With China’s appetite for natural resources and foodstuffs ever growing, regional trading partners Australia and New Zealand are attracting fresh attention. New Zealand made news April 7 by becoming the first developed country to sign a free trade agreement with China (NZ Herald). The same week, Australia’s Prime Minister Kevin Rudd departed for his first tour of China, with rapidly expanding bilateral economic relations high on the agenda. Experts say burgeoning relations between China and its neighbors down under promise economic dividends, particularly for Australia’s mining industry and New Zealand’s farmers. They also raise political concerns, however, and threaten to bring a rise in protectionist sentiment that could undermine regional trade liberalization.
China’s new interest in Australia and New Zealand stems primarily from its need for commodities, a trend that has already brought gains to Latin America and Africa, as noted in a 2006 report from Deutsche Bank (PDF). The Economist writes that China’s hunger has been “manna from heaven” for Australia, the leading global exporter of iron ore, which is running mines at full tilt and still can’t meet heady Chinese demand. Not only has China been willing to buy up all the ore the Aussies can produce, its huge demand has spiked the price of the commodity—sending the price of fines, the most heavily traded form of iron ore, from $31.40 in 2003 to $132.20 in 2008. The prices of lump ore and iron pellets, two other commonly traded forms, have also jumped. Australian miners have reaped the benefits as the world’s leading steel manufacturers have rushed to gain access to Australia’s iron.
On April 7, New Zealand became the first developed country to sign a trade agreement with China. China also needs to make trade agreements with Australia because of its need for iron ore from Australia. These trade agreements can help Australia's miners and New Zealand's farmers, but they do raise political concerns.
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