Resources Sector and Foreign Investment

Yinhua Mai and Philip Adams INTRODUCTION The resource sector represents a natural complimentarity between Australia and China. Australia is a world leader in mining technology, and has rich energy and mining resources. China, on the other hand, has become a net importer of mining products due to its rapid industrialization in the past three decades. To secure the supply of energy and mining inputs to its manufacturing sector, China has invested heavily in resource assets around the world. In this chapter, we discuss issues related to the resource sector under a bilateral free trade agreement (FTA) between Australia and China. In addition to border protection (tariff and non-tariff barriers) on bilateral merchandise trade of resource products, we also discuss the openness of the two countries’ foreign investment regimes. The foreign investment issues discussed in this chapter are mainly those concerning foreign direct investment or portfolio investment with an interest in the management of the company. Bilateral investment issues are important to the resource sector for two reasons: ● ● most of Chinese investment in Australia is in the resource sector; and China’s investment regime is important to the Australian providers of mining technology services as they establish their commercial presence in China. In this chapter, we also discuss our quantitative estimates of the potential benefits of the trade and investment liberalization under the FTA, with special reference to the resource sector. However, as the resource products are mostly used as inputs into other industries, we consider the impacts of the FTA on..