Free-trade foreplay to speed up

By GREG ANSLEY in Canberra

Australia and China have agreed to accelerate overtures that could lead to a free-trade agreement, after talks between Trade Minister Mark Vaile and top-ranking Chinese ministers in Beijing.

A key concession by Canberra is its commitment to push forward a study into Beijing's status as a market economy, a position already taken by New Zealand and a recognition keenly sought by China as part of its broader worldwide trade agenda.

The coalition Government of Prime Minister John Howard, which faces an election this year, is equally keen to make important inroads into Asia to counter claims that it has relegated the region behind its security and economic relations with the United States.

Australia's proposed free-trade agreement with Washington has taken centre stage, although it still faces an uncertain passage through the US Congress and is under heavy fire at home.

Significant progress towards a trade pact with China would bolster Howard's Asian credentials, adding to agreements already signed with Singapore and Thailand and to the recent decision by the Association of Southeast Asian Nations (Asean) to discuss a free-trade link with the transtasman CER agreement.

Yesterday, Vaile said from Beijing that Australia and China had agreed to fast-track the free-trade scoping study set up after Chinese President Hu Jintao's visit to Canberra last October.

Under the trade and economic framework agreement signed by the two Governments during the visit, officials were to have completed the study by October next year.

But Vaile said the two countries had agreed to fast-track completion of the joint study into the feasibility of a free-trade agreement.

"The Australia-China trade and economic relationship is set to move into a new, expanded phase," he said.

"My visit to China re-affirmed the long-term goal of both countries to build on the trade and economic complementarities and closer integration of our two economies."

Vaile confirmed that as part of the accelerated timetable Canberra would speed up its own consideration of China's claim to be a full market economy.

Last year's trade and economic framework agreement stipulated that a free-trade agreement could be negotiated only on an "equal basis", and that talks would only begin after Canberra had given full recognition of China's market economy status.

"China has asked that Australia move to recognise its market economy status and we have agreed to have further discussions on this issue," Vaile said.

Analysts have also suggested that in addition to Australia's backing on China's claims for recognition as an open economy, Beijing would view a pact with Canberra as a valuable dry run for similar negotiations with the US and the European Union.

China is already Australia's third-largest trading partner, two-way merchandise trade trebling since 1996-97 - the year Howard won office - to more than A$22 billion ($25.6 billion) in 2002-03.

During Hu's visit, the countries signed a US$30 billion deal to supply 3.3 million tonnes of Australian liquefied natural gas over 25 years.

The year before, China's Guangdong province awarded a similar A$25 billion, 25-year LNG contract to Australia.

During Vaile's visit the two countries have also signed two memorandums of understanding to help boost two-way investment, which Vaile said did not at present match the strong performance of trade in bilateral merchandise and services.

"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," he said.

"Australia is well placed to assist China in this economic growth now and into the future."