The importance of the 'rule of law' in the development of the Australia-China business relationship.

• Author: Moens, Gabriel A.
• Position: 173717048
• Pages: 54(7)

INTRODUCTION

This essay briefly analyses the current state of the business relationship between Australia and the People's Republic of China and assesses its future prospects. In particular, I will argue that, although commentators confidently predict that China will become an economic superpower in the 21st century (1) and already is "a leading pillar of global society", (2) the enhancement of the Australia-China business relationship largely depends on China's implementation of the "rule of law". But first, I will briefly review and assess the current business relationship between Australia and China.

THE CURRENT STATE OF THE AUSTRALIA-CHINA BUSINESS RELATIONSHIP

A brief review of the Australia-China business relationship

Formal diplomatic relations between Australia and China were established on 21 December 1972. Following a visit four years ago by the President of China, Hu Jintao, both countries signed a Trade and Economic Framework between Australia and the People's Republic of China on 24 October 2003. The framework provides that "the parties will cooperate to achieve balanced and comprehensive trade and investment facilitation and liberalisation" (paragraph 1). Australia and China also confirmed that they "recognise that all national government measures which impact on bilateral trade and investment should be carried out in a reasonable, objective and transparent manner" (paragraph 6). The framework, in its Annex I, lists cooperation in a number of other areas, including textiles, clothing and footwear, agriculture and quarantine inspection, services and recognition of educational and professional qualifications. It also confirms that intellectual property rights are important in providing a stable and competitive business environment for enterprises.

In November 2004, the Chinese President and the Australian Prime Minister, John Howard, strengthened the cooperation envisaged by the framework by committing themselves to a deepening of the economic and trade links between Australia and China and by extending their collaboration in the field of energy and technology. Australia and China are now engaged in a number of bilateral cooperative activities to develop trade and investment in the areas of mining and energy through the Australia-China Bilateral Dialogue Mechanism on Resources Cooperation and the Australia-China Natural Gas Technology Partnership Fund. On 18 April 2005, the Australian Prime Minister and the Chinese Premier, Wen Jinbao, also agreed that both countries will endeavour to negotiate a free trade agreement. (3)

Tim Harcourt, in a short but revealing paper entitled Is Australia Benefiting from China's Economic Resurgence? At First Glance, the Signs Are Promising, notes that: (4)

"China is Australia's second largest export market after Japan and ahead of the USA, New Zealand and Korea. It accounts for just over $15 billion or 9 per cent of our total exports--mainly because of its contribution to global industrial production... "China's significant contribution to global industrial production means it has an insatiable appetite for resource inputs and raw materials--much of which they get from Australia, with wool, coal, iron ore and liquefied natural gas (LNG) playing an important role." The validity of this statement was anticipated in June 2005 by the Embassy of the People's Republic of China in Australia in a submission to the Senate's Foreign Affairs, Defence and Trade References Committee. The submission, entitled A Rising China and the Flourishing China-Australia Relations, recounts that: (5)

"China is now Australia's third largest trading partner and second largest export market. Australia is China's...