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How to upset the Chinese apple cart

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It was with a sense of bewilderment and wry amusement that I read that the NSW State Government proposes to impose a requirement that all future NSW Government tenders provide a 20 percent loading preference to Australian suppliers and a further five percent to NSW suppliers in an effort to reduce imports from China. We need to remember that we are on the cusp of completing negotiations for the Australia-China Free Trade Agreement and as members of the World Trade Organisation (WTO) have agreed to work towards lowering barriers to trade and in goods and services. Members of the WTO such as Australia eagerly entered into negotiations to lower trade barriers because it is in their self interest. Australia and all state governments are bound by the General Agreement on Trade in Services (GATS). The GATS is not designed to secure free trade in services but to ensure fair competition in the supply of services - particularly market access - and that government measures that affect market access do not create unfair competition in favour of local service suppliers. Discrimination in favour of local service suppliers is not only a breach of GATS but inevitably may be reversed by the disputes procedures of the WTO, which leads to the question: why do it? Apart from GATS the only legally binding agreement dealing with government procurement under the WTO umbrella is the Government Procurement Agreement (GPA), based on the principles of openness, transparency and non-discrimination as those principles apply to government procurement. This means that a Chinese company competing with a company from another signatory to the GPA for a government contract in Shanghai, may not be favoured against the competing non-Chinese company. While it is true that Australia is merely an 'observer' while China is a full member of the GPA, and so Australia and NSW are not technically bound by the GPA, isn't it perhaps wiser to consider our long term economic goals rather than a short term fix of our problems? We should well remember that China is NSW’s largest trading partner with $16.4 billion two-way merchandise trade in 2007/08 with exports to China rising from $749 million in 1997/98 to $2.2 billion in 2008/09. For those who can count, this is a tripling in NSW's exports in 10 years. May be it's time we grew up a little and realised that the best way of solving our financial problems is to be better than our competitors. -James Millea is a senior associate at Argyle Lawyers

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