China-Australia Free Trade Agreement: How does it benefit them?

Australia is the 19th largest export economy in the world according to Economic Complexity Index.
Top importing nations from Australia are China, Japan, South Korea, India and Hong Kong. Australia
imports majorly from China ($44.7B), USA, Japan, Singapore and Germany. The recent agreement
with China is the resultant of 21 rounds of negotiation between both governments for almost a
decade. Finally, The ChAFTA, The China-Australia Free Trade Agreement was signed on 17th June
2015. The agreement has come to force from 20th December 2015 and the first direct import from
Australia reached China recently. This step towards free trade is a step towards easier market
access for the Australian businesses.
Here is a sneak-peek at the pros and cons of ChAFTA from the Australian viewpoint.
Here are the potential benefits that are in store for Australia:
Tariffs that are charged in China presently on various Australian products like beef, dairy, sheep,
pork, live animals, hides, skins and leather, horticulture, wine and seafood ranging from 3-30% are
aimed at nullification in various stages in coming 9 years.
Tariffs on Australian goods like coal, aluminum and gemstones are to be reduced by 3-10% in 4
years.
Chinese electronics and likely are available at 5% tariff to Australia. This shall soon reduce the
burden on Australian pockets by whitegoods being available at cheaper prices.
Tariffs will be reduced for processed foods from Australia like canned fruits, juices and natural
honey.
Australian hospitality and tourism companies can own their subsidiaries in China. This includes
hotel chains and restaurants.
China allows Australian firms to establish profit-aimed aged care institutions and hospitals in
specified parts of China.
This agreement also includes Australian businesses forming joint ventures with a majority stake in
services sectors of agriculture, forestry, hunting and fishing. This also improves Australian stake in
partnerships in Chinese firms up to 49% for legal and financial services.
Foreign Investment Review Board (FIRB) will continue to screen the investments by Chinese stateowned enterprises.
Here are a few cons that Australia is subject to, due to ChAFTA:
Sugar, rice, wool, cotton, wheat and canola including maize have not witnessed any tariff
reductions which constitute a huge part of Australian agro-exports.
China reserves power to add custom duties if the Australian exports of beef or milk powders
exceed determined limits, which are subject to change.
Foreign Investment Review Board (FIRB) can screen the Chinese investments only beyond
$1094M. (Before the agreement, the screening threshold was $252M). This reform excludes

sensitive sectors like agriculture, media, telecommunication and defense.

Chinese business entities will have enhanced rights to sue the Australian governments if it brings in
the policy changes that contradicts their business well-being.
$150M worth projects will receive additional rights to bring temporary migrant workers into Australia
without local labour market testing.
Hence, China gains by rights to intervene in governmental policies of Australia if the amendments
are in contradiction with its business interests, FIRB screening is not required for any investments in
non-sensitive sectors within $1094M, and the Republic of China can also bring in temporary migrant
workers into Australia without local labour market testing. This makes it clear that the monitory
upper hand for present seems to be benefiting Australia but will surely benefit China on a longer run.
On a closing note,Straits Times in Singapore is worth quoting, "There is no altruism in China's grand
plan to revive the ancient trade routes between China and the West ... Economic self-interest and
big power projection are clearly at play."

For more details on ChAFTA, Click Below :

http://www.eximdesk.com/buzz/china-australia-free-trade-agreement-how-does-it-benefit-them?
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