Economic Effects of Australia-China FTA: Challenges and Opportunities for Bilateral Trade Policy

The global trading system has seen a very substantial increase in preferential trading arrangements (PTA) over the past decade. There were only two such agreements in 1958: one was the European Community (EC, now European Union) in the form of Customs Union, the other was the EC in the form of Services Agreement. The number of agreements had grown to 30 by 1991 and in 2005 there were 188 in force. World Trade Organization (WTO) statistics show that by March 1, 2006, 193 Regional Trade Agreements (RTAs) had been notified to the WTO (WTO 2006a) and are currently in force. This increase in RTAs raises the potential for diverse and overlapping agreements with various types of preferential Rules of Origin (RoO). The initial impetus for economic integration at a regional level was from the formation of the plan in 1950 for a European Coal and Steel Community, which contributed to the establishment of the European Economic Community in 1958 – which evolved into the European Union in 1993. Together with the increasing fragmentation of global production and increase in intra-industry trade, the proliferation of RTAs and associated RoO has the potential to substantially affect the relations between the trading countries, and, furthermore, to influence worldwide trade patterns resulting from RoO compliance and administrative costs.