Australia-China FTA Negotiations

Third round of negotiations

11 November 2005

The third negotiating meeting on the Australia-China Free Trade Agreement (FTA) was held in Beijing from 2 to 4 November 2005. The Australian and Chinese delegations included officials from a wide range of agencies. (A list of the agencies represented from both sides can be found in our report of the second negotiating meeting.) The Department of Foreign Affairs and Trade led the delegation for Australia, and the Ministry of Commerce led the delegation for China.

The meeting continued the exchange of information about each other's trade and investment regimes begun at the second negotiating meeting in August. This has involved asking and answering a range of detailed questions to gain a thorough understanding of each others' trade and investment regimes in preparation for market access negotiations.

At the third negotiating meeting, each side raised further questions in follow-up to earlier questions raised, as well as on issues not previously covered. All issues raised by either side were discussed without prejudice to the position that either might take in the negotiating phase.

The Australian delegation continued to raise the concerns that industry had brought to its attention through submissions and during consultations with industry and other groups.

At this early stage, discussion is continuing on how specific areas of interest might be dealt with in an FTA. For example, Australia made presentations on how an FTA might cover rules of origin for trade in goods, customs procedures, government procurement, services, investment, competition policy, intellectual property rights, and dispute settlement. China explained how its other free trade agreements with Hong Kong and the members of ASEAN work. China also told us that it was about to sign an FTA with Chile, the details of which will be of interest.

The meeting agreed that the initial information exchange phase of the negotiations has now finished although, of course, we will continue to clarify with each other as necessary aspects of our respective trade and investment regimes as the negotiations proceed. It was agreed that the next meeting would start to consider the text of some provisions of an agreement. In most cases, however, both sides will need to start by presenting papers on how they think various provisions could be handled in the FTA. The next meeting will also begin discussing how the negotiations for reducing market access barriers could be approached.

At the third negotiating meeting, the discussions continued to take place in four parallel working groups, covering: agriculture, quarantine and technical regulations and standards; trade in goods, and government procurement; trade in services, investment and electronic commerce; intellectual property, competition policy, transparency, and legal and institutional issues.

In the first working group (agriculture), we made a presentation on Australia's overall approach to agriculture, including on the sensitivity of sectors such as horticulture. We discussed export competition, domestic support and market access. Both sides agreed that export subsidies were a particularly damaging form of trade distortion. China gave a detailed account of its sanitary and phyto-sanitary (SPS) import risk analysis process. Australia emphasised the need for science-based and transparent SPS decision making. This discussion was preceded by a one-day workshop in Beijing on SPS policy issues, which provided an opportunity for Australian officials to outline Australia's SPS regime in the context of our WTO SPS commitments. The session on technical barriers to trade (TBT) covered recognition of foreign testing for standards compliance, transparency, the involvement of foreigners in the development of standards and technical regulations, and specific Australian concerns including wine labelling and wool retesting.

In working group two (goods), there was a useful discussion on the operation of China's Tariff Commission. This is an important government body that has a role in setting tariff levels in China. On the question of assistance to industry, China said that it had almost completed its report to the WTO on its industry assistance measures, which will be the first such report to consolidate this information from across the country. It will be an important information resource as we work through the negotiations. Rules of origin (that determine whether goods qualify for preferential treatment in an FTA) were discussed, and we continued to encourage China to move to a change in tariff classification approach to the rules of origin for goods, although China favours a value-added approach. We began to discuss how an FTA could facilitate the movement of goods by improving customs procedures. We also used the meeting to improve our understanding of China's government procurement system, and explained to China how government procurement could be dealt with in the FTA.

In working group three (services and investment), further detailed discussion took place on a wide range of services sectors, including professional services (legal, architecture, engineering, accounting, arbitration and mediation), telecommunications, financial services (banking, insurance and funds management), education and training, transport, construction, and electronic commerce. China pointed to the liberalisation it had undertaken in the WTO. We outlined the approaches taken to services liberalisation in our recent FTAs and emphasised that Australia is seeking additional liberalisation for Australian companies in an FTA. Each country sought further information on the other's investment regime, and we made a presentation on how Australia has treated investment in its other FTAs.

In working group four, we had preliminary discussions on possible elements of an intellectual property chapter and agreed to continue these discussions at the next meeting. We explained to China the relevance of competition policy for trade, and how Australia has dealt with competition policy in its other FTAs. In particular, competition policy provisions in FTAs help to amplify the benefits of these agreements through increased market access and ensuring lower prices for consumers. Australia underlined the importance of transparency in an FTA, and China explained its extensive commitments in its accession to the WTO on transparency. We agreed on an approach for further discussion of transparency issues. Both sides confirmed that they wanted an institutional structure that would allow continuing and regular review of the FTA's operation. On dispute settlement, both sides registered their strong interest in creating an effective mechanism which encouraged resolution of disputes through consultations, with third party adjudication as the last resort.

The meeting tentatively agreed that the next negotiating meeting would take place in February/March 2006 in Canberra.

For more information, contact the China FTA Task Force:

For information on Australia's existing FTAs.