Australia plays risky balancing game with Asian suitors bearing FTA's

Australia faces the parlous challenge of juggling trade relations with the three key economies of Eastern Asia, all of whom covet free trade agreements with the antipodean continent in order to shore up their access to resources.

According to J.D. Wilson in an article on resource security in the Asia-Pacific, the three main Northeast Asian economies of China, Japan and Korea are all dependent upon imports of commodities for their resource security, which serves as the keen spur for their ardent pursuit of free trade agreements with Australia.

The resource-rich antipodean nation is already a signatory to a raft of free trade conventions with its nearby neighbors in South East Asia, and is currently in the process of negotiating further agreements with the far larger economies of Northeast Asia.

For China, Japan and Korea who are all resource importers, the FTA's are vital tools for bolstering their economic security.

The three nations have launched a total of 26 FTA initiatives with suppliers of key raw materials, including Peru and Chile for copper, India for iron ore and bauxite, the Gulf Cooperation council for oil and gas, and finally Australia for a broad slew of natural resources.

The FTA's provide preferential treatment in specific areas of trade, including measures such as limitations on the use of trade controls and exemptions from foreign investment criteria.

The three East Asian nations are now vying aggressively with each other for FTA's with Australia and the trade benefits they bring.

Japan entered FTA negotiations with Australia due to concerns that China's surging investment could edge it out of the resource sector, and obtained an agreement in principle for a clause granting special access to resources in 2007.

China and South Korea subsequently made the same requests during their own FTA negotiations with Australia.

According to Wilson Australia faces some risks in juggling its trade relations with the three vying economies of Northeast Asia, and must handle the matter with sensitivity and prudence.

Preferential agreements conferred upon one party may be seen as "playing favourites," and have a deleterious upon trade relations with the other two. The conferral of special policy concessions could also conflict with the principle of most-favored nation which is integral to the operation of the World Trade Organization.


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