The Quiet Revolution

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"We want to be making trains in Australia, not just cleaning them," says Ridout. For producers like Leupen, the competition is relentless. "The competitive pressure used to come like a slow locomotive. It now comes at you like the Concorde, and it's hitting some companies with ferocity: there are pressures on price, delivery and materials. Thankfully, it doesn't apply to everyone all the time, but you need to have a business model that's sustainable in the face of a growing China." From his office, Ian Campbell looks out on a vista of marooned shipping containers and the rusting industrial landscape of western Melbourne. Tariff cuts have taken a toll, to be sure, but most heavyweight manufacturers have decamped for China, leaving the country's industrial and engineering heartland as a distribution hub and home to small, parochial players. If you want to get the friendly Campbell really riled, ask him about bilateral trade deals. "I just want one of those Canberra politicians or bureaucrats to explain the value of free trade agreements," he says. "What is the actual net tangible benefit to Australia?"

Spread out on a sofa in his Parliament House office, Foreign Minister Downer has the answer to that one down pat: "We get imports more cheaply, and we get better access to their export markets. There's no doubt that the net impact on our economy would be very positive." And politically? "An FTA is a way of building a very strong bond with a country," Downer says. He believes the Chinese view Australia as more important to them than before, while Canberra's friendship with Washington gives it "gravitas" in the region. "As China's economic power has grown," Downer says, "it has looked around to see who matters around here, and Australia has been one of the countries it has particularly focused on." Ambassador Fu not only agrees with Downer that the relationship between their two countries is better than ever, she uses the same phrases to explain why. "We do not see each other as a threat," she says. "There are no strategic obstacles in our relations. We are able to understand each other's concerns."

As well, "our economies are quite complementary, like gears meshing with each other," says Fu, whose mix of charm, steeliness and intensity has made a big impression on locals during her year in Canberra. "China has what Australia needs: a market for its resources and technology. Australia has what China needs. Both sides can see the opportunities and want to seize them." Two-way trade has tripled in value since 1998. Despite Australia's growing dependence on China, its share of all the goods going into the People's Republic is a mere 2%. Downer sees no reason why the two nations shouldn't enter into the FTA talks as equals. Fu is not so sure. "The biggest difference we have is the gap in per capita income," she says. "So Australia should always remember that it is dealing with a very poor country. If Australia wants to keep China as a friend, it has to understand the need in China."

But behind these crafted lines and negotiating gambits, there are other agendas on both sides. An FTA with a developed country would give China international legitimacy, says an Australian government adviser. It would also expose China to the realities of the international trading system and give a wary state, which has experienced sanctions in the past and is disinclined to trust the world trading system, greater security over resources. For Australia, an FTA would be another step in a deepening relationship with a potential superpower; it would also help Canberra to lay the foundations for a treaty to govern future Chinese investment - relaxing the rules of what and how much a foreign entity can own in Australia - at a time when public resistance to an increased Chinese presence is virtually non-existent, says the adviser.