The China-Australia Free Trade Agreement is the most ambitious trade agreement China has concluded with any developed country, and promises a big boost for jobs and prosperity in Australia, writes Senator Richard Colbeck.
The China-Australia Free Trade Agreement (ChAFTA) is an historic step forward in Australia’s economic relationship with China and unlocks significant opportunities with our largest export market.
It is the most ambitious trade agreement that China has concluded with any developed economy and the Australian Government recognises the importance of ratifying the agreement this year.
China has been Australia’s largest trading partner since 2009 and over the last decade our two-way trade has grown by about 17 per cent each year. In 2014, two-way trade was valued at more than $150 billion, which makes up almost a quarter of our total trade with the world.
China is our number one export market, number one import supplier and largest market for exports of the agriculture, resources, tourism and service sectors. With a population of more than 1.3 billion people, it’s also the world’s second-largest economy and one of the world’s fastest growing major economies.
ChAFTA will help ensure the growth of our important trade relationship with China by reducing and removing high tariffs and other barriers. This will put our sectors on a more competitive footing internationally and provide businesses with a significant advantage over many of our key international competitors.
The Meat and Livestock Association estimates the elimination of tariffs under ChAFTA will result in an $11 billion boost to the meat and livestock industry.
The dairy industry estimates 600 to 700 new jobs will be created in its first year of operation in this sector alone. They have described the ratification of ChAFTA this year as their number one political priority.
The Financial Services Council believe the agreement has the potential to create nearly 10,000 new jobs in areas such as banking, insurance and funds management.
ChAFTA enhances the prospect of increased two-way investment flows, providing much needed capital for business to expand into domestic and international markets.
It means lower import prices on a variety of consumer goods and business inputs which will increase purchasing power and business competitiveness.
Overall, ChAFTA means a boost for jobs and prosperity in Australia.
Australian businesses are already looking towards the benefits that will flow from ChAFTA. For example, dairy farmers have said the opening of markets will inject confidence to invest on farms, which will grow their business and create more jobs.
You just need to look at the recently signed free trade agreement with South Korea (KAFTA) to understand the significance of free trade agreements. We’re already seeing positive outcomes, such as Tasmanian cherry grower Reid Fruits experiencing a more than 30-fold increase in exports after the 24 per cent tariff on cherries was immediately eliminated.
A similar good news story is Australian exports of Brussels sprouts to South Korea, with the tariff reduced from 27 per cent to 19.2 per cent already and further cuts to eliminate the tariff by 2020. Under KAFTA, exports of Brussels sprouts have increased to more than 181 tonnes between December 2014 and August 2015, up from less than 3 tonnes in the same period the year before. This has made Korea our largest export market for Brussels sprouts.
China is also our largest services export market and in 2014 was worth $8.2 billion (14 per cent) of Australia’s services exports. ChAFTA provides us with China’s best-ever services commitments, including guaranteed market access not included in any of China’s other agreements.
As our largest education services export market, worth $4.4 billion in 2014, Australian private education providers will benefit from improved profile with prospective students and employers, enabling them greater access to China’s higher education market.
Within one year of the agreement’s entry into force, China will list an additional 77 Australian private higher education institutions, registered on the Commonwealth Register of Institutions and Courses (CRICOS), on China’s Ministry of Education ‘Study Abroad’ website. The website provides Chinese students and employers with quality and fraud assurance for assessing educational qualifications and this outcome is an important development for Australian higher education providers.
For the tourism industry, China has guaranteed that Australian services suppliers will be able to construct, renovate and operate wholly-owned hotels and restaurants in China. Australian travel agencies and tour operators will be able to establish wholly-owned subsidiaries in China, providing travel and hotel accommodation for domestic and foreign travellers, tours within China for both domestic and foreign travellers, and travellers’ cheque cashing services.
There are enormous opportunities for Australian businesses to capitalise on the additional market access that will be created by ChAFTA, empowering them to seize opportunities to expand into the Chinese market.
It is encouraging that the Joint Standing Committee on Treaties announced (19 October) their support of the ratification of this agreement, noting that Australia’s business and industry community will benefit substantially from greater access to one of the world’s largest economies. The enabling legislation also passed through the House of Representatives on 22 October, making it one step closer to coming into force.
The Australian Government’s number one priority at this stage is to do everything we reasonably can to ensure ChAFTA is brought into force before the end of this year. We want to enable the benefits to flow quickly to our exporters, consumers, and importers.