Bulletin

Issue: July 2006

News

Key role in Australia-China free trade conference

La Trobe University's new Professor of Economics, Gary Magee, has played a key role as organiser of the recent major international conference on the Australia-China Free Trade Agreement currently being negotiated between the two governments.

Professor Magee with
Prime Minister Howard and
Mr Kenny Zhang, Managing
Director of Waratah International
Australia Pty Ltd, the main
conference sponsor.
Photo by David Foote, Auspic

The conference - at which Prime Minister, John Howard, delivered a keynote speech - received extensive publicity in Australia. It was held in late June in Shenzhen, China.

Professor Magee says it was attended by some 570 senior government leaders and officials, Australian and Chinese negotiators, business and corporate representatives, and leading academic analysts. It focused on issues central to the proposed FTA, particularly in relation to manufacturing, resources, investment, intellectual property and business law.

Other La Trobe analysts at the conference were Dr Robert Waschik, from the Department of Economics and Finance, who presented a paper, as did former students and staff members of the University, Professor Wang Dashu, now at the School of Economics at Peking University, and Dr Mary Amiti, who works for the International Monetary Fund.

Professor Magee says the conference, sponsored by the Department of Foreign Affairs and Trade and the Chinese Ministry of Commerce, was of vital importance to Australia's future. It also provided a rare forum for Australian academic economists to make a 'direct and major impact on an important plank of our national trade policy'.

He says the conference also helped open many new opportunities for La Trobe to develop and strengthen its links with China's top academic and policy institutes.

China today, he says, is the most dynamic force in the world economy, accounting for more than a quarter of global growth. In the next decade, China is projected to become the world's third largest economy after the United States and Japan. Australia is in position to benefit from this.

'The Australia-China bilateral economic relationship has strengthened dramatically since China's policy shift towards global economic integration. China is already Australia's third most important trading partner. Our exports to China have grown at an annual rate of around 20 per cent in recent years.

For example, sales of iron ore rose by 126 per cent in 2005 to $5.7 billion while exports of manufactures increased by 17.6 per cent to $2 billion.

'Australian exports of total services to China have more than trebled over the last decade, reaching almost $1.3 billion in 2004, driven by growth in education, tourism and transport services.'

Professor Magee says China is now Australia's number one source of foreign feepaying students, and student enrolments grew by 18 per cent last year to more than 80,000.

China is also emerging as a major source of tourism and short-term visitors. Arrivals from China reached 285,000 in 2005.

'However, despite rapid growth in trade, there remain significant barriers for Australian exports to China in several important areas.

Chinese tariffs remain high relative to Australia's, with the average in 2005 at 9.9 per cent for all products and 15.3 per cent for agricultural products.

'Importantly, tariffs escalate on many value-added products exported by Australia. Exports of services are constrained by regulatory barriers that restrict market access and increase costs. Though bilateral investment has been increasing in recent years, it still remains relatively low.

'Australian investors, for example, have concerns about legal transparency, security of investment, enforcement of contract law and protection of intellectual property in China.

'In this context a wellstructured Australia-China FTA has the potential to yield very substantial benefits to both economies. Negotiating a comprehensive agreement that meets the concerns and objectives of both Australia and China is a challenging task.

'The Shenzhen conference was designed to make a major contribution towards developing mechanisms and procedures that will enable a satisfactory conclusion to these negotiations.'