On 17 June 2015, the Commonwealth Minister for Trade and Investment, the Hon Andrew Robb AO MP, and Chinese Commerce Minister Gao Hucheng signed the China-Australia Free Trade Agreement (ChAFTA).
Upon its entry into force, the ChAFTA will result in the removal of tariffs on more than 85 per cent of Australian goods exports, rising to 95 per cent upon the ChAFTA’s full implementation.
The ChAFTA will lead to:
Improved competitiveness of Australian agricultural exports to China through the progressive elimination of tariffs on meat, dairy and wine;
Almost all of Australia’s resources, energy and manufacturing exports entering China duty-free within four years; and
New or significantly improved market access for a range of services sector suppliers including Australian banks, insurers, securities and futures companies, law firms, professional services suppliers and education services exporters.
The Barton Deakin Brief outlines the key outcomes of the ChAFTA and the next steps involved in its implementation.
Key outcomes
Agriculture
(i) Beef
All tariffs on beef, currently set at 12 to 25 per cent, will be eliminated within 9 years of the ChAFTA’s entry into force. China will maintain a discretionary safeguard trigger on beef imports exceeding 170,000 tonnes annually.
(ii) Dairy
Chinese tariffs on Australian dairy products will be phased out within 4 to 11 years. The 15 per cent tariff on infant formula and the 10-19 per cent tariff on ice cream, lactose and casein will both be eliminated within 4 years.
(iii) Sheep and goat meat
Chinese tariffs on all sheepmeat currently ranging from 12 to 23 per cent will be removed within 8 years. Furthermore, the 18 per cent tariff on frozen sheepmeat offal will be eliminated within 7 years. The 20 per cent tariff on goat meat will be eliminated within 8 years.
(iv) Wool
China imposes a 38 per cent tariff on wool imports that exceeds the annual World Trade Organization (WTO) 287,000 tonne quota. Australia has successfully negotiated to expand the clean wool quota by an additional 30,000 tonnes, a figure that will increase by five per cent annually. Australia is the first nation to secure a Country Specific Quota in relation to wool imports into China. Currently, China represents 71 per cent of Australian wool exports and Australia is the source of 66 per cent of Chinese wool imports.
(v) Seafood
Chinese tariffs on a range of imported Australian seafood will cease in four years. Abalone, rock lobster, crabs, oysters, prawns, scallops and southern bluefin tuna are among the products that will be awarded duty-free access to China under this deal.
(vi) Wine
Tariff restrictions on Australian wine imports into China of 14 to 20 per cent will be abolished within four years. Furthermore, tariffs of up to 65 per cent on other alcoholic beverages and spirits will be abolished within 4 years.
(vii) Horticulture
Under ChAFTA, all tariffs on horticultural products will be progressively abolished. This includes removing the 10 to 25 per cent tariff on macadamia nuts, almonds, walnuts, pistachios and all other nuts within four years and the 10 to 30 per cent tariffs on fruit and vegetable products within four to eight years.
(viii) Other products
A 10 per cent Chinese tariff on Australian live animal exports will be removed in four years.
The 15 to 20 per cent Chinese tariff on Australian pork will be eliminated within four years.
The three per cent Chinese tariff on Australian barley imports will be immediately removed.
Five to 14 per cent tariffs on Australian hides, skins and leather exports to China will be eliminated from two to seven years.
Chinese tariffs on a range of processed foods will be eliminated within four years, including fruit juice, natural honey, pasta, chocolate, canned fruit, biscuits and cake.
Resources, Energy and Manufacturing
On the ChAFTA’s entry into force, 92.9 per cent of China’s imports of Australian resources, energy and manufacturing products from will enter duty free, with most remaining tariffs eliminated within four years.
Upon its full implementation, 99.9 per cent of Australia’s current resources, energy and manufacturing exports (by value in 2013) will enter China duty free.
(i) Resource and energy products
The three per cent Chinese tariff on coking coal imports will be immediately removed. The six per cent tariff on thermal coal will be phased out over two years;
Chinese tariffs on a wide range of transformed resources will be removed upon the entry into force, including aluminium oxide, refined copper and alloys. The removal of the eight per cent tariff on aluminium oxide will benefit Australian exports by $1.3 billion a year.
The ChAFTA locks in current zero tariffs on iron ore, gold, crude petroleum oils and liquefied natural gas (LNG).
(ii) Manufactured goods
The 3 to 10 per cent tariffs on pharmaceuticals will be phased out within 4 years;
Tariffs of up to 20 per cent on car parts and engines will be abolished within 4 years;
Tariffs ranging from 6.5 per cent to 14 per cent on plastic products will be removed within 4 years;
The 3 per cent and 8 per cent tariffs on precious stones, including opals within 4 years will be eliminated in 4 years.
