By Rhiannon Hoyle 

SYDNEY--The head of the world's largest mining company is pressing Australian leaders to work toward the maximum degree of free trade with China, playing down concerns over security and questions about whether Australia is growing too dependent on its giant trading partner.

As politicians from Canberra continue to negotiate a free-trade pact with Beijing, Andrew Mackenzie, BHP's chief executive, said Australia should go as far as possible to accommodating the resource-rich nation's biggest trading partner, which last year swallowed up close to 40% of its exports, mainly commodities.

"I think it's a positive step, unquestionably, to more intimately tie Australia to the main market for resources going forward," Mr. Mackenzie said in an interview Wednesday. "I look for politicians to be skillful about how they think about getting things done which have got longer-term benefits."

Australia hopes to conclude a free-trade deal with Beijing this year, after talks that have dragged on for almost a decade. Sticking points have included better access for Australia's agricultural products, and Beijing's desire for more direct-investment opportunities, lower manufacturing tariffs and less-onerous visa arrangements.

Australia completed free-trade deals with both Japan and South Korea earlier this year. The agreement with Tokyo, following seven years of talks, gives Japanese car manufacturers and Australian farmers better access to each other's markets.

Mr. Mackenzie is leading a trade task force for the Business 20, a private-sector forum which makes policy recommendations to the Group of 20's annual meeting, and spoke to a B20 meeting in Sydney on Wednesday.

He said he is keen to see faster progress in Trans-Pacific Partnership talks as well. Separate negotiations among 12 nations taking part in the U.S.-led TPP trade talks have been slow, amid disagreements over tariff policy and agricultural-trading arrangements.

"Increased ties between Australia and the rest of Asia can only be good for the health and vibrancy of this economy going forward," he said. "A country like Australia can offer them something they don't have, which is resources."

BHP is among a horde of mining companies operating in Australia, including Rio Tinto PLC, that have invested heavily in building new mines and infrastructure to feed industrializing Asia's voracious appetite for raw materials such as coal and iron ore, which is used in steelmaking. China's demand for commodities helped shield Australia from a recession following the 2008 global financial crunch.

Still, opening up investment opportunities to Chinese companies remains a contentious issue in Australia, where some lawmakers worry that the country's security may be threatened. While the board that reviews such investments has approved the vast majority, Chinese investors say it presents excessively high hurdles. Investment in the agricultural sector has been a particular concern because of the perceived implications for food security.

Many negotiated trade deals haven't gone far enough toward liberalizing trade, Mr. Mackenzie said in the interview. Talks have focused too much on tariffs at the expense of removing other barriers to the free trade of services and intellectual property.

"We will lose out if, through too much protectionism, that trade doesn't develop," he said. "I am absolutely convinced if you had a complete market free-for-all in Asia, Australia would do wonderfully in terms of resources."

Australia's neighbor New Zealand reached a free-trade deal with China in 2008 that is credited for having turbocharged New Zealand's agricultural industry-driving a near fourfold increase in farm-related exports to NZ$8.6 billion in just four years.

"If China thinks it can get dairy products from New Zealand, it will spend less money on dairy in China and do other things that China is good at," Mr. Mackenzie said. "That's good for New Zealand and good for China, and I think the same thing will be true with Australia."

Australia's foreign-investment regime requires major investments to be recommended by the opaque Foreign Investment Review Board, or FIRB, and approved by the nation's treasurer.

Prime Minister Tony Abbott's conservative government is expected to agree to allow Chinese companies specifically to make investments of up to A$1 billion without regulatory scrutiny--a higher threshold than is applied now, although there will be tighter controls for state-backed companies.

"I would like there to be less restrictions in those ways," said Mr. Mackenzie, referring to foreign-investment barriers. "Countries wanting to be more and more concerned about who can and who can't invest in their country sounds like a good idea to protect their country, but it's a shadowy form of protectionism, rather than just letting the market rip."

China is also unhappy about the treatment of its technology companies, such as Huawei Technologies Co., which was locked out of construction contracts for Australia's new national broadband network on national-security grounds.

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