China and Aus­tralia: This is not just a sim­ple trade deal

Financial Mirror (Cyprus) - - FRONT PAGE -

After a decade of ne­go­ti­a­tions, a free trade deal be­tween China and Aus­tralia was fi­nally com­pleted in Can­berra on Mon­day. In the com­ing years, both coun­tries stand to ben­e­fit sig­nif­i­cantly from their com­mit­ment to ce­ment and di­ver­sify business ties. For Aus­tralia, it is a land­mark achieve­ment which of­fers great op­por­tu­ni­ties; for China, the world’s sec­ond largest econ­omy, this is another in­di­ca­tion of its ex­pand­ing in­flu­ence over­seas.

Es­sen­tially, at the heart of the deal, is the fact that Chi­nese mar­kets will be open to ex­porters of Aus­tralian agri­cul­tural goods and ser­vices, and in re­turn, Aus­tralian re­sources will be ac­ces­si­ble to Chi­nese in­vestors.

This isn’t the start of their trade re­la­tion­ship. Aus­tralia is al­ready the most China-de­pen­dent of the world’s de­vel­oped economies and over 35% of its ex­ports went to the Asian su­per­power last year, ac­cord­ing to the IMF. Yet, the deal does take eco­nomic and strate­gic ties be­tween the coun­tries to a whole new level. In the long-term, this week’s deal could mean that 95% of Aus­tralia’s ex­ports to China will be free of any tar­iffs.

It’s no sur­prise that Aus­tralia has cel­e­brated the agree­ment as the best ever be­tween Beijing and the West. After all, such deals are of­ten par­tic­u­larly ben­e­fi­cial for the smaller eco­nomic part­ner. That, in this case, is of course Aus­tralia, whose econ­omy has been heav­ily de­pen­dent on the min­ing sec­tor and en­ergy ex­ports; it will profit tremen­dously from greater di­ver­si­fi­ca­tion. Although ser­vices make up around two third of Aus­tralia’s gross do­mes­tic prod­uct, they ac­counted for only 17% ex­ports in 2013. Now, Aus­tralian com­pa­nies will be able to mar­ket medicines and health­care ser­vices to China’s ag­ing pop­u­la­tion, as well as fi­nan­cial ser­vices and wine, dairy, and meat pro­duce to its grow­ing mid­dle and up­per-classes.

China ob­vi­ously gains by pro­vid­ing its pop­u­la­tion with the im­ports and ser­vices they need. But there’s more in it for them than just that. In ex­change for sup­port­ing Aus­tralia’s ex­port-strong econ­omy, China now has de­manded the same in­vest­ment priv­i­leges in the coun­try as Amer­ica and Ja­pan. Its pri­vate com­pa­nies will be able to invest as much as A$1bln with­out any for­mal re­view.

This is another ex­am­ple of Beijing’s po­lit­i­cal-eco­nomic strat­egy to es­tab­lish in­flu­ence and as­sert its soft power over­seas. It sees in Aus­tralia a will­ing business part­ner who of­fers it en­ergy, re­sources, and fi­nan­cial op­por­tu­ni­ties – all com­po­nents it needs for its econ­omy to con­tinue de­vel­op­ing should it want to con­tend for the world’s num­ber one su­per­power spot.

Trade agree­ments are never just sim­ple eco­nomic deals. They are in­di­ca­tors of a po­lit­i­cal and so­cial con­nec­tion, and they open new doors for business as much as sup­port­ing ex­ist­ing ven­tures. They cre­ate co­op­er­a­tion and de­pen­dency, which, like in any hu­man re­la­tion­ship, gives both sides strength as long as the com­mit­ment re­mains. The deal be­tween Aus­tralia and China may have been in the mak­ing since 2005 but it has been signed now a great time for both coun­ties. Both economies can grow from it, and their cit­i­zens will be the win­ners if they adapt to change and max­imise the new op­por­tu­ni­ties avail­able.

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