Michael Smith
Jul 31, 2019 — 7.00pm

Shanghai | Australia is confident of securing a regional trade pact that includes 10 of its 15 largest trading partners by the end of the year despite resistance from India to a deal it fears will flood its market with cheap Chinese goods.

Trade Minister Simon Birmingham, who arrives in Beijing on Thursday, said the latest round of talks for the Regional Comprehensive Economic Partnership (RCEP) would be "critical" to meet a deadline set to secure an agreement by the end of this year.

"I anticipate it will take every minute of that time, right through to the final couple of months of this year, to get to a point where we can hopefully reach a potential conclusion in negotiations," Senator Birmingham told The Australian Financial Review.
Joel Carrett, AAP

"This meeting will be critical for establishing momentum, narrowing the areas of ongoing negotiation and then we can hopefully springboard out of Beijing to ensure over the coming few months we settle all residual matters and disagreements."

Australia has played a key role in negotiations for a regional free trade pact that the federal government said would lower trade barriers and bolster growth in the region. It has resisted calls for the deal to be scaled back to ensure it is signed by the end of the year.

Senator Birmingham's visit to China is also seen as a step in efforts to repair Sino-Australian relations, which cooled under the Turnbull government and remain frosty due to differences over security issues and a ban on Huawei.

Sources said the main sticking point remained tensions between China and India. New Delhi, which already has a large trade deficit, fears greater market access for China would hurt its steel, textiles and other manufacturing industries. It has also resisted greater market access to partners, including Australia.

"India-China negotiations are critical, and the need for India to be realistic about what it can expect around labour market access," one source said of the talks being held this Friday and Saturday in Beijing.

The trade deal, which was championed by Prime Minister Scott Morrison at the G20, includes the 10 members of the Association of Southeast Asian Nations (ASEAN) as well as six other countries: Japan, South Korea, China, Australia, New Zealand and India.

Could be excluded

There have been suggestions that India, Australia and New Zealand could be excluded from an initial trade agreement, as a way of resolving tensions between New Delhi and Beijing. However, Senator Birmingham said he was confident Australia would be part of any deal concluded at the end of the year, and Canberra wanted a deal with all 16 participants.

"My instructions from Scott Morrison are very clear – to get on and get a deal done in the interests of Australia," he said. "The Prime Minister in his various bilateral engagements has consistently raised the priorities Australia places on successfully concluding RCEP with each of the other negotiating.

"Australia has been an active contributor, participant in every step of the negotiations. We want RCEP to succeed because we see the benefits of deeper, richer regional integration."

Senator Birmingham last visited China in November for a major import expo in Shanghai. Apart from the appearance of sports minister Richard Colbeck at an AFL match in Shanghai, there has not been a senior ministerial visit to China this year.

The trade talks in Beijing will take place in the same week that top US and Chinese trade negotiators meet in Shanghai as they try to keep alive efforts to end a crippling trade war.

The enormity of the regional trading bloc that would be created is something that the rest of the world would sit up and take notice of.

— Simon Birmingham

A successful RCEP is seen as a counter to rising US protectionism under the Trump administration.

"We are now seeing some of the benefits that flow from the TPP [Trans-Pacific Partnership] and we would expect similar benefits from RCEP in years to come. Our region stands together and it will not be deterred by negative trade rhetoric from elsewhere," Senator Birmingham said, without naming the United States.

He said the RCEP did not mean a "dramatic change" for the Australian economy but would be an important building block for future growth. It would also lift the standard of rules in areas such as ecommerce and intellectual property.

"The enormity of the regional trading bloc that would be created is something that the rest of the world would sit up and take notice of," he said.

The last round of negotiations took place in Melbourne in July.

A deadline has been set for a deal to be concluded by the end of the year, possibly on the sidelines of the East Asia Summit in October or November, but India's concerns that its market will be flooded with cheap Chinese goods has been a major sticking point. India also wants greater regional access for its skilled workers.

A report in the Nikkei Asian Review in June said China put forward a "blueprint" for the pared back trade deal in April but the idea was opposed by Japan. Beijing has denied it is part of any move to reduce the number of parties in RCEP.

Third of global trade

A deal, in its full form, would cover about half the world's population and nearly a third of global trade and dwarf the revived Trans-Pacific Partnership, which was signed last year without US participation.

An agreement would be Australia's second major multilateral deal signed since Donald Trump was elected and began pursuing a more protectionist trade policy in the US, while also launching a tariff war with China. Last year, Australia and Japan spearheaded the revival of the TPP, after Mr Trump withdrew US involvement on his first day in office.

When RCEP was first flagged eight years ago, there was debate about whether it should be "ASEAN plus three" or "ASEAN plus six", and the larger grouping was ultimately favoured. However, negotiations have dragged on longer than expected.