http://www.abc.net.au/news/2014-11-11/heffernan-says-china-free-trade-deal-could-turn-into-disaster/5880966

A senior Liberal senator is warning a free trade deal with China could “turn into a disaster” for Australia if appropriate safeguards are not put in place.

In an exclusive interview with the ABC, Bill Heffernan raised the prospect of China cutting its tariffs, but then manipulating its currency to come out ahead.

“How do you really have a trade agreement with a country that won’t put their currency on the market? I mean we should learn from our free trade agreement with the US,” Senator Heffernan said.

“When we signed that agreement we were at 65 cents, when we enacted it the following February we were at 67 cents to the US.

“We did away with 5 per cent and 15 per cent tariffs and within a few years we found ourselves at a huge trade disadvantage because we had a 45 per cent currency tariff against us because we went parity with the US and above parity at one stage.”

The Government is hoping to seal a deal with Australia’s biggest trading partner when the Chinese president Xi Jinping visits Australia this weekend.

At the present time… it’s a non-market currency which makes it very difficult for us [to] manage good times, bad times, high interest rates, low interest rates

Senator Bill Heffernan

“Thanks to a lot of focus from Australia and from China over the last 12 months, I think it is very much on track for success in the next few days,” Prime Minister Tony Abbott told reporters in Beijing on Monday.

“Still a few things to finalise, but I think very much on track for success in the next few days.”

While welcoming a possible breakthrough, Mr Heffernan warned Australia could still be a loser because of China’s currency.

“At the present time… it’s a non-market currency which makes it very difficult for us [to] manage good times, bad times, high interest rates, low interest rates,” he said.

“In code, it really means we can’t win until the currency comes on the market.”

Audio: Australia must toughen its tax laws to benefit from free trade: Heffernan (AM)

The Federal Agriculture Minister Barnaby Joyce rejected concerns from his Coalition colleague that China’s fixed currency will negate any benefits of a free trade deal.

Senator Joyce said Australia needs to step up its trade with China so national debt can be paid off.

“If we don’t do a deal with China, if we don’t trade with what is now our major trading trading partner, then our capacity to pay our bills and re-float our economy after the disastrous episode of the previous government, is going to be impinged,” he said.

“We have to make sure that our soft commodities – such as wheat, such as beef, such as cotton, such as wool – start flowing in a more formidable form.”

Government sources have told the ABC a deal is looking likely, but some key issues are still being negotiated.

Mr Abbott said the pact was not perfect and could be changed.

“We are trying to build a house,” he said.

“Let’s build the first storey and then in a year or two we can build the second storey and maybe even a third storey, but let’s get things done and I very much hope that we will be able to say that we have got things done within a few days.”