Australia-China FTA Negotiations

Subscriber Update, June 2006

Fifth round of negotiations

The fifth round Australia-China FTA negotiations took place in Beijing from 22-24 May 2006.  At this meeting both sides started to consider the possible shape and content of an agreement.  This followed several meetings with the Chinese in a detailed information exchange about our respective trade and investment regimes.  Useful progress was made in a range of areas on drafting the architecture of an agreement during the fifth round, and both sides will start to negotiate actual provisions for access to each others’ markets from the next meeting.

Australia tabled texts for an initial 15 proposed chapters of an agreement and there was a good discussion around these.  The chapters we put forward covered goods and services including areas of importance for Australian business such as the protection of intellectual property rights, standards for goods, rules of origin and customs procedures.  Positively, China agreed that investment and government procurement chapters will also need to be included in the agreement.

On agriculture, there was useful discussion on possible ways to deal with China’s tariff rate quotas that limit Australia’s exports of wheat, wool, sugar, cotton and rice.  This was without prejudice to the requests that Australia will put forward in these areas at the next meeting.  Discussions also covered the inclusion of chapters in sanitary and phytosanitary measures and technical barriers to trade (or technical regulations).

On trade in goods, good progress was made in drafting text for an agreement.  Discussions covered how to address Australian concerns on export restrictions, import licensing, export taxes and customs procedures.  The rules of origin negotiations are still at an early stage with both sides exploring preferences (Australia’s being the change of tariff classification approach; China’s the value-added approach).  There were useful discussions on the inclusion of government procurement provisions in an agreement, and text for a chapter will be considered at the next negotiating session.  Government purchasing in China is enormous and better access for Australian firms will be important, particularly as China moves to join the WTO Government Procurement Agreement, of which Australia is not a member.

Services issues remain a sensitive area for China however the Chinese negotiators were closely engaged in discussion of Australia’s proposed texts, including on financial services, telecommunications and education.  China indicated its interest in a separate chapter on movement of business people.  A foundation issue still to be resolved is the issue of whether to take a negative or positive list approach to the sectors to be liberalised in the agreement (with Australia preferring a negative list and China preferring a positive list approach).

China agreed to discuss that Australia would table an investment chapter at the next negotiating session.  China’s restrictions on investment, particularly by Australian services companies, are one of our main targets in the negotiations.  The scope and coverage of this chapter will be the central area for further discussion by both parties.

Preliminary but useful discussions took place on Australian draft texts on intellectual property, dispute settlement, general legal and institutional framework provisions, competition policy, and on how to include transparency provisions in the agreement.

These discussions have helped prepare for market access negotiations – that is, the negotiations that aim to reduce tariff and associated barriers for goods, and to reduce the various barriers that affect trade in services and investment.

Both sides acknowledged the impetus given to the negotiations by the high-level visit to Australia of Premier Wen Jiabao in April, and Premier Wen’s proposal that both sides should aim to achieve breakthroughs in the next one to two years.  The Chinese side again noted that the negotiations with Australia are complex and represent a level of ambition in an FTA that is unprecedented for China.  They also reaffirmed China's strong, political-level commitment to producing high quality, mutually satisfactory outcomes.

Both sides plan to exchange market access offers in goods and agriculture at the next negotiating meeting in September.  Services and investment market access negotiations should follow before the end of the year.  This slight gap in timing reflects the fact that services and investment issues are sensitive from China’s perspective, and that more time is needed to work through difficult issues that are fundamental to market access negotiations, such as a negative versus a positive list approach, and the handling of investment.  We have underlined the importance Australia attaches to a single undertaking – that is, no exclusions of any major sector from the negotiations, no part of the FTA is agreed until everything is agreed.  The Chinese side has accepted this.

The next round of negotiations will take place in Beijing, scheduled for the week of 4 September.

For more information, contact the China FTA Taskforce:

For information on Australia's existing FTAs.