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Opinion_

Row over China FTA risks backfiring badly on Australia

2 September 2015
Opposition to the free trade agreement with China will have an impact on Australian businesses

The free trade agreement with China is more important to Australians than to those in Beijing, failure to implement it will hurt Australia's economy.

Imagine the response in Australia if advertisements appeared on television in China portraying a worried-looking father telling his son that because of the recently signed free-trade agreement with Australia, better-prepared foreign companies are about to move into the Chinese market and take all the jobs in the services sector.


There would be noisy accusations of China turning anti-foreign, and rabidly protectionist.  Beijing would stand guilty of wanting asymmetrical economic relations with the outside world, always on its terms, not more equitable ones.

And yet, with the roles reversed,- this is exactly what happened during August in Australia.

It is claimed that the FTA will flood the country with cheap labour. Jobs and labour market standards will be lost. The terms of the deal, to liberalise inward investment and open new sectors for Chinese involvement, are taken as a huge new threat that needs to be seen off. There have been protests, demonstrations, advertising, and promises by the federal opposition to review the FTA if it is passed and Labor regains power.

An event like this shows just how bewildering it must be for policy makers and businesses in China to read a multiparty system like Australia particularly well. First they would have to work out how Labor, one of the key parties that took the FTA negotiations forward for more than half a decade, has decided now that it was all a bad deal and has, ostensibly, changed its mind.

SOURCE OF PUZZLEMENT

There might be some Chinese who understand the vagaries of Australian politics a bit better. For them, the more likely source of puzzlement will be the fact that with prices of iron ore and other commodities falling, and their own economy moving to a more services and consumption-based model, then surely a trading partner like Australia would want a new framework, like the one offered by the FTA, to support all these new, undeveloped areas of trade.

The conclusion they might reluctantly arrive at is that if there is such strong opposition to an FTA despite it seeming to make economic sense – nudging both countries towards a new, more sustainable trading and investment future – maybe there is something deeper being exposed. They might start to wonder if, in fact, underneath all the talk in recent years of embracing China as a huge economic partner, there is a bedrock antagonism towards them.

They might start to worry about the fact that, when the relationship is weighted almost wholly in Australia's terms and it is making huge profits out of natural resource exports to China, all they meet is friendly faces.

But once the terrain becomes even a little more complicated, the friendly atmosphere dissolves and they see more something much more ambiguous.

The problem with the current antagonism towards the FTA with China is that while it is right to worry, it does so in this case for the wrong reason. Australia has become complacent towards the benefits it has received from its vast northern regional partner. It has the air of a country with a sense of entitlement. Chinese businesses can, and many will, read the recent negative coverage as an advertisement for them to stay away. If they do, there are problems of where an alternative emerging large economy might appear to replace it. Europe and the United States  are mature partners. It would be folly to expect more from them. Just sustaining current levels of trade and investment there would be good. India and Indonesia are too immature. Maybe one day, decades ahead, they will figure more, but not now.  

DIVINE RIGHT

If opposition to the FTA is on the basis of principle, those opposing it might care to set out their ideas for where future growth in Australia will come from. Perhaps after a quarter of a century of solid gross domestic product growth they think this situation is Australia's by divine right. If so, they are in for a nasty shock. These days for Australia, if China catches even a cold, as it has done recently with the fall in GDP growth, the impact is immediate and dramatic – witness the loss of jobs and collapse of value of companies in the mining sector. This is when things happen by accident. Deliberate eschewing of the Chinese market risks having a devastating impact.

Before opponents of the deal get too agitated, there is one final thing to remember. The FTA has been presented as some prescriptive piece of legislation, put in place by heedless government officials in Canberra and Beijing, which will dictate what happens afterwards. In fact, like any FTA, it is no such thing. At best it provides a common framework between two parties, a way of doing business better in ways both sides understand. It gives Australia a few months or years, when it is passed, of competitive advantage over European, American and other markets with no FTA in working in the highly desired Chinese market. But Australian companies will have to take up the real work.

Of course, Australia can refuse to sign. It can look to other markets. It can simply shut China out. It can put up a trade wall around itself, and wait until the next commodities boom, so that things can be wholly on its terms once more. The sobering truth is that this attitude will have little or no impact in Beijing. In the world's second-largest economy, enjoying main trading relations with more than 130 other countries, Australia is only a small part of its universe. Like it or not, the FTA is more important to Australians than to those in Beijing.  And that is not speculation, just hard-nosed reality.

Kerry Brown is director at the China Studies Centre, professor of Chinese politics at University of Sydney and an associate fellow at Chatham House, London. First published in the Australian Financial Review on 1 September 2015.