China-Australia Free Trade Agreement. Cheap Microwaves?

The China-Australia Free Trade agreement was signed on 17th of June this year after negotiations were wrapped up in November last year.

What is China-Australia Free Trade Agreement?

The China-Australia Free Trade Agreement, also known as ChAFTA will initiate a number of steps in order to further increase the already growing trade between the two countries. China and Australia are already very important trade partners with a major portion of Australia’s exports imported by China and vice-versa. In the year 2013-2014, $107.5 billion worth of Australian exports were imported by China while around $52.1 billion worth of Chinese exports were imported by Australia. Australian investment in China was close to $29.6 billion where as Chinese investment in Australia was close to $31.9 billion. ChAFTA would ensure that the exports as well as investment rises between the two countries to further strengthen the economies of both countries.

Outcomes at a Glance

China is one of Australia’s biggest trade partners with around 33% of Australia’s exports bought by China. China remains the biggest exporter of Australian exports in the fields of agriculture, services and resources. ChAFTA aims at cutting the tariffs on major export items to give more space to the Australian manufacturers, investors and businesses.

On agricultural products exported by Australia

– The tariffs would be completely removed on sorghum and barley

– The tariffs would be quickly reduced on seafood, pork and sheep meat

– The tariffs on dairy products would be cut by 20% in the next four to eleven years

– The tariffs on beef would be cut by 12 to 25% in the next nine years

– The tariffs on wine would be cut by 14 to 20% in the next four years.

On resources and energy products exported by Australia, 92.9% of the total exports to China would become duty free when the agreement would come into force while 99% of the total exports to China would become duty free when the agreement would be completely implemented. This means that

– The tariffs on gold, LNG and crude petroleum would lock zero tariffs

– The tariffs on coking coal would be removed completely

– The tariffs on thermal coal would be removed completely within the next two years

– The tariffs on unwrought zinc, aluminum and nickel would be cut by 10% as soon as the agreement comes into force

– The tariffs on pharmaceutical products like vitamins would be cut by 10% either by the time the agreement comes into force or within the next four years

– The tariffs on car engines and parts, opals and plastic products would be removed completely in the next four years.

On services exported by Australia

– China would provide access to Australian legal firms to form commercial partnerships with Chinese firms in SFTZ (Shanghai Free Transfer Zone).

– China would also offer access to Australian telecom companies looking to invest in telecommunication services in SFTZ.

– China would also list the names of 77 Australian educational institutions on its own Education Ministry website within one year.

– China would also allow Australian tourism and healthcare companies to operate their own offices in China.

– China would provide improved access to Australian service providers in the fields of engineering, banking, insurance, securities and funds management.

For investment in Australia, ChAFTA would increase the screening threshold for Chinese investment in sectors which are considered non-sensitive to $1,094 million AUD from $252 million AUD. Any investment below this threshold by enterprises not owned by the state of China won’t be screened by the Foreign Investment Review Board (FIRB).

Skilled workers from both countries will be able to travel without much hindrances while staying within the confines of each country’s existing immigration system.

Marine Transportation Service and Engineering and Construction Industry

Almost 13% of all Australian services exports were exported to China (this amounts of $7.5 billion) in the year 2013-14. ChAFTA would improve this statistic even further by ensuring that China would guarantee better access and give more space to Australia’s service industries to prosper in China.

When it comes to marine transportation service, ChAFTA binds China to provide the Australian maritime transport service providers the chance to establish completely Australian owned and managed enterprises in the SFTZ.

When it comes to engineering and construction services, ChAFTA binds China to grant approval to Australian construction and engineering companies to undertake joint projects with Chinese companies in Shanghai. There will be no restrictions on Australian construction and engineering companies in this regard with the companies allowed to start and complete a wide variety of projects with commercial appeal.