China, Australia to finalize FTA within year

Dairy industry group expects big trade boost following deal

China and Australia are likely to reach a long-awaited free trade agreement (FTA) within the year, a senior Australian official said Monday.

A press officer with China's Ministry of Commerce (MOFCOM), who did not give his name, also confirmed the time schedule with the Global Times on Monday.

The news was welcomed by Australia's dairy industry which sees growth opportunities in the agreement.

Australian Trade and Investment Minister Andrew Robb told a dairy industry forum held Monday in Melbourne that "finalization [of the FTA] with China remains in prospect this year," according to a speech posted on the minister's official website.

China and Australia started FTA negotiations in 2005. The two sides just concluded the 21st round of talks in Beijing on September 5, with solid progress being made in issues such as trade in goods and services, and investment, read an earlier statement from the MOFCOM.

Robb told the forum that "to further delay [the deal] will only exacerbate the advantages our direct competitors have, including most relevant to you, New Zealand," and his major objective with the China FTA is to get at least a New Zealand-equivalent deal for the dairy industry.

Australian Dairy Farmers Limited (ADF), the country's dairy industry association, is eager to see the deal concluded as soon as possible.

"Australian dairy imports help meet the shortfall between domestic supply and demand in the high-end sector of the Chinese market, including products such as specialty powders, cheese, butter and infant formula and in many cases these are products that China does not produce," Natalie Collard, CEO of ADF, told the Global Times via e-mail on Monday.

While Australian dairy is keen to pursue growth opportunities off the back of an FTA with China, it is not the industry's intention to do so at the expense of Chinese dairy production, she said.

China and New Zealand signed an FTA in April 2008. Since concluding the agreement, New Zealand's dairy trade revenue from China increased by A$3.7 billion ($3.3 billion) by the end of 2013, while Australia's revenue from China only increased by A$173 million during the same period, according to Robb.

But analysts said that Australia is not likely to receive as big a boost in dairy exports as New Zealand had experienced.

"New Zealand mainly exports raw milk to China where demand from local dairy companies is huge, but Australia mainly exports finished dairy products, and the demand is not that large," Song Liang, a dairy analyst at the Beijing-based Distribution Productivity Promotion Center of China Commerce, told the Global Times Monday.

But he said the FTA deal might facilitate Chinese companies to invest in Australian dairy farms or companies.

Officials said the difficulty of the Sino-Australian FTA negotiations mainly lies in the two countries' divergence in market access and agricultural products.

Chinese Commerce Minister Gao Hucheng told a press conference in March that China seeks greater access for Chinese companies to invest in Australia, while the main concern for the latter is its agricultural exports to China.

China is Australia's largest trade partner and biggest export market. The bilateral trade reached $136.4 billion in 2013, up 11.5 percent year-on-year, data from Chinese customs showed.

China has made great progress in inking free trade deals. Its FTAs with Iceland and Switzerland have taken effect since July 1.

The China-South Korea FTA is also expected to be signed within the year.

"These agreements are not likely to greatly boost China's foreign trade revenue amid sluggish external demand, but with more FTAs concluded, their role in improving trade figures will become pronounced," Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times Monday.