Co-incidence or plot that both the AFR and
Oz today run stories about China FTA negotiations not going well? The plot
would be preparation of the ground for a quiet admission that the deal isn’t going
to happen.

The Oz story comes from China correspondent Rowan Callick, but is very Canberra in content
and tone. The Fin story is straight Canberra:

Scepticism over China’s
real commitment to a comprehensive free-trade agreement will be at the heart of
the debate over negotiating tactics in federal cabinet today. At issue
is whether Australia
should be generous in its offer to cut tariffs on manufactured and agricultural
goods at the next round of FTA negotiations in September before it sees the
colour of Beijing’s
money on access to China
for Australia’s
services sector.

Maybe the reality leaking out of Canberra is that
there’s not much upside at all in the China FTA without an immediate and
unfettered services deal. Agriculture is much too hard for Beijing to deal
with seriously – the first rule of every Chinese dynasty is to stop the
peasants revolting – and there’s also a little matter of what China can
do by modernising its farms.

For example, the former head of McDonalds
in Australia, Guy Russo, now runs the golden arches business in China. He
recently proudly told a room full of agriculture types in Sydney that 99 per
cent of what McDonalds sells in China is produced in China – they’ve
effectively created a modern potato industry there just as one part.

The local produce wasn’t mandated by
government, but it is part of the overall need to keep costs local in dealing
with local customers.

There’s really not much leverage for Australia
in these FTA talks with China. They’re happy to take from us what they want now and there’s
really not much of a barrier here for what China

The idea of preferential status with the
world’s next economic superpower sounds good… but don’t count on it happening.