Opening Speech at the Australia-China FTA Conference - Strategic setting: Common Future

Speech by DFAT Secretary, Dr Ashton Calvert AC

Sydney 12 and 13 August 2004

Thank you Alan

I would like to begin by extending a very warm welcome to our distinguished guests from China.

We are very pleased that you are able to join us for this event - your contributions will bring a range of important and valuable perspectives to the conference proceedings.

A warm welcome also to Ambassador Fu Ying and Alan Thomas, Australia's Ambassador to China.

I should also like to welcome the Hon Warwick Smith, National President of the Australia-China Business Council.

Ladies and Gentlemen

I am delighted to be here this afternoon to assist in opening this conference.

Alan, may I say that the APEC Studies Centre has again demonstrated its commitment and expertise in bringing this conference to life, working with the Department of Foreign Affairs and Trade and a range of important corporate partners to bring together an impressive range of speakers to address an equally impressive range of topics.

Strengthening and deepening trade and economic relations with China is a major priority for the Australian Government.

China's opening to the world and its emergence as a major growing industrial power is one of the most significant - and positive - global developments of the past 25 years.

A prosperous and outward-looking China is a vital component of international security and regional economic prosperity.

The rise of China has rightly been described as the most important strategic trend of our times in the Asia-Pacific region.

And it is one from which Australia stands to be a significant beneficiary.

Within a short number of years China is likely to pass Japan as the world's third biggest trading nation.

And China's vast appetite for energy and iron ore is having a significant impact on global demand for these commodities.

Australia has been well placed to benefit from China's rapid industrial expansion because of our strengths - our flexibility, our dynamism, the complementarities between our economies, and the competitiveness of our open economy.

China is now Australia's second largest merchandise export market, behind Japan and just ahead of the United States.

As you are all aware, great advances have been achieved in the Australia-China partnership since our two countries normalised diplomatic relations 32 years ago.

The issue that has brought us all here for this conference - the joint Australia-China free trade agreement feasibility study agreed under the Australia-China Trade and Economic Framework - represents a giant stride in our efforts with China and presents Australia with historic choices.

The Australia-China Trade and Economic Framework is an expression of the will of both Australia and China to build an even stronger economic and trade relationship by liberalising trade and investment between our two countries.

At the core of the Framework, is a joint feasibility study that will result in recommendations to ministers on the opportunities and challenges that an FTA between Australia and China might bring.

Good progress has been made on the study.

So much so that our respective trade ministers have brought forward the study's conclusion to the first half of 2005.

In response to our call for public submissions, we have received over ninety from business, the States and Territories, and other stakeholders.

This conference provides a timely opportunity for the business community, government and other interested parties to hold discussions on a range of important issues currently being considered in the context of the study.

These naturally include commercial and economic considerations and matters of international and domestic trade policy.

But they also rightly include broader strategic considerations, and the strengths and qualities of the Australia-China bilateral relationship.

It is very important to take a broad perspective when looking at what an FTA with China would mean for our national interest.

An FTA with a major regional partner and an emerging global power like China is as much about strategically positioning our relationship for the long term as it is about the benefits for greater trade and investment flows that would come from removing barriers in each country.

An FTA with China would be a formal government-to-government framework to support the growth of a wide-ranging and mature relationship for the future.

It would have a head-turning effect for investment flows - and China is emerging as a major source of investment for our region - and would ensure that our future integration with China would be broadly based.

The question for Australia is not whether we should integrate our economy with China's.

That will happen in any case in view of the complementarities between us.

The question is rather on what terms do we integrate?

We should and do openly acknowledge this as a major policy challenge and a priority for Australia.

This afternoon I would like to explore a number of these issues:

International Trade Policy Context

To begin to establish the broader context for a possible FTA with China, we first need to look at the trade policy environment.

The current state of multilateral trade negotiations is of immense relevance and concern to us all - we have seen some promising progress in the Doha Round with agreement on 31 July to a Framework Package to guide the next phase of negotiations.

At the same time, we are also bearing witness to an international trade policy negotiating process which has become excessively complex and difficult as the WTO's membership has grown.

Australia continues to push for an outcome in the WTO which provides genuine liberalisation and addresses core problems relating to agricultural subsidies and market access issues.

We know that finding solutions at the multilateral level offers the best means for making gains across the board, particularly in addressing agricultural subsidies.

But we also know that in its current state the multilateral system is not able to satisfy - within a reasonable time-frame - all our ambitions or needs as a liberal and efficient trading nation.

Throughout the Asia-Pacific and beyond, countries such as Australia - with a forward-looking agenda and who want to push ahead in building deeper economic and commercial relationships and mature policy linkages - are pursuing FTAs.

