On Monday, Australia and China signed a statement of intent in Canberra, to make a free trade agreement, taking another step towards a historic free trade deal between the two nations. The statement of intent was singed between Australian Prime Minister Tony Abbott, Trade Minister Andrew Robb, and China’s President Xi Jinping after the conclusion of the G20 in Brisbane on the weekend. China is already Australia's biggest trading partner and two-way commerce between the two nations is worth $150 billion a year, and this new free trade agreement will generate up to $18 billion into the Australian economy. The ChAFTA (Chinese and Australian Free Trade Agreement) has outlined a comprehensive arrangement including removing tariffs in sectors such as agriculture and food, and other arrangements in the manufacturing, service and investment sectors. There may be many advantages associated with this free trade agreement, however, there are also disadvantages that lie beneath the arrangement.
The key aspects of the ChAFTA include the removal of tariffs on food and agriculture, the opening of opportunities in services, manufacturing and investment.
In the agriculture and food sector, the Australian Government has secured the removal of tariffs on dairy products, beef, live animal exports and seafood. Over the next four to eleven years, China and Australia have agreed to remove all tariffs on the Australian dairy exports. This is great news for our domestic dairy farmers, as they will save millions of dollars from not having to pay a tax on imports into China. There will also be a progressive removal of tariffs of 12-25% on Australian beef over the next nine years, a removal of tariffs on live animal exports of 10% within four years, and the seafood tariff phased out over the next four years.
Within the service sector, the free trade agreement has also opened doors within services such as aged care, education, law and financial services. According to the ChAFTA, China will allow hospitals and aged care institutions that are wholly Australian owned to be established in China. This will therefore greatly expand the private health sector’s medical services through East Asia. China will also list, on an official Ministry of Eduction website, all Australian private higher education institutions to allow overseas students browse them on the CRICOS (Commonwealth Register of Institutions and Courses for Overseas Students), within one year of the commencement of the trade agreement. The FTA also outlines that Australian law firms will be able to establish commercial associations with Chinese law firms in the Shanghai Free Trade Zone (SFTZ). This will allow them to offer Australian, Chinese and international legal services through a commercial presence, without restrictions on the location of clients.
China has also committed to deliver new or improved market access to Australian financial services providers in the banking, insurance, funds management, securities, securitisation and futures sectors.
In the manufacturing sector, Australia and China have agreed that Australia has guaranteed access for wholly Australian- owed companies to prove contract manufacturing services covering a wide range of manufactured products. China will also take into account Australian applicants for architectural and urban planning jobs, to undertake high value projects in China. As a result of this agreement, many jobs will be created, lowering Australia’s unemployment levels, therefore rising the quality of life in Australia.
ChAFTA will promote further growth of Chinese investment into Australia. The screening threshold at which investments by the private sector from China will be dramatically raised, from $248 million to $1,078 million. To promote higher investor confidence, investment obligations in the agreement can be enforced directly by both investors from Australia and…