Lyla Lindsey
The China-Australia Free Trade Agreement (ChAFTA) is a bilateral agreement between the governments of Australia and China. The agreement was signed on 17 June 2015 and came into force on 20 December 2015. ChAFTA is expected to benefit many Australian industries, including agriculture, by enhancing Australia's competitive position in the Chinese market. It will also provide opportunities for organisations in developing countries that are matched with skilled Australians. However, it may also have some negative impacts, particularly for agricultural industries that do not export to China or are not in line for tariff reduction. Overall, the agreement is expected to have a significant impact on the economic relationship between Australia and China.
| Characteristics | Values |
|---|---|
| Date of signing | 17 June 2015 |
| Date of coming into force | 20 December 2015 |
| Type of agreement | Bilateral free trade agreement |
| Expected impact on Australian exports to China | 95% tariff-free |
| Expected impact on Australian agricultural products | Positive |
| Expected impact on Australian beef industry | Positive |
| Expected impact on Australian cattle industry | Positive |
| Impact on Australian market access for services sector | Liberalization |
| Impact on investments by private Chinese companies under 1,078 million AUD | No FIRB approval needed |
| Impact on visa process for Chinese nationals | Up to 5,000 visas to be granted by Australia for work and holiday |
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What You'll Learn
- The China-Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015
- Deloitte predicts the FTA will benefit Australian agriculture, specifically the beef industry
- % of Australian exports to China will be tariff-free, including agricultural products
- The FTA will also liberalise market access for Australia's services sector
- The agreement will impact Australian businesses' approach to the Chinese market
The China-Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015
ChAFTA is a bilateral free trade agreement that enhances Australia's competitive position in the Chinese market and provides significant opportunities for Australian businesses. China is Australia's largest export market for goods and services, accounting for nearly a third of total exports. The agreement boosts economic growth, creates jobs, and has a positive impact on various Australian industries, including agriculture and agribusiness.
One of the key benefits of ChAFTA is the reduction or elimination of tariffs on Australian exports to China. For example, the Australian cattle and beef industry has experienced increased exports, higher prices, and overall growth due to the removal of tariffs. However, it's important to note that not all agricultural sectors have benefited equally, and some non-exporting industries may experience small declines in output.
ChAFTA also includes provisions for a Work and Holiday Agreement, with Australia granting up to 5,000 visas to Chinese nationals for work and holiday purposes. Additionally, the agreement provides a platform for cooperation and collaboration between the two countries, with organisations in developing countries being matched with skilled Australians.
Overall, the China-Australia Free Trade Agreement has strengthened the economic ties between the two nations, unlocking new opportunities and enhancing Australia's presence in the Chinese market. The agreement has benefited numerous Australian industries and created a more favourable environment for trade and investment between Australia and China.
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Deloitte predicts the FTA will benefit Australian agriculture, specifically the beef industry
The China-Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015. The agreement enhances Australia's competitive position in the Chinese market, which is Australia's largest export market for goods and services, accounting for nearly a third of total exports.
Deloitte predicts that the FTA will benefit Australian agriculture, specifically the beef industry. Australian food and fibre exports to China have risen dramatically in recent years, and there is great optimism that this will continue. Rising demand from China was a pivotal reason why Deloitte identified agribusiness as a key growth area for the Australian economy in the coming decades.
Deloitte Access Economics modelled the economic impacts of the FTA on the Australian economy, including on different parts of agriculture. The cattle and beef industry was identified as one of the sectors expected to benefit the most. The existing tariff on Australian beef imports into China is between 12 and 25 per cent, and Deloitte's modelling is based on the complete removal of this tariff within a decade. There is also an existing 10 per cent tariff on live cattle, although much of the Australian live cattle imported into China is purebred and does not attract a tariff. Therefore, it is the removal of the tariff on beef that will have the largest direct impact on the Australian cattle and beef industries.
The higher prices for cattle and beef cause a supply response from Australian farmers. The volume of output of cattle increases by approximately 2.2 per cent, or 280,000 head when applied to the size of today’s national herd. There is also an increase of nearly 3 per cent in the volume of processed beef produced, or an additional 60,000 tonnes. Exports of chilled or frozen beef increase by more than 6 per cent. The combination of higher prices and higher output sees an overall value-add in beef cattle rise by approximately 2.5 per cent, or $350 million applied to today’s industry.
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95% of Australian exports to China will be tariff-free, including agricultural products
The China-Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015. The agreement enhances Australia's competitive position in the Chinese market, which is Australia's largest export market for goods and services, accounting for nearly a third of total exports.
China's demand for high-quality agricultural and food products is growing rapidly. The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) predicts China's demand for agricultural products will more than double by 2050. In the past, the absence of a bilateral FTA with China meant Australian producers and exporters faced significant tariffs on agricultural products and were at a competitive disadvantage to countries that had an FTA with China, including New Zealand, Chile, and ASEAN.
