After almost a decade of negotiations, Australia and China have signed a landmark Free Trade Agreement that will reduce or eliminate tariffs and allow easier access to both markets.
Dubbed as the China-Australia Free Trade Agreement (ChAFTA), the deal is expected to be worth about US$18 billion over the next few years.
Australian businesses will have unprecedented access to the world’s second largest economy. It greatly enhances our competitive position in key areas such as agriculture, resources and energy, manufacturing exports, services and investment.
On full implementation of ChAFTA, 95 per cent of Australian goods exports to China will be tariff free.
Significantly, tariffs will be abolished for Australia’s $13 billion dairy industry. Australia’s beef and sheep farmers will also gain from the abolition of tariffs ranging from 12-25 per cent and all tariffs on Australian horticulture will be eliminated.
Tariffs on Australian wine of 14 to 30 per cent will go within four years, while restrictive tariffs on a wide range of seafood, including abalone, rock lobster, and southern bluefin tuna will also cease within four years.
Tariffs will also be removed on a range of Australian resources and energy products, including the eight 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 phasing out over two years.
Tariffs will be also eliminated on a wide range of Australian manufactured goods, including pharmaceutical products and car engines.
A key feature of ChAFTA is a built-in mechanism to allow for further liberalization and the expansion of market access over time, including a first review mechanism within three years. This places Australia in a strong position to secure additional gains as China undergoes further economic reform into the future.
The Chinese Government estimates total outbound investment of US$1.25 trillion (A$1.44 trillion) over the next 10 years.
ChAFTA will promote further Chinese investment in Australia by raising the Foreign Investment Review Board (FIRB) screening threshold for private companies from China in non-sensitive areas from $248 million to $1,078 million.
Consistent with the promise made by the Coalition at the last election, the Government will be able to screen investment proposals by private investors from China in agricultural land valued from $15 million and agribusiness from $53 million.
Furthermore, FIRB will continue to screen proposed investments by Chinese State Owned Enterprises regardless of value. These provisions are consistent with Australia’s trade agreements with Korea and Japan.
ChAFTA will also contain an Investor State Dispute Settlement (ISDS) mechanism. This will enable Australians to invest in China with greater confidence. The ISDS provisions contain strong safeguards to protect the Australian Government’s ability to regulate in the public interest and pursue legitimate welfare objectives in areas such as health, safety and the environment.
The ISDS will also allow Chinese corporations to sue Australia's government if a change in Australian law can be claimed to have harmed their investments in Australia.
With a view to maximizing the benefits of the FTA for business, Australia and China have also agreed to review their bilateral taxation arrangements, including relief from double taxation.
China will also get a relaxation in the rules for investment.
The level for Chinese investment by a private company in Australia, without Foreign Investment Review Board approval, will be raised to $1.087 billion from $248 million, in line with other Australian free trade agreements.