The China-Australia Free Trade Agreement is not the perfect trade liberalisation deal, but it is still a modest step forward for an economically mature relationship.
A couple of months ago the Trade Minister Andrew Robb announced the signing of the China-Australia Free Trade Agreement allowing producers and investors to trade in goods and services across the Chinese and Australian borders with fewer impediments.
When the ChAFTA comes into force, subject to parliamentary approvals, it is estimated more than 85 per cent of Australian goods exports to China, by value, would become tariff-free, increasing to 95 per cent when the agreement is fully implemented.
The listing of Australian exports designated to be relieved from Chinese tariffs, within a decade after the agreement comes into force, includes horticulture, milk, cheese, pork, seafood, coal, wine, pharmaceuticals, orthopaedic appliances, and plastics.
A "most favoured nation" clause is also included in the ChAFTA, whereby more generous trading terms extended by China to other countries are automatically afforded to Australian exporters in certain sectors.
For its part, Australia, through the new agreement, would extend a range of benefits to Chinese producers and investors. This includes the gradual elimination of remaining Australian tariffs on Chinese imports, which in turn benefit our consumers and businesses through lower prices and better product availability, and relaxing foreign investment scrutiny thresholds for private Chinese investors in some areas.
These provisions are certainly helpful but it should also be made clear the ChAFTA does not reflect the comprehensive, unremitting liberalisation in goods and services trade, investment, and labour movement that Australia needs.
Indeed, politicians on both sides of the negotiating table have managed numerous carveouts or exemptions from the ChAFTA designed to either placate vested interests, or to uphold a desire not to unduly abridge conventional political sensitivities.
Beef producers will benefit from tariff cuts over a nine-year period, but a clause exists allowing China to reimpose tariffs if imports from Australia exceed a so-called "safeguard trigger volume" of at least 170,000 tonnes in a given calendar year.
A fairly similar arrangement will apply with regard to whole milk powders.
Australian service providers will gain additional access to the Chinese market, though the terms of access for the likes of finance and legal, and education and healthcare, will be regulated in various ways, for example on a geographic or activity basis.
The OECD has indicated that the Australian foreign investment scrutiny regime, managed by the Foreign Investment Review Board, is potentially one of the more restrictive in the developed world.
Aside from raising the screening threshold for private investors, in line with other countries with whom we share free trade agreements, the ChAFTA does not mitigate other flaws inherent in our foreign investment regulations in any material way.
The Abbott government will maintain its ability to screen Chinese investments at lower thresholds for agricultural land and agribusiness, in line with National Party demands, as well as politically sensitive areas such as media and telecommunications.
The ChAFTA does not alter Australia's discriminatory arrangement of vetting investments by all foreign state-owned enterprises, either, despite the obvious lack of regulatory neutrality in treatment arising from such a policy.
One of the great criticisms of politically stage-managed trade agreements by free trading economists, such as the internationally respected Razeen Sally, is that they hardly address the significant "behind the border" impediments to cross-border flows of goods and other valuable resources.
The ChAFTA allows Australian and Chinese investors to identify breaches in agreement obligations, and provides dispute-settlement mechanisms, but these exclude many policy areas, such as health, safety, environment, and so on, that can potentially lead to discriminatory economic treatment.
There are also significant behind the border impediments to freely flowing trade, investment, and labour resulting from the maintenance of government procurement policies, intellectual property, and technical regulatory standards.
Australian unions are fomenting a xenophobic scare campaign about the potential loss of jobs domestically, but the reality is that various migration and occupational licensing barriers against the inflow of foreign workers remain.
All in all the ChAFTA is not actually free trade by nature but, rather, a managed agenda to further cross-border good economic relations between Australia and China in ways that do not offend political imperatives on both sides.
Australia should ideally free up all trade, investment, and labour on a unilateral basis for everyone, expanding our economy and providing domestic consumers and firms with more and cheaper products, but this liberating reform route does not presently appear to be on the cards.
Despite immense benefits we have received through past unilateral trade reforms, Australian governments now appear more content to hit the "snooze button" on go-it-alone reform.
This is worrisome because multilateral trade reforms through the World Trade Organisation have also largely run aground.
Concerns about the growth of bilateral agreements inducing a "spaghetti bowl" of global trading complexity are well sustained, but in the broader climate we now face it is probably better not to let the perfect to become the enemy of the good.
With the ChAFTA looking net liberalising, at least on paper, it should be allowed to proceed, with the proviso that we still keep pushing for more reforms delivering additional benefits down the track.
If the federal Labor Party and the labour unions can pull back from their fearmongering over the ChAFTA, the agreement would mark a new, much brighter, chapter in what has been a historically fraught economic relationship between Australia and China.
We shouldn't forget that colonial governments enacted legislation from the 1860s restricting immigration, following racist agitations against Chinese miners in the goldfields, forming the basis for the disreputable federal White Australia Policy.
Governments, mostly at the behest of unionists, also introduced regulations targeting furniture-making and other manufacturing pursuits by Chinese workers in this country.
Labour market discrimination was coupled with tariffs introduced, in part, on the irrational fear that low-priced imports from China and elsewhere could undercut the pay cheques of Australian manufacturers and their unionised workforces.
Australia took a long time to move well away from these unwarranted discriminatory policies, but sadly elements of Sinophobia still lurk as shown by the inexplicable complaints against investments, students, workers, and goods flowing from China.
As imperfect as the ChAFTA may be, it if does manage to get scuttled by anti-Chinese policy sentiments ordinary Australians would miss out immensely on a chance for constructive economic engagement with our region.
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