The 6 and 10 per cent tariffs on aluminium plates and sheets will be removed within 4 years;
Tariffs on make-up and hair products ranging from 6.5 to 15 per cent will be phased out in 4 years.
The 10 per cent tariff on centrifuges will be eliminated within 4 years
The 21 per cent tariff on pearls will be removed within 4 years
Services
China is Australia’s largest services exports market, valued at $7 billion in 2013. The ChAFTA provides
for a significant expansion of access for Australian services firms seeking to operate in China. The following services sectors are subject to changed rules in the ChAFTA.
(i) Financial
China has committed to deliver new or improved market access to Australian financial services providers in the banking, insurance, funds management, securities, securitisation and futures sectors.
(ii) Legal
Australian law firms will be permitted to establish and form commercial associations with Chinese law firms based in the Shanghai Free Trade Zone (SFTZ). This will allow Australian law firms to service clients from anywhere in China.
(iii) Health
Under the ChAFTA, Australian owned hospitals and aged care institutions will be permitted to establish healthcare facilities in China. No other trade agreements that China has entered into have included these generous provisions.
(iv) Education
Within one year the ChAFTA’s entry into force, China will list every Australian higher education institution on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) on the official PRC Ministry of Education website. This will add a further 77 institutions to the existing list of 105 Australian institutions on this website, exposing prospective Chinese students to educational opportunities in Australia.
(v) Tourism
Australian service suppliers will be given access to the Chinese tourism market. The ChAFTA allows wholly-owned Australian businesses to construct and operate hotels in China and to run tours for domestic and international tourists.
(vi) Telecommunications
Australian companies investing in value added telecommunications services within the SFTZ will be eligible for improved foreign equity limits, facilitating increased access to China’s domestic telecommunications market.
(vii) Construction
Australian companies established in the SFTZ will be permitted to undertake joint construction projects with Chinese partners in Shanghai. Business scope restrictions will not apply to these arrangements, allowing for a wider range of potential projects.
(viii) Architecture and urban planning
China will consider the experience of Australian architecture and planning firms in the assessment of business licences and permits for high-end projects throughout China.
(ix) Transport
Australian maritime transport service suppliers will be permitted to establish wholly-owned subsidiaries in the SFTZ. Furthermore, cooperation in air transport services will be enhanced.
(x) Mining Services
Australian mining services suppliers will be permitted to provide technical consulting advice in the development of coal bed methane and shale gas extraction projects.
(xi) Other
Australian software, research and development, cleaning, packaging, translation, real estate and environmental services firms will be permitted to establish wholly-owned subsidiaries in China.
Implementation
Today’s signing of the ChAFTA follows the conclusion of negotiations on 17 November 2014 during Chinese President Xi Jinping’s State visit to Australia.
The ChAFTA will formally enter into force following the completion of domestic legal and parliamentary processes in both Australia and China.
The Australian Government will proceed in accordance with normal Australian treaty-making processes:
The Joint Standing Committee on Treaties (JSCOT) will conduct an inquiry into the ChAFTA and report back to Parliament, normally within 20 joint sitting days.
Following the completion of the JSCTOT report, the Australian Parliament will consider amendments to the relevant legislation and relevant Regulations would also be amended in due course.
Separately, the Senate References Committee on Foreign Affairs, Defence and Trade has established an inquiry into ChAFTA which will release its final report within one month of JSCOT.
Both countries will review the ChAFTA in three years. Further review processes are available under the ChAFTA, ensuring that the agreement positions both nations for any future gains as the Chinese economy develops.
The signing of the ChAFTA concludes the Abbott Government’s finalisation of free trade agreements (FTAs) with Australia’s top three export markets. Barton Deakin has published Briefs summarising the Government’s previously negotiated trade agreements with Korea and Japan.
Further information
A joint press release issued by the Prime Minister and Minister for Trade and Investment regarding the announcement is available https://www.pm.gov.au/media/2015-06-17/australia-signs-landmark-trade-agreement-china-0
The full text of the ChAFTA is available on the Department of Foreign Affairs and Trade (DFAT) website – click http://dfat.gov.au/trade/agreements/chafta/official-documents/Pages/official-documents.aspx
DFAT has published a ‘snapshot’ of the ChAFTA which can be read http://dfat.gov.au/trade/agreements/chafta/official-documents/Pages/official-documents.aspx
DFAT has also published a list of FTAs currently in force and under negotiation which can be accessed
http://dfat.gov.au/trade/agreements/chafta/official-documents/Pages/official-documents.aspx
Source: Barton Deakin Brief: China-Australia Free Trade Agreement http://www.bartondeakin.com/china-australia-free-trade-agreement
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