China deal vital, says BHP boss Andrew Mac­kenzie

The boss of the world’s biggest diversified mining­ company has urged the final­isation of the FTA with China.

The chief executive of the world’s biggest diversified mining­ company has urged the final­isation of the free-trade pact with China, saying stronger diplomatic ties are vital as Beijing­ imposes new restrict­ions on imports of low-quality coal.

In the face of union and Labor attacks on the multi-billion­-dollar deal, BHP Billiton chief executive Andrew Mac­kenzie has championed free trade as “absolutely necessary” to boost productivity.

“Australia relies on access to foreign markets for goods, servic­es and capital to invest in our future,” Mr Mackenzie says.

Writing in The Australian today, he says he believes the most significant achievement from the deal will be deeper links between Australian and Chinese officials.

“In a world of fewer and lower tariffs, we will increasingly need government mediation to resolve ‘hidden’, non-tariff barriers­ constraining trade and exports — and the creation of jobs,” he writes.

Mr Mackenzie co-chaired the B20 trade taskforce of global business leaders that provided advice during Australia’s G20 presidency last year.

China will have the G20 presidency next year and Mr Mackenzie says Australia needs to be prepared for a world where China and other emerging economies wield growing economic clout.

He points to China’s new impor­t restrictions on trace elements­ in coal as an example of non-tariff barriers that drag on competitiveness.

The restrict­ions on low-­quality coal, announced last September to fight pollution, took effect from January 1.

As well as ­setting standards on ­ ash and sulphur­ content, the measures set benchmarks for other trace elements­ including phosphorous, fluor­ine, arsenic and mercury.

“These new regulations, and the testing regime that has been put in place at the border, have caused delays and uncertainty for both Australian exporters and our customers,” he says. These are the first public comments by Mr Mackenzie on the new rules.

Minerals Council of Australia executive director of coal Greg Evans said there was “no doubt” the restrictions were “placing pressure on the trade with China and this has consequential impacts in other markets”.

Industry has proposed solutions including applying testing arrangements prior to shipment, Mr Evans said.

Noting that the government is “already engaged” on the issue, Mr Mackenzie says stronger diplomatic relations from concluding the deal will be vital in “delivering free-trade outcomes on the ground and quickly resolving issues­ that do arise”.

“These sorts of non-tariff trade barriers are likely to become more common as the global trading environm­ent deepens and becomes­ more complex,” he says.

Mr Mackenzie joins Fortescue Metals Group chairman Andrew Forrest, Rio Tinto’s iron ore boss Andrew Harding and Seven Group Holdings chairman Kerry Stokes in backing the free-trade pact with China, amid union and Labor criticism of it.

Unions have warned that locals would be shut out of jobs while Bill Shorten said last month Labor would aim to rewrite labour stand­ards, conditions and skills testing in the deal.

Mr Mackenzie points to Minerals Council estimates that reducing tariffs on resources could increase the cost of energy and minerals trade by $600 million a year. “Savings of this magnitude are crucial for Australia’s coal industr­y, where profit margins are squeezed by depressed prices and compounded by competition from countries enjoying zero tariffs from FTAs already secured with China,” he writes. “ChAFTA puts the Australian resources sector back on a level playing field.”

Business fears the passage of enabling legislation for the free-trade agreement through parliament could be ­delayed.

The Financial Services Council released new research this week that found up to 10,000 new jobs and more than $4bn in economic gains would be jeopardised if the deal was delayed.

After the breakdown last weekend of talks to secure a Pacific-wide free-trade deal, business leader Rod Eddington and the Business Council of Australia ­insisted the priority had to be ratifying the China-Australia deal.