By Pat McGrath
Analysts say the inclusion of a range of professional services in Australia’s Fair Trade Agreement (FTA) deal with China marks a shift in the focus of Australia’s bilateral trade negotiations.
Australian healthcare providers, insurers, and educational institutions will gain increased access to Chinese consumers under the FTA deal.
This is expected to drive growth for many Australian businesses, and help China’s economy to evolve beyond its dependence on manufacturing and construction.
In the almost decade of negotiations leading up to the deal, much of the focus has been on easing restrictions on the trade of goods between China and Australia.
But former Australian trade negotiator Alan Oxley said the game had changed.
“There’s a new reality, if you look at the numbers around the region now, barriers of trading goods are quite low,” Mr Oxley said.
“In fact we are at the point now where trade agreements are really all about opening up for foreign investment and creating new markets for the service industry.”
The Australian Federal Government said no other countries had convinced China to include services in their bilateral trade agreements.
Australian healthcare providers will be able to set up private hospitals and nursing homes in China, and train staff to operate them.
Australian tourism operators will also be able to buy businesses in China, and insurers will be allowed to offer third-party car insurance to drivers on China’s ever-expanding roads.
Mr Oxley said the deal reflects the change in nature of Australia’s domestic economy, in which most people are now employed in the services sector.
“In Australia 90 per cent of our GDP is generated from services, in Asia you find it’s much lower,” he said.
“But it’s got to get higher – with low tariffs on goods the markets are competitive, but their labour charges are rising.
“If they’re going to remain competitive they’ve got to make the service sector more competitive. So it’s really a new wave and it’s the way of the future.”
Deal with Australia ‘good test trial’ for China
There appears to be clear incentives for the Chinese government as well.
“The Chinese leadership know that they’ve got to get their services sector more competitive – services are a big generator of GDP,” Mr Oxley said.
“And in all the Asian economies, as they’ve made the manufacturing more competitive and higher priced, further growth has to be achieved by more liberalisation through services.
“But why Australia? Well maybe it’s because we don’t have very many large global companies and their entry into the market won’t be terribly disturbing and might be a good test trial of how they can manage having foreign operators in those sectors.”
But money will not only be flowing into Australia in the form of new revenue for services businesses.
Mr Oxley said the decision to raise the threshold for screening Chinese investment in Australian businesses to $1 billion will drive a new wave of investor interest.
“We did some analysis recently which showed that the delays in having to check over foreign investment approvals, most of which are approved, actually means that we reduce the amount of foreign investment we can get each year,” he said.
“So the billion-dollar ceiling, which the United States gets, Japan gets, and China will now get, is quite important.”
Australian Farmers’ Federation president Brent Findlay said he was glad that had been met with a lowering of the threshold for Foreign Investment Review Board inspections of agricultural land purchases to $15 million.
“My understanding is that they’re just the same as the FTA with Korea and the economic partnership agreement with Japan,” Mr Findlay said.
“We welcome foreign investment into this country, into agriculture, but we need to know who it is and what they’re doing.
“Australian agriculture are high users of capital and we’ve got a long history of foreign investment in agriculture – we shouldn’t be frightened about that.
“We may need money to invest in Australian agriculture and foreign money – we welcome that, we’d also welcome more domestic money.”
But Mr Findlay said the agreement is not necessarily an automatic win for Australian farmers.
“It depends on whether you’re a buyer or a seller of Australian agricultural land,” he said.
“At the end of the day we need capital investors in Australian agriculture if we are to double Australian agriculture output.
“We also have to be mindful that we have 7 billion people in the world and we’re moving to nine billion people by 2050 – here is an opportunity to grow Australian agriculture, but also grow our whole Australian economy.”