ChAFTA addresses this issue and also gives Australia a significant advantage over other larger players, such as the US, the EU, and Canada. The agreement eliminates tariffs on many Australian exports to China, including on resources, energy, and manufacturing. For example, ChAFTA locked in existing zero tariffs on iron ore, gold, crude petroleum oils, and liquefied natural gas, providing greater certainty for Australian exporters.
In agriculture, ChAFTA eliminated remaining tariffs on Australian barley and sorghum on 20 December 2015 and will see a rapid tariff reduction on other agricultural exports, including seafood, sheep meat, and horticulture. Other key agriculture outcomes include the elimination of tariffs on beef offal by 1 January 2022, dairy by 1 January 2026, and beef by 1 January 2024.
Overall, ChAFTA is expected to have a positive impact on Australia's agricultural sector, with many sectors expected to benefit from increased access to the Chinese market and higher demand for their products.
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The FTA will also liberalise market access for Australia's services sector
The China-Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015. The agreement enhances Australia's competitive position in the Chinese market, boosts economic growth, and creates jobs. It is Australia's largest export market for goods and services, accounting for nearly one-third of total exports.
The FTA will liberalise market access for Australia's services sector. This means that Australian companies will be able to more easily enter the Chinese market and compete with local businesses. This will be achieved through a range of in-market and Australian-based services provided by Austrade, which will help Australian companies familiarise themselves with local market conditions, including culture, politics, and business etiquette.
The FTA will also reduce tariffs on Australian exports to China, making Australian goods more competitive in the Chinese market. This includes agricultural products such as beef and dairy, as well as other sectors of Australian agriculture. The removal of tariffs will also have an impact on the supply chain, with potential declines in some areas and increases in others. Overall, the FTA is expected to benefit many different Australian industries and create significant opportunities for Australian businesses in China.
In addition to the benefits for the services sector, the FTA will also encourage investment by private companies from China. Investments under 1,078 million AUD will not be subject to FIRB approval, further enhancing market access for Australian businesses. The FTA will also include a Work and Holiday Agreement, with Australia granting up to 5,000 visas to Chinese nationals for work and holiday purposes.
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The agreement will impact Australian businesses' approach to the Chinese market
The China–Australia Free Trade Agreement (ChAFTA) is a bilateral free trade agreement (FTA) between the governments of Australia and China. The agreement came into force on 20 December 2015, following the completion of the usual treaty-making process, which included a review by the Australian Parliament's Joint Standing Committee on Treaties.
ChAFTA has significantly impacted Australian businesses' approach to the Chinese market. Firstly, it has enhanced Australia's competitive position in China, providing a level playing field with other nations that have FTAs with China, such as New Zealand and Chile. This has particularly benefited the Australian agribusiness sector, with food and fibre exports to China rising dramatically. For example, Australian beef and cattle exports have increased due to the removal of tariffs, causing a supply response from Australian farmers.
Moreover, ChAFTA has unlocked opportunities for Australian businesses in China, which is Australia's largest export market for goods and services, accounting for nearly a third of total exports. The agreement will make 95% of Australian exports to China tariff-free, including agricultural products such as beef and dairy. It also liberalizes market access for Australia's services sector and simplifies the process for private Chinese investments under 1,078 million AUD.
In addition to the economic benefits, ChAFTA provides a platform for Australian businesses to familiarise themselves with the Chinese market. Austrade, an Australian government agency, assists companies in understanding local market conditions, culture, politics, and business etiquette. This support helps Australian businesses navigate the cultural and political differences when entering the Chinese market.
However, the impact of ChAFTA on Australian businesses is not entirely positive. Some agricultural industries that do not export to China or are not in line for tariff reduction may experience small declines in output due to exchange rate effects and shifts in land use. Additionally, the agreement has contributed to a downward trend in per capita beef consumption in Australia due to higher domestic beef prices.
Overall, ChAFTA has significantly influenced Australian businesses' approach to the Chinese market by enhancing competitiveness, creating new opportunities, and providing support to navigate cultural and political differences. While there are benefits across various sectors, some industries may also face challenges due to the agreement.
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Frequently asked questions
The China-Australia Free Trade Agreement (ChAFTA) is a bilateral free trade agreement between the governments of Australia and China.
The China-Australia Free Trade Agreement was signed on 17 June 2015 in Canberra, Australia.
The China-Australia Free Trade Agreement came into force on 20 December 2015.
The agreement enhances Australia's competitive position in the Chinese market, unlocking significant opportunities for Australian industries. It will also lead to 95% of Australian exports to China being tariff-free, including agricultural products such as beef and dairy.
While the agreement will benefit many Australian sectors, there may be small declines in output for agricultural industries that do not export to China or are not in line for tariff reduction.
