Australian Trade Agreements With China

ChAFTA concludes a historic trio of trade agreements with our three main export markets, which account for more than 55% of our total exports of goods and services. Together, these agreements will strengthen our vital trade and investment relations in the region, support the reform process and promote greater prosperity. The full text of the agreement is now publicly available online, along with materials that contribute to the understanding of the agreement. 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. ChAFTA will strengthen export momentum and give Australian exports an advantage over major competitors from the US, Canada and the EU. It also puts Australia on an equal footing with competitors from countries like New Zealand and Chile, which have already negotiated trade deals with China. Before entering the Chinese market, there are a number of factors to consider, including culture, politics, and business etiquette. Austrade can help Australian companies become familiar with local market conditions and help develop export opportunities through a number of merchant and Australian services. The establishment of the China-Australia Free Trade Area not only facilitates trade and investment between the two countries, but also contributes to the stability of development in the Asia-Pacific region and the liberalization of world trade. The first round of negotiations took place on 23 May 2005 in Sydney.

The benefits for Australians who export goods to China are significant and range from the removal or reduction of tariffs, larger quotas for certain limited items and optimised customs procedures. In total, 98% of Australian products exported to China are entitled to enter duty-free or at preferential rates. Essentially, the negotiated terms have given Australia a significant competitive advantage in the Chinese market over some of our main competitors such as the US, Canada, the EU and New Zealand, particularly for our agriculture and the processed food sector. Among the key results, chAFTA offers considerable benefits for Australia`s energy resources and exports. Once effective, 93% of Australia`s current resource, energy and industrial exports will enter China duty-free and reach 99.9% if fully implemented. It is important that the recently introduced 3% coal coking tariff is immediately abolished and that the 6% tariff for thermal coal expires within two years. But obviously, the payment is worth it. These trade policy developments will improve market access and help Australian exporters harness the full potential of the world`s largest economy.

Others, which successfully guarantee free trade agreements with China, have benefited from a sharp increase in trade flows. For example, Chinese imports from New Zealand have increased by more than 450% since the entry into force of the China-New Zealand Free Trade Agreement in October 2008. China`s total imports increased by only 50% over the same period (Chart 6). Deloitte has extensive experience in helping companies of all sizes manage governance and compliance issues raised by IFRS to achieve best practices. Our free trade agreements with Korea and Japan go back months, and we are already seeing an increase in exports compared to a year ago – such as a 26% increase in frozen beef cuts to Korea and a massive 84 percent increase in the same product to Japan. Macadamia`s exports to Korea have more than doubled, and Japan imports 82 percent more of our oatmeal. Wine, lamb, horticulture and many other products have also seen increases, and we look forward to further positive results as soon as ChAFTA comes into effect.