China, Australia strike major free-trade deal after Obama leaves

No sooner had President Obama left Australia than that country announced a new major free-trade agreement Monday with China, shedding perspective on the president’s failure to secure the proposed Trans Pacific Partnership trade pact that he views as the key to his administration’s renewed focus on the region.

Hours after Mr. Obama flew home to Washington, Chinese President Xi Jinping attended the signing of the pact in Canberra, which is expected to give Australian agriculture advantages over competitors from the U.S., Canada and the European Union.

Coming just days after Mr. Obama told Australians that the U.S. “will always be a Pacific power,” Mr. Xi told Australia’s parliament in a rare address that China is “the big guy” in the region.

“Others will naturally wonder how the big guy will move and act and be concerned that the big guy may push them around, stand in their way, or even take up their place,” Mr. Xi said, adding that Beijing is committed to peaceful development.

Australian Prime Minister Tony Abbott said it is the first deal China had concluded “with a substantial economy, with a major economy; and it’s the most comprehensive agreement that China has concluded with anyone.”

China is Australia’s biggest trading partner, with the value of their commerce exceeding $131 billion annually in U.S. dollars. Australia’s dairy and beef industries are expected to be the biggest winners when tariffs are lifted by the agreement, which could be worth $20 billion annually.

The pact was announced after Mr. Obama returned to Washington from Asia without completing his proposed Trans Pacific Partnership, a 12-nation free-trade agreement that the president views as the linchpin of his oft-touted “rebalancing” of U.S. interests toward the Pacific Rim. Australia is one of the proposed partners in the TPP.

“So far in his presidency, President Obama has been more talk than action,” said Bryan Riley, a specialist in trade policy at the conservative Heritage Foundation. “He’s got a couple of years left to try to make progress on trade but so far, it’s been very disappointing as the United States has sat on the sidelines and watched other countries wrap up deals.”

During his week-long trip to Asia, Mr. Obama sought to reassure allies wary over Washington’s commitment towards its strategic realignment to the region.

Washington and Beijing have competing visions for free trade in the Asia-Pacific region, with the U.S. pushing the TPP, which excludes China, and China backing a free-trade zone.

Before leaving Australia Sunday, Mr. Obama told reporters that he’d made progress on a variety of economic fronts, including a conditional information technology agreement with China, calling it “a good week for American leadership and for American workers.”

“We made important progress in our efforts to open markets to U.S. goods and to boost the exports that support American jobs,” Mr. Obama said. “We continue to make progress toward the Trans-Pacific Partnership.”

But it was the Chinese president who went home with a free-trade agreement in writing, and Mr. Xi is also set to reach a trade pact with South Korea next year. Analysts said China’s trade deal with Australia could actually provide more momentum for the U.S. to complete the TPP by persuading Japan to overcome some of its concerns.

“Japan could be looking at an Asia that’s all linked up to Chinese free-trade agreements and a trading system that’s more dictated by China,” said Derek Scissors, a specialist on Asian economic issues at the American Enterprise Institute. “I think they’re going to be more cooperative on TPP than they have until now. The alternative is the Chinese playing a leadership role on trade, which neither we nor the Japanese want.”

The TPP and a separate proposed trade agreement with the European Union are part of Mr. Obama’s push to boost U.S. exports.

When Mr. Obama took office in 2009, he pledged to double U.S. exports by the end of this year. He will fall well short of that goal; the Commerce Department said exports were up 59 percent, or $1.2 trillion, through September, compared with the same period in 2009.

The China-Australia agreement gives Australian dairy farmers tariff-free access within four years to China’s lucrative infant formula market, minus any of the “safeguard” caps that currently restrict competitors from New Zealand.

Wine makers, currently selling more than $200 million (Australian dollars) worth of goods to China each year, will see tariffs eliminated over four years, while a 3-percent coking coal tariff will be removed immediately and a 6 percent tariff on thermal coal within two years.

Dairy companies, including Canada’s Saputo Inc, which owns Warrnambool Cheese and Butter Factory Company Holdings Ltd, and Bega Cheese Ltd are among likely leading beneficiaries of the deal.

Health and aged care providers, such as Japara Healthcare and private hospital operator Healthscope will get a jump on providers from Japan, the U.S. and Europe, while financial services companies ANZ Bank and IAG will get a boost from preferential access.

• This article is based in part on wire-service reports.