In December this year, China and Australia will enter a new round of talks on the possibility of a free trade agreement (FTA) on both merchandise and services, but face difficulties due to different expectations.

Both China and Australia have agreed that bilateral trade is complementary and growing fast. As Mr. Wang Chao, an assistant to the Chinese Minister of Commerce, said at the Australia-China Forum on Business Cooperation in Beijing on Monday, trade between China and Australia has been increasing by more than 40 percent annually since 2003. The value of bilateral trade reached over US$27.3 billion in 2005 and more than $US23 billion in the first nine months of 2006. Australia is China's ninth largest trading partner while China is Australia's second.

Mr. Saul Eslake, chief economist at the Melbourne-based ANZ Bank, was present at the forum. He said Australia is a major exporter of merchandise and importer of finished products while China, conversely, is a major importer of merchandise and exporter of finished products. This has actually reversed the slump in Australia's per capita income, which was caused by falling merchandise prices. Mr. Eslake regards China's peaceful rise as an opportunity rather than a threat to Australia's economy.

However, this does not resolve the disagreements between the two parties when it comes to free trade talks. Australian manufacturers are concerned about the competition from China. Mr. Ric Wells, Head of Australia's China FTA Task Force, assured Australian manufacturers that no concessions would be made on Australia's existing manufacturing goods tariff of approximately 5 percent.

However, China has the same concerns about its service sector. Mr. Wells insisted that Australia's quality service providers would work with, rather than against, Chinese providers. He recognized that Australia is ambitious in the talks.

Each country's concerns reflect their different expectations of the FTA. Mr. Eslake argued that it is the responsibility of the government to ensure that good, cheap, goods and services are made accessible to consumers to improve their living standards, no matter who offers those goods and services.

There is no timetable for the conclusion of the FTA talks. Mr. Wells stressed that they would focus on a ��high quality outcome�� and that a timetable might create more difficulties.

by People's Daily Online