seeks to explain why the negotiations of the ACFTA have been extremely difficult. It points out that while Canberra wants to gain more market access in China for Australian firms, particularly access to agricultural and foreign direct investments sectors, Beijing is more interested in seeking a stable supply of energy resources and raw materials that China needs for her rapidly growing economy. The sticking point has been the differing approaches of the two countries by reason of their differences in level of economic development, understanding of FTA, the logistics of market and non market economies, different political systems, cultural outlook, and the issue human rights. There has also been stubborn resistance in some quarters to a FTA in both countries: in China, against further liberalisation of the agricultural and services sectors beyond the level of her World Trade Organisation (WTO) commitments; in Australia against the potential influx of cheap Chinese goods as well as the risk of losing control of its Resources industry. Additional Australian concerns include China's poor record on environmental and food safety standards. As a means of overcoming these hurdles, the paper suggests the need for a period of adjustment of the respective markets in the sensitive areas of agriculture, and the services and investment markets. This will condition the constituencies in both countries of the benefits of ACTFA. In this respect, the existing China – New Zealand FTA provisions Special Agricultural Safeguard Measures (Art 13) and Trade in Services (Arts 103-124) provide a useful referent. The paper suggests avenues for breaking the deadlock, and that these lie in terms of institutional changes, and a stronger commitment from the leadership of both economies