The devil in the detail of the China trade deal

Australia’s heralded FTA with China is still a long way from being introduced and it’s not about free trade.

Trade Minister Andrew Robb arrived in Beijing last night ahead of two days of high-level talks with senior business people, academics and bureaucrats from China and Australia.

While he’s in town, Mr Robb will also be spruiking the benefits of the recently inked ‘free-trade agreement’ between the two countries.

In an address to the Australia-China Chamber of Commerce on Friday morning, the Minister is expected to do his best to encourage Australian businesses already operating in the mainland to take full advantage of the trade agreement.

The only problem is the agreement isn’t really an agreement and it’s not even about free-trade.

The much heralded deal that was signed when Chinese President Xi Jinping was in Canberra a couple of weeks ago was technically a ‘a statement of intent to conclude an FTA’.

An actual agreement won’t come into existence until after the text is ‘legally scrubbed’ and painstakingly translated into Chinese -- a process that could take from three to six months.

Once that process is over, the deal will be made public and available for signing. In Australia, it will be tabled in parliament for 20 joint sitting days and be examined by the joint standing committee on treaties, which will conduct an enquiry into the agreement and report back to parliament.

China will need to have it ratified by the National People’s Congress standing committee on treaties. 

Once that’s done the two sides can exchange diplomatic notes to put the agreement into effect, they will then either specify a particular date or thirty days from the exchange of letters and then it will enter into force. 

That means it’s likely the whole thing will only come into effect towards end of next year or early 2016.

But when it does come into effect, it still won’t be a free-trade deal. The agreement is probably best described as a ‘preferential-trade deal’.

After all, if it really was a free-trade deal, there would have been nothing to negotiate and the last decade of diplomatic back and forth would have been for naught.

In the end, Australia wanted a package of outcomes on agricultural market access which was roughly consistent with the New Zealand’s 2008 FTA and also a decent market access package covering services and investment.

For its part, China was interested in investment, movement of natural persons and a reduction in Australia’s tariffs on manufactured goods.

But ideally, Australia would have liked to have gained access for agricultural products such as cotton, sugar, wheat and rice and China was pushing for a relaxation of regulatory arrangements on state-owned enterprises.

In the lead-up to the announcement of the deal, the opposition accused the government of selectively leaking good news.

In fact, some of the good news leaked prior to the deal being signed, didn’t even end up as being part of the deal.

The widely touted the $1 billion-a-year Australian beef cattle live export deal was actually separate to the agreement.

And as Mexico’s former ambassador to China quipped, Australia’s upgrade to a ‘comprehensive strategic partnership’ in China’s eyes was "like getting 'employee of the month' instead of a pay raise, some fall for it.”

The deal has been spruiked by Trade Minister Robb as a boon for the services industry in particular. Australia, we have been told, has got the best deal on that barring Hong Kong and Macau.

And indeed, the inclusion of services is definitely a positive. But on closer inspection, some of the commitments in the deal already exist in terms of market access benefits already available to Australian companies.

The agreement on commercial association for law firms and greater access for investment in value-added telecoms are already on the cards in the Shanghai free-trade zone.

Needless to say, the areas China has been willing to bend on closely align with Chinese policy priorities.

Presumably the government has leaked as much good news about the deal as possible.

So between now and early 2016, expect to hear more about the alleged ‘hidden nasties’ that Labor have been warning about.

So far, Mr Robb has received almost universal praise for the deal.

On the Insiders program on ABC on Sunday, Robb was asked if there was any one issue in the deal he could identify that would hurt Australians?

“Well, we have given them zero-elimination of all tariffs on everything,” he said.

“… some people would see that as a cost to us. I see that ... as long as we do it gradually in some areas, so where people are losing protection, they get the chance to transform their operation, transition to some other related area.”

But Joe Hockey, perhaps sick of being the punching bag, gave a more direct answer yesterday.

In a pitch lasting around 45 minutes, the Treasurer made it clear to his parliamentary colleagues that there would not have been any free-trade agreements if he hadn’t cut off industry assistance at the beginning of the year.

“Ending the age of entitlement” was a hard decision he later said in Question Time, but “it needed to be made because as a result of that decision we were able to get free-trade agreements with Korea, Japan and China".

Opposition trade spokeswoman Penny Wong and opposition spokesperson for innovation and industry Kim Carr said they were alarmed by the revelation that support for Australian jobs was used as a bargaining chip in the trade negotiations.

"The Abbott Government is seeking to rip $900 million out of automotive industry assistance, which would lead to an early closure of manufacturers, cutting off opportunities for workers in the supply chain to retrain,” they said.

"On top of this, the Coalition cut $4.1 million in funding set aside for workers affected by the decision of Ford Australia to end local manufacturing operations in October 2016.”

The question for Australians working in sensitive areas such as tinned fruit, car parts, carpets, textiles, clothing and footwear is can they transition in time for the phasing out of tariffs in four years time?

And can Joe Hockey’s rapidly dwindling budget afford another billion dollars’ worth of foregone car levies smashed out of it?

The government would argue that the tariff changes on the Chinese side mean those Australian manufacturers of automotive components who used to supply the domestic industry will be better placed to be competitive suppliers to car manufacturing companies in China.

But while Robb continues to sell the deal in the Chinese capital, businesses and their workers remain in the dark.

Even though Labor have been loudly asking for the text to be produced, when push comes to shove, they aren’t for revealing it.

In the Senate yesterday, a move by the Greens aimed at requiring the Government to table the text was shot down by both the government and the Labor Party.

“Releasing the text now, before it is signed, is the only opportunity for potential changes to the text to occur following democratic public and parliamentary input,” said Greens spokesperson for Trade, Senator Peter Whish-Wilson.

“Labor has been calling for the Government to release the text, but words are cheap. When it comes to action they squib it,” he said.

The way this is going, the government will continue to soften the electorate up with soft news and Labor can continue to bluff their way through.

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