Observations on the Australia-China Free Trade Agreement negotiation process

The proposed Australia-China Free Trade Agreement (ACTFA) has been in the offing since 2005 and survived a change of government in Australia. While little of a conclusive nature has been achieved, given that such free trade agreements have a gestation period of between 15 to 20 years, there is much hope of a satisfactory resolution to the problems that bedevil it. This section note examines some of the obstacles the negotiation process has encountered and reviews the attempts made to overcome them. 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 a free trade agreement (FTA) in 2005. So far, 15 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 its 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 human rights issue. 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 its 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, this section note suggests the need for a period of adjustment of the respective markets in the sensitive areas of agriculture, and the services and investment markets. Hopefully, this will condition the constituencies in both countries of the benefits of ACFTA . In this respect, the existing China-New Zealand Free Trade Agreement provisions – Special Agricultural Safeguard Measures (Art 13 ) and Trade in Services (Arts 103-124 ) provide a useful reference. This section note 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