Australia China Free Trade Agreement Agriculture

While many of the details are not yet complete (official documents will be signed in 2015), the government estimates that the deal will generate economic benefits of $18 billion (1.1% of GDP) over a decade. Australia and China signed the China-Australia Free Trade Agreement (ChAFTA) on 17 June 2015, which will enter into force on 20 December 2015. Trade negotiations have secured many future benefits for Australian business with Australia`s largest trading partner, China. It is mainly those who work in the agriculture, manufacturing, services, investment, resources and energy sectors who benefit. China has also agreed to a special clause that recognizes Australia as a “most-favoured-nation” (MFN). This allows Australian companies to access the same agreements that China refuses to enter into in free trade agreements with other nations (such as the United States) that could offer better access to the Chinese market. Many other sectors of Australian agriculture will also benefit from the free trade agreement. However, not everything is good news for Australian agriculture. For agricultural industries that either do not export to China or are unable to reduce tariffs, there may be slight declines in production.

This reflects both currency effects (the overall impact of the free trade agreement on Australia is dominated by benefits to the coal industry) and a general transfer of activity, including land relocations, to sectors that have become relatively profitable due to the reduction in tariffs. For this purpose, Australian beef exports to China are currently taxed at almost 19%, while comparable exports from New Zealand enter the Chinese market almost duty-free. ChAFTA will thwart this advantage in the coming years and offer Australia the same conditions as those offered to any other country that signs a free trade agreement with China in the future. The ChAFTA concludes the government`s “trade deal” with Australia`s three largest export markets, after concluding similar deals with Japan and South Korea earlier this year. These three North Asian markets together accounted for more than half of Australia`s exports last year. Others, which successfully guarantee free trade agreements with China, have benefited from a sharp increase in trade flows.

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