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Australia looks at possible free-trade accord with China

Australia is likely to begin negotiating a free-trade agreement with China after a preliminary study was finalized last week, Australia's prime minister said yesterday.

Negotiations are expected to begin if the preliminary study convinces both countries that such a trade pact would be in their interests.

Prime Minister John Howard said Australia would have to recognize China as a market economy at the outset of negotiations and China would have to agree that all industries were on the negotiating table.

"I believe there's a good chance" negotiations will begin, Howard told Australian Broadcasting Corp television.

Howard is expected to formally launch the talks when he visits Beijing next month.

Australian Trade Minister Mark Vaile said yesterday a free-trade pact with China could be worth tens of billions of dollars to Australia.

"There's a unique opportunity that's presenting itself to Australia as a nation to consolidate our position in a trading relationship that is our third largest trading relationship, that with China," Vaile said.

Australia giving China market economy status would set an important precedent for China.

Last year, the EU refused to recognize China as a market economy, saying there was still too much government interference in business.

Australia has told China it would not consider China a market economy if it excluded industries such as its subsidized agricultural and services sectors from the deal.

"We're going to have a Cabinet meeting to decide whether we're going to commence the discussions. As of now we haven't conceded anything," Howard said.

"If we do concede market economy status, it will be in return for everything being on the table and also a very comprehensive agreement at the end," he said.

China is a major buyer of Australian iron ore, coal and natural gas, and its imports of these raw materials are surging as its energy needs grow.

Australia is also eager to ship more farm products such as grains and citrus fruits, but China considers itself a developing country in terms of agriculture and subsidizes its impoverished farmers.

China is Australia's third-largest and fastest-growing trading partner and fourth-largest export market. Trade between the two countries has quadrupled in the last decade. Last year, trade between the two countries was worth A$28.9 billion (US$23 billion).

Australia believes a free-trade accord with China could be more lucrative than a free-trade agreement with the US which began in January this year.
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