Essentially, we are seeking to maximise the gains for Australia and Australians by pursuing complementary opportunities at all levels - multilaterally through the WTO, bilaterally through free trade agreements, and at the regional level in APEC.

We do not see this in terms of having to choose between free trade agreements with an economic partner or a region, on the one hand, and the multilateral trading system, on the other.

It would seem that this debate at the policy level in Australia has now more or less been settled.

FTAs serve as a complementary vehicle for pursuing trade liberalisation within the WTO's global trade rules.

Our own experience is instructive.

While playing a key role in the Doha Round negotiations as a member of the Five Interested Parties (or FIPs) group and as leader of the Cairns Group we have also successfully negotiated high-quality FTAs with Singapore, Thailand and the United States.

And further FTAs with Malaysia and ASEAN are in prospect.

Keeping a Competitive Edge with China

Another important feature of the broader context is to recognise that Australia is not the only country asking “Why China?”

As I mentioned earlier, increasing numbers of countries are seeing the benefits of pursuing FTAs as part of a comprehensive trade policy agenda to enhance their international trade opportunities.

And they are looking towards China as a possible FTA partner, in some cases already discussing studies or negotiating FTAs

This means there is a lot of natural competition out there on FTAs in relation to China - for example, NZ, Singapore, ASEAN, South Africa and possibly Chile.

Australia competes directly with some of the countries involved in FTA discussions with China in areas such as dairy, forestry, citrus, table grapes, wine, copper, coal, gold and motor vehicles and parts.

At the same time, China is seeking to deepen bilateral relations with some of its important trading partners, including through the possibility of a tripartite FTA with Japan and Korea.

We need to be aware of what other countries in the China market are doing in an effort to make competitive gains for themselves.

There is no question that concluding a high-quality FTA between Australia and China would be an important part of Australia's international trade profile.

And above all, I believe that concluding an FTA with China - following this week's work in Canberra to lock in the FTA with the United States - would position Australia very favourably for its economic future.

Feasibility Study

It is important and, perhaps to some a very obvious point to make, that we - Australia and China - want to look at the options for a high-quality FTA.

Consistent with our WTO obligations, our joint FTA feasibility study is comprehensive, covering goods, services, investment and so-called horizontal issues such as intellectual property.

The feasibility study will explore the benefits to Australian exporters and services suppliers by removing or reducing barriers.

It will explore the potential gains of trade facilitation measures such as cooperation in the movement of business people, customs procedures, technical standards and electronic commerce.

The FTA study will also examine any adjustments that an FTA might involve and that would need to be taken into consideration in deciding whether pursuing an FTA would ultimately advance the national interest.

An important issue for Australia will be whether to treat China as a market economy for anti-dumping purposes.

As mentioned earlier, it is important that all stakeholders use the study process to raise issues they may wish to see addressed in a possible FTA with China.

Common Future

The most important reason for considering an FTA relates to the quality of the contribution it would make to the Australia and China bilateral relationship.

There is much to consider in this regard.

We already have a bilateral relationship built on a range of vital shared interests - from economics and trade to security and defence interests.

A possible FTA needs to be judged in terms of assisting the overall bilateral relationship reach its highest potential.

There are a number of broader and long-term benefits that would flow from having a formal treaty-level government-to-government framework within which the bilateral relationship can flourish.

It would provide a stronger bilateral framework for the future - building our relationship in ways which allow both countries to take a long-term view of our interests in each other.

It would increase our capacity to help shape policy development in China in the direction of further reform and liberalisation.

It would help to anchor a broadly-based commercial and political relationship.

It would help keep our public and private decision-makers focused on each other, and would allow us to address complex and sometimes controversial issues in context and with increased confidence.

In Conclusion

As you are aware, Australia and China are at present examining the potential benefits and costs of a high-quality, comprehensive FTA.

This conference builds on extensive consultations with business now being conducted through the FTA study process.

We need the views of stakeholders to ensure that the study provides governments in both countries early next year the best possible advice on whether or not to begin actual negotiations.

The overall aim of this conference is to stimulate us all to give some thought to the opportunities and challenges of an Australia-China FTA.

We look to the discussions in the various sessions today and tomorrow to explore the many interlocking aspects of this most significant and topical policy question.

Today discussions are intended to cover some of these themes and areas of shared interests - key issues, economic trends and outlook, trade policy issues and political dimensions and the bilateral relationship.

Tomorrow we look forward to a sectoral focus and an expert panel on the benefits of an FTA.

Tomorrow the Minister for Foreign Affairs, Mr Downer, and the Minister for Trade, Mr Vaile, will give keynote speeches - Mr Downer in the morning and Mr Vaile over the lunch session.

Opposition Spokesman for Trade, Senator Stephen Conroy, will also address a session tomorrow afternoon.

I look forward to speaking to you again in the closing session of the conference to look at future directions.

Thank you