Services the Key to China FTA

23 November 2006

The Age

By John Denton
BCA Trade and International Relations Taskforce.

Bringing down barriers to exporting know-how is vital for our future, writes John Denton

There is considerable pressure on our politicians and senior officials to get the best deal possible for Australia in bilateral free trade negotiations currently under way.

The Business Council of Australia believes progressing multilateral trade negotiations is always preferable, but in their absence we support working towards bilateral agreements that deliver improved trade opportunities for Australian companies.

With the recent failure of multilateral trade talks in Doha, Australian businesses are looking to the free trade agreement negotiations between Australia and China for a deal that could provide greater economic opportunity in trade between our countries.

Our politicians and officials are under intense scrutiny in their efforts to ensure any deal does not disadvantage Australia, and these efforts must continue at the talks to be held in Australia next month.

We want an agreement that addresses comprehensively all barriers to trade in goods, services and investment, including the movement of people and intellectual property.

In 2004–05, China was Australia’s second largest partner for trade in goods and Australia’s sixth largest trading partner in services. This reflects the dominance of goods in the trading relationship between the two countries and the strength of education and tourism in the services sector.

What we know, however, is that the export of professional services to China is relatively small compared to our export of education services and tourism.

Australian service exports to China are currently worth $2.3 billion, or 6.6 per cent of our services exports, with tourism and education making up 85 per cent, or $1.9 billion.

So, it is important that we make significant headway for both business specifically and for the economy more broadly on the investment conditions in the critical area of services.

We believe that if Australia is to sustain economic prosperity into the future we must boost our services sector as a proportion of our GDP. This is increasingly vital to our economic growth.

However, we continue to caution that an agreement for an agreement’s sake will take us nowhere.

Success of the China FTA must be measured by whether or not Australian business sees genuine and achievable benefits in the final agreement and accompanying processes.

This is why the BCA and its member companies – Australia’s leading corporations – insist that significant progress be made on services exports and investment in the negotiations with China later this year.

Many of our members, who are already competing in a global market, understand the mutual opportunities that lie in expanding Australia’s services exports to China.

As one of the fastest growing economies in the world, China can benefit from importing Australian know-how in services such as accounting, project management, finance, banking, law, architecture, engineering and construction, and a range of other professional services.

The benefits for Australia in opening up this market as the demand for Australian commodities, and the prices paid for them, decline in the future, are vast.

BCA member companies list looser capital controls, eliminating restrictions on particular services, and greater tax and decision-making transparency among priorities to be addressed in any agreement.

Achieving progress on these matters will be vital for Australian business to be able to compete effectively within China.

Specifically, BCA members believe a FTA with China should include:

  • Looser ownership controls and capital requirements.
  • Raising the project value limit above which central government approval is currently required.
  • Eliminating restrictions on the services that can be delivered by Australian companies.
  • Greater regulatory and decision-making transparency.
  • A more transparent tax system.
  • Mutual recognition of professional qualifications.
  • Freer movement of skilled business personnel between the two countries.

BCA members also believe an FTA must aim to address domestic barriers to trade, ensure a level playing field for Australian companies to compete within China, and establish robust dispute resolution processes as well as mechanisms for ongoing consultation on services issues.

China’s full and continuing participation in the World Trade Organisation should also be supported.

China dominates regional trade and is increasingly dominating Australia’s trade and investment.

How well Australia competes within China on services, and how trade barriers between the two countries are managed, will determine Australia’s ability to maintain its prosperity.

Australia’s politicians and trade officials currently have the key role in negotiations, but despite this vital responsibility can only achieve so much.

Business rightly expects they ensure any trade agreement factors in the issues they identify for benefits to flow from lowered bilateral trade barriers.

But ultimately it is business that must take advantage of improved economic and political relations between our country and the emerging economic superpower in our region that is China.

John Denton is chairman of the Business Council of Australia Trade and International Relations Taskforce.




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