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China, Australia agree to free trade talks
Updated: 2005-04-18 22:09

BEIJING - China and Australia signed an agreement to begin negotiations on a free trade pact, with visiting Prime Minister John Howard also announcing Canberra's recognition of China as free market economy.

A memorandum of understanding on the free trade talks was signed following a meeting between Howard and his counterpart Wen Jiabao in the Great Hall of the People in central Beijing.

China's President Hu Jintao (R) talks with visiting Australia's Prime Minister John Howard during a meeting at the Great Hall of the People in Beijing April 18, 2005. [Reuters]

"Australia has decided to recognize China as a complete market economy," Howard was quoted by China Central Television as telling Wen.

"We hope to begin negotiations on a free trade agreement and deepen economic and trade cooperation."

Wen said China was willing to move forward with the free trade process, but also underscored the need to build up more political trust between the two countries and seek to consult each other on regional security issues, the report said.

"Under the complex international situation, the deepening of Sino-Australian relations is not only in the fundamental interests of the peoples of the two countries, but is also in the interests of peace and stability in the Asia Pacific region," Wen was quoted as saying.

Howard arrived in China for a visit Monday, expressing caution over the prospects for a free trade deal with Asia's fastest growing economy.

Canberra has insisted that any agreement be comprehensive, with no sensitive sectors excluded, and in return agreed to recognise that Beijing had reached "market economy" status.

The status is crucial for China's World Trade Organization undertakings as it will give Beijing a better basis to negotiate trade disputes.

"I realize the importance of Australia recognizing the market economic status of China," Howard said in late talks with President Hu Jintao.

"The agreement that the premier and I reached is historic. It is the first agreement to negotiate an FTA between China and a fully developed country."

Hu also praised the agreement, saying the deal was in the interests of both.

In remarks before his departure for China, Howard sought to lower expectations that a deal was inevitable.

"I want to stress that whatever happens on the free trade agreement front, Australia has a huge and positive and growing trade relationship with China," he told reporters in the northern city of Darwin.

"That sort of relationship can go on, but if we can improve it and make it even better by reaching a free trade agreement, well, we certainly intend to do so."

Even without any deal, China would remain a massive market for Australia's mineral resources, said Howard.

According to Chinese statistics, two way trade between China and Australia reached nearly 20.4 billion dollars in 2004, up 50 percent from the year earlier and double the figure in 2002.

China is now Australia's third largest trading partner.

In 2004, Australia's exports to China grew to 12 billion Australian dollars (9.3 billion US), with resources accounting for about 60 percent, Australian statistics show.

Last week Australia agreed to negotiate a free trade deal with Malaysia while it already has FTAs with Thailand, Singapore, the United States and New Zealand.

Howard's two-leg China trip, from April 18-24, will be broken up by a visit to Tokyo starting on Tuesday. Howard is expected to be back in China on April 22 to attend the annual Boao Forum for Asia in southern China's Hainan province.

The visit is his fifth trip to China as Australia's prime minister.

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