Australia and China access to open trade

Since the opening of Chinese ports during the Qing dynasty, the adoption by China of Deng Xiapeng's "kai Fang" policy and more recently, since the visit to Australia by China's second most important statesman, Chinese Premier Wen Jiabao, in more than 18 years1 – the economic, business, and strategic links between Australia and China have formed a synergy.

Australia and China, have forged strong trade and investment, formed a burgeoning tourism industry, shared intellectual capital, and developed close business ties. The purpose of this discussion is to expound on the Australian-Sino symbiosis and posit the significance for Australia, and what this means for Australia's role in the wider world.

The overtures between Australia and China of a possible and sustainable free-trade agreement have taken place for a year and have led to some joint feasibility studies2 stating that in the arrangement of a deal between the two countries, Australia's GDP would grow by A$18 billion dollars and China's by A$64 billion3.

Although a free-trade agreement between Australia and China would create a liberalised trading atmosphere, in which goods and services would be freely traded, in the long-run, the deal may concentrate wealth. The NAFTA (North American Free trade agreement) between USA, Canada and Mexico has concentrated wealth. This has happened due to imports being made inexpensive to the regional grouping (USA, Mexico and Canada) at the expense of other trading nations.

Australia's trade with China in the past decade has quadrupled, making China, Australia's second-largest trading partner. Large influxes of low-cost manufactured goods have helped Australian consumers by curbing inflationary pressures and shielding markets from high interest rates. Imports from China in 2004 grew by 25 per cent and such low-cost labour is providing middle-class Australians with relatively inexpensive goods.

Australia's trade terms4, the ratios of prices Australia receives per unit of its exports to the prices it pays per unit of its imports, have dramatically changed. The standard of living for Australians declined in the beginning of the 20th century but received a boost by domestic growth and savvy economic management, to their highest levels, in 1974. Since then Australians have enjoyed a higher standard of living. China now, is a valuable importer of tourism and education services that are helping boost Australia's trading terms. 

China's exorbitant energy and mineral consumption has led to the issuance of new supply contracts. A multi-billion dollar arrangement is in place for the transfer of liquefied natural gas to Southern China over a period of twenty-five years. In addition, the signing of the "nuclear safeguards agreement" between the two countries, plans to temper China's use of fossil fuels (i.e. coal, natural gas, petroleum) with nuclear energy.

The significance for Australia's prosperity and overall economic rigour has a lot to do with Australia's investment in China's manufacturing, financial, insurance, education and business sectors. This has come about due to the increasing transparency of China's business ethics and work environment6. The Economic and Commercial Section of the Consulate General of the People's Republic of China in Sydney reported in 2000 that Australia's investment in China had hit A$8 billion dollars; China's investment in Australia was estimated to be A$6 billion.

Australia has directly benefited not only from foreign direct investment ,but also from China's accession to the World Trade Organization in 2002. This meant that Australia could foster the above mentioned agreements, due to China's liberalised markets – representing a further economic incentive for Australia's trading of goods. The economic benefits that Australia has derived from its agreements with China has not only aided middle-class Australia but also bolstered Australia's image in the world as a cogent industrialised power.

Australia's strategic and diplomatic powers on internationally tentative grievances, have been strengthened ever since the seminal introduction of dialogue between China and Australia that was established by Gough Whitlam in 19727. Australia can fill the vacuum existing in international dialogue over issues such as North Korea's reneging of the nuclear non-proliferation treaty, Iran's nuclear expansionism, North-East Asian security, the stability in Taiwan strait, by its new formed trade and economic alliance with China. Since China's role in global security is of great importance, Australia can use its existing status as a major trading partner to cosset China implicitly, to foment dialogues in favour of Australia's interest.

The debate over Iran's nuclear ambitions, if allowed to protract, will precipitate Australian consumers' worst fears. Not only will the supply of oil contract, producing a strain on Australia's domestic consumption, but it will bode a tentative international playing field (of which Australia is a part and parcel of) – with America feeling the pinch first, followed by other nations, with vested interests in Iran's oil. The question of North Korea's avoidance of any restrictions placed on its nuclear program, also needs to be mediated by China – North Korea's closest neighbour.

Thus Australia's significance with China and more broadly in the international scene is clear. Global security and internationally topical issues may be aided by Australia's synergistic bond with China. China's position as a veto-holding power yields many positives for Australia. It provides a counter-balance to America's hegemony and therefore concessions may be extracted perhaps on issues that may arise between the U.S. and Australia. Moreover, Australia's obligations to the U.S shouldn't stop Australia pursuing other globally sustainable and equitable bi-lateral relations – ie with China.

Also, any breakdown of relations with China and nuclear North Korea will have a direct impact on the well-being of global security – more so Asia-Pacific security. Therefore, to necessitate a smooth dialogue between China and its volatile neighbours would be in Australia's and the international community's best interests.

Core issues outlined in this paragraph must be handled with care and not with diplomatic doublespeak. The issue involving Taiwan and the "one-China policy" is a tentative issue. Australia can assist in the maintenance of a level playing field in the Asia-Pacific. Australia should be in favour of being politically expedient rather than being politically coercive and should utilise this leverage that it has with China to promote egalitarianism, democratic institutions and liberty within China.