ChAFTA: The Benefits of the China-AU Free Trade Agreement
It took nearly 10 years, over 20 meetings and who knows how many hours, but a free trade agreement between two of the most powerful economies in the world – Australia and China – is finally signed and complete.
The agreement signifies a huge moment for both countries.
For Australia, the agreement means that 95% of all Aussie exports will no longer be subjected to Chinese tariffs, a particularly appealing clause for the agricultural industry which already exports a substantial quantity of beef and dairy to China. Australian farmers and agricultural exporters now have a tactical advantage over their main competition (Canada, the United States and the European Union) in dealing with Asia’s largest import market, and sets them on equal footing with New Zealand and Chile who reached their own free-trade agreements with China in 2006 and 2008 respectively.
Early indications seem to suggest the deal is decidedly one-sided in favour of Australia, though that commonly held opinion may change in the coming years as the global economy continues to evolve.
Though the agreement will likely emerge as a boon to all Aussie business, it could be particularly beneficial for those operating in the SME space who find themselves far more adversely impacted by the financial consequences of tariffs.
Some of the highlights of the agreement as announced by the Australian government include:
- The removal of all tariffs on our dairy products (which can be as high as 20 per cent) within four to 11 years.
- The removal of tariffs of 12 to 25 percent on beef over nine years.
- The removal of tariffs on all horticulture products, ranging up to 30 per cent, most within four years.
- The removal of tariffs of 14 to 20 per cent on wine over four years.
- The removal of tariffs of 5 to 14 per cent on hides, skins and leather over two to seven years.
- On full implementation of the Agreement, 99.9 per cent of Australia’s current resources, energy and manufacturing exports will enjoy duty free entry into China.
For an in-depth explanation of what ChAFTA will do for Australian businesses, visit the Department of Foreign Affairs and Trade here.