ChAFTA offers significant benefits to Australia`s energy resources and exports. With the entry into force, 93% of Australia`s resources, current energy and industrial exports will enter China duty-free and 99.9% if fully implemented. It is important that the recently introduced 3% coking rate be immediately abolished and that the 6% tariff for thermal coal be abolished within two years. Australia and China signed the China Australia Free Trade Agreement (ChAFTA) on June 17, 2015, which came into force on December 20, 2015. Trade negotiations have secured many future benefits to Australia with Australia`s largest trading partner, China. The largest beneficiaries are those working in agriculture, manufacturing, services, investment, resources and energy. China also accepted a special clause recognizing Australia as the “most favoured nation” (MFN). This allows Australian companies to access the same agreements that China has in the area of free trade agreements with other nations (such as the United States) that could provide better access to the Chinese market. ChAFTA will strengthen export momentum and give Australia`s exports an advantage over major competitors from the United States, Canada and the EU. In addition, Australia is likened to competitors from countries such as New Zealand and Chile, which have already negotiated trade agreements with China. Free Trade Agreement to help Australia expand its exports to agriculture and services Others that successfully guarantee free trade agreements with China have benefited from a sharp increase in trade flows. For example, China`s imports from New Zealand have increased by more than 450% since the China-New Zealand Free Trade Agreement came into force in October 2008.
China`s total imports increased by only 50% over the same period (Chart 6). But a free trade agreement with China will also boost Australia`s export competitiveness and promote export diversification. As expected, ChAFTA benefited from better access, particularly to emerging markets in China`s agriculture and services. This should help Australia rebalance growth towards non-resources – a major economic cushion after the end of the mining boom. But of course, the reward is worth the challenge. These trade policy developments will improve market access and help Australian exporters fully exploit the potential of the world`s next largest economy. After nearly a decade and 21 rounds of intense negotiations, Australian Prime Minister Tony Abbott and Chinese President Xi Jinping this week launched a sweeping free trade agreement. ChAFTA exports 85% of Australia`s exports to China duty-free after entry into force, with an increase of 93% in four years and 95% if fully implemented. Although many details are not yet complete (official documents will be signed in 2015), the government estimates that the agreement will generate $18 billion in economic benefits (1.1% of GDP) over a decade.
The Australian economy is reported to benefit from a 10-year dispute of about AUD 18 billion, making ChAFTA an important deal. If this figure is about correct, we should certainly welcome the agreement as extremely positive. It seems, however, that there is not much new to this subject in China at the time of this article. As I said before, there is still a lot of work to be done before the agreement is signed, but the signs of how ChAFTA could work for Australia are very positive.