Francisco A. Laguna & Jennie Linder Cunningham
To launch our 2014 blog, TransLegal is beginning a 3-week series on Australia. Australia occupies a unique position in the international community: geographically, its location allows for immediate trading partners in Asia, particularly Southeast Asia. However, culturally, linguistically and politically, it resembles a Western capitalist democracy – to some extent. Observers of Australia frequently note the historic and current peculiarities of the country’s politics. Of particular interest, as a new administration sets its agenda, is Prime Minister Tony Abbott’s indications that he fully intends to (finally) complete ongoing, but stalled, Free Trade Agreements with China, Japan and South Korea. These announcements met with some skepticism: negotiation of all the FTAs have dragged on for at least four years. Today, we begin our analysis of Australian relations with China, followed in the next weeks by a look at Japan, the US and India.
Australian Trade Numbers
Below is a chart showing trade numbers for Australia, generally.
Australia Trade in Brief
|Bilateral||FTA||two-way total trade||% share||Export/Import Snapshot|
|China||in negotiations since 2005||125.2b||20.3||E: mineral resources, travelI: telecom, textiles|
|Japan||in negotiations since 2007||71.1||11.5||E: mineral resources, beefI: vehicles, refined petroleum|
|US||went into effect Jan. 2005||56.2||9.1||E: pvt. commercial services, vehiclesI: meat, precious metals, optic/med. instruments|
|Russia||1.7||E: meatI: crude petroleum|
|India||in negotiations since 2011 for a Comprehensive Economic Cooperation Agreement||17.4||E: coal, goldI: tourism, diamonds|
|ASEAN 10||went into effect Jan. 2010, includes NZ||91.7||14.9|
Currently, China is Australia’s largest two-way trading partner, with 2012 trade totaling US$ 125.2 billion. In comparison, trade with Europe reached US$ 92.7 billion and with the Americas, US$ 72.2 billion.
Australia primarily exports iron ores and concentrates to China, upwards of AUS$38.7 billion, along with coal, gold and crude petroleum. Imports include telecom equipment and parts, computers, clothing and some furniture items. In terms of services, Australia exports almost $4 billion in “education-related travel” and normal tourism to China.
Since April 2005, Australia and China have had a series of negotiations on a potential free trade agreement. They have completed 19 rounds of negotiations, but the process has stalled lately, mostly on issues related to agricultural trade and Australian Foreign Investment Review Board scrutiny of Chinese investments. Prime Minister Abbott has indicated that he wants the FTA finalized within a year. It is largely believed that successfully meeting the 12-month deadline for China FTA talks will be the impetus to concluding the FTA talks with South Korea and Japan as well.
Issues delaying the FTA primarily have to do with concern over China potentially acquiring large amounts of Australian farmland, as well as China’s unwillingness to allow significant agricultural imports and its maintenance of quotas on wool, dairy, beef and seafood, among others. This is especially of interest given that initial estimates predicted that China would overwhelmingly benefit from an FTA, with fully three-quarters of the US$82 billion in economic benefit over ten years going to China. Very recent developments indicate that China may be willing to allow increased Australian food exports – but only on the condition that China is allowed to purchase additional Australian farmland through foreign direct investment (FDI), which would not necessarily benefit Australia if China simply begins exporting food products grown in Australia back to China at cost. Other commentators argue that this tradeoff – more agricultural exports for allowing Chinese FDI in real property – will prove far more beneficial to the Australians in the long run, particularly as more Chinese enter the middle classes and begin to eat higher-value foods, especially protein.
TransLegal has two correspondent offices in Australia in Sydney and Perth. We are available to answer your questions concerning doing business in the country.