After more than a decade of negotiations, the China-Australia Free Trade Agreement (ChAFTA) was signed in Canberra yesterday.
The signing by Trade and Investment Minister Andrew Robb and Chinese Minister of Commerce, GAO Hucheng, signals a new era in the Australia-China relationship.
In a joint statement Prime Minister Tony Abbott and Trade Minister Andrew Robb said the new agreement will lock in existing trade and provide the catalyst for future growth across a range of areas.
“The Agreement secures better market access for Australia to the world’s second largest economy, improves our competitive position in a rapidly growing market, promotes increased two-way investment and reduces import costs. “It is a win for households and businesses alike.”
On day one of the ChAFTA more than 85 per cent of Australian goods exports will be tariff free, rising to 95 per cent on full implementation.
Australia’s agriculture sector will be able to capitalise on its well-deserved reputation as a clean, green producer of premium food and beverage products.
Tariffs will be progressively abolished for Australia’s $13 billion dairy industry.
Australia’s beef and sheep farmers will also gain from the phased abolition of tariffs ranging from 12-25 per cent and all tariffs on Australian horticulture will be eliminated.
Resources and energy products
Tariffs will be removed on almost all Australian resources and energy products, including the 8 per cent tariff on aluminium oxide on the first day of the Agreement, benefitting our exports worth around $1.3 billion a year. The tariffs on coking coal will be removed on day one, with the tariff on thermal coal being phased out over two years.
Tariffs will be also eliminated on a wide range of Australian manufactured goods, including pharmaceutical products and car engines.
With total trade worth almost $160 billion in 2013-14, China is Australia’s largest trading partner.
Australia-China Business Council (ACBC) President John Brumby welcomed the signing, which will help bolster Australian agribusiness, manufacturing, tourism, education, finance and professional services.
“This is a great development for Australia and can help take the Australia China relationship to the next level,” Mr Brumby said.
“China’s economic rebalancing is generating greater demand for consumer goods, premium products and professional services. Australian goods and services are recognised as being of a high quality, and ChAFTA will help reduce the barriers for Australian companies as they seek to enter an increasingly competitive market.”
Level playing field
Mr Brumby said previously Australian companies faced tariffs of up to 40 percent on exported goods to China.
“ChAFTA will ensure that Australian companies can compete on a level playing field with those countries holding existing FTAs and will give us a significant advantage over some of our largest competitors including the US, EU and Canada,” he said.
“Importantly the awarding of the “most favoured nation” status will ensure that Australia automatically receives the same treatment provided to any other country in the future.”
ChAFTA completes a historic trifecta of trade agreements with our top three export markets – China, Japan and Korea.
These key markets account for more than 55 per cent of our total goods and services exports.
ChAFTA will come into force after the completion of domestic legal and parliamentary processes in China and Australia, including review by the Australian Parliament’s Joint Standing Committee on Treaties, and the Senate Foreign Affairs, Defence and Trade References Committee. Both countries are working to complete these steps and bring the Agreement into force as soon as possible.
‘Optimism and trepidation’
The agreement comes at an opportune time as China’s economy shifts to consumption driven growth, driving demand for Australian premium products and services.
The Australian Industry Group, Australia’s peak industry body, also welcomed the new agreement.
Ai Group Chief Executive Innes Willox said industry has long viewed the agreement with our largest trading partner with a mixture of “optimism and trepidation.”
Ai Group, which is named in ChAFTA as an Authorised Body, will work with exporters to support them in understanding how to meet Rules of Origin for their product and producing export documentation that complies with the agreement.
“The national roll-out of the North Asia Free Trade Agreement Information Seminar Series, as well as the development of an online FTA portal, are important and welcome initiatives necessary to ensure that companies large and small can take best advantage of all FTA’s, including CAFTA,” Mr Willox said.
The full text of the Agreement is now publicly available online at: dfat.gov.au/chafta, along with materials to assist in understanding the Agreement.