Role of Agriculture in The Proposed Free Trade Agreement between Australia and China: Challenges and Opportunities

Australia's trade, investment and economic ties with China are very important, particularly in the current global economic uncertainty. China has become Australia's top trading partner, with trade in goods and services worth $63.8 billion in 2007-08. The Australia-China Free Trade Agreement (AUSCHI-FTA) has already passed the 13th round of negotiation in December 2008 and there are several significant issues that are still unresolved. The FTA initiative enjoys a high level of political support from both governments give the large potential economic benefits and the strategic importance of it to both countries. However, the negotiations have stalled over the treatment of Australian grain exports to China. While Australia looks for a comprehensive FTA, China insists that grain should be exempt as sensitive products from the agreement. This paper analyses the economic effects of the proposed FTA between Australia and China by taking the sensitivity of agricultural trade liberalisation into consideration.