BY EVA CHENG
The central objective behind Prime Minister John Howard's invitation to Chinese President Hu Jintao to visit Australia has been to secure a bilateral free trade agreement (FTA) with China, in the hope that this will provide privileged access for Australian corporations to China's rapidly growing economy.
China was Australia's third largest export market in 2002, taking 7% of Australia's exports ($8.4 billion, a 10% rise over 2001). On the other hand, 10% of Australia's imports ($12.8 billion in 2002, an increase of 25%) came from China, making it the third largest source of imports. This resulted in a $4.5 billion trade deficit on the Australian side, which obviously Howard aims to reduce, if not reverse.
By comparison, in a fairly stable pattern for years, Japan and the US are Australia's largest and second largest trading partners, accounting for 15% and 14% of Australia's external trade turnover respectively last year.
There is a significant difference between these two relationships. Japan is also Australia's biggest goods market, taking $22.2 billion or 19% of Australia's exports in 2002, $6.4 billion more than Australia imports from Japan.
A growing problem for Australian capitalism is that Japan's importance as an export market has been in a long-term decline as a result of Japan's stagnating economy. Australia's exports to Japan last year fell 7% compared to 2001, contributing to a 24% fall in Australia's trade surplus with Japan over the same period.
The US, on the other hand, is the largest source of imports into Australia. In 2002, the US accounted for $23.2 billion or 18% of Australia's goods imports, resulting in a trade deficit to Australia of $11.6 billion.
Goods trade shortfalls contributed significantly to Australia's persistent current account deficits, which surged again in 2001-02 to $22.2 billion, despite having eased earlier from 1998-99's high of $33.6 billion.
While Australia has limited room to improve its trade balance with Japan and the US, the prospect is much better with regard to China.
However much the Howard government has trumpeted about Australia moving away from its traditional "resources-based" export pattern, the fact remains of Australia's goods exports, 59% are primary products (farm-based products and mineral and fuel resources), 10% "simply transformed manufactures" (STMs), 21% "elaborately transformed manufactures" (ETMs) and 10% other merchandise.
By contrast, Australia's import pattern is almost a mirror image of its export pattern, with ETMs accounting for 75%, STMs 9%, primary products 14% and other merchandise 3%.
Australia's recent trade with its leading trading partners has largely conformed to this overall pattern. Australia's imports from Japan and the United States are ETM-heavy. Motor vehicles and their component parts, plus computer parts, top the goods that Japan exports to Australia while those from the US are dominated by aircraft and aircraft parts, telecommunications equipment, measuring and controlling instruments and internal combustion engines. With its relatively small domestic market, there is a significant limit on the extent that Australia can reduce such imports from overseas by making these goods itself.
On the other hand, the prospects of Australia boosting both its primary product and manufactured goods exports to Japan and the US is also limited by the sluggish growth rate of these two highly developed capitalist economies and fierce resistance from their agribusiness sectors.
The Howard government wants to boost Australia's exports to the US with a bilateral free trade agreement. But there are risks that US exporters may gain more from such an agreement than the Australian capitalists as a whole.
The prospects for Australian capitalism are brighter with China. On the back of an average GDP growth of 7% per year in the last decade, more than double the world average, China continues firmly on its path to become the "factory of the world" in limited value-added manufacturing and assembly work. It has a big appetite for the primary products to feed its booming factories, providing a big and rapidly growing market for Australia's mining and agribusiness corporations.
Australia's biggest exports to China last year were iron ore ($1.5 billion), wool ($1.4 billion), crude petroleum ($369 million) and coal ($224 million). China is now the biggest market for Australian wool, taking more than a third of this Australian export. Australia also managed to export a significant quantity of coal to China, despite China having huge coal reserves of its own.
By the end of 2000, Australian corporations had invested $8 billion in China, while Chinese corporations had invested $6 billion in Australia, principally in joint-ventures with Australian resource companies.
Last year, for example, thanks to top-level lobbying from Howard, Beijing signed a $25 billion deal to obtain natural gas from Australia. And during Hu's visit to Canberra, last week, the Chinese National Offshore Corporation signed a 25-year contract worth $30 billion to buy between 80 million and 100 million tonnes of natural gas from Barrow Island, off Australia's north-west coast.
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From Green Left Weekly, October 29, 2003.
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