Leslie Massey
The China-Australia Free Trade Agreement (ChAFTA) is a bilateral free trade agreement (FTA) between the governments of Australia and China. The deal was completed on 17 November 2014 and was signed between the two countries on 17 June 2015. The agreement came into force on 20 December 2015, after the Chinese government completed its domestic legal and legislative processes and the Australian Parliament’s Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee finished a review.
| Characteristics | Values |
|---|---|
| Name | China–Australia Free Trade Agreement (ChAFTA) |
| Type | Bilateral free trade agreement (FTA) |
| Countries Involved | Australia, China |
| Agreement Date | 17 November 2014 |
| Signed | 17 June 2015 |
| Entered into Force | 20 December 2015 |
| Impact on Australian Beef Industry | Removal of tariff on beef imports, increase in exports, rise in farm gate prices, and overall benefit to the industry |
| Impact on Australian Agriculture | Expected benefits for various sectors, potential small declines for non-exporting or non-tariff reduction industries |
| Australian Objectives | Gaining preferential market access to Chinese agricultural and services sectors |
| Benefits for Australia | Enhanced competitive position in the Chinese market, boost to economic growth, job creation, and access to opportunities |
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What You'll Learn
The China-Australia Free Trade Agreement (ChAFTA)
The ChAFTA has delivered enormous benefits to Australia, enhancing its competitive position in the Chinese market, boosting economic growth, and creating jobs. The agreement has unlocked significant opportunities for Australia in China, which is Australia's largest export market for goods and services, accounting for nearly a third of total exports.
One of the sectors expected to benefit the most from the ChAFTA is the cattle and beef industry. The existing tariff on Australian beef imports into China is between 12 and 25 percent, and the removal of this tariff is expected to result in an incremental 1 percent rise in the farm gate price of live cattle. This is due to the rising demand for Australian beef in China, as it becomes relatively cheaper for Chinese consumers. Additionally, exports of chilled or frozen beef are expected to increase by more than 6 percent, with the volume of exports increasing more than production, leading to a 2.5 percent increase in the overall value-add in beef cattle, or $350 million.
Other sectors of Australian agriculture will also benefit from the ChAFTA. However, it is important to note that there may be small declines in output for agricultural industries that do not export to China or are not in line for tariff reduction. Overall, the ChAFTA is expected to have a positive impact on the Australian economy, and it puts Australia at an advantage over other major food and fibre competitors in the Chinese market, such as the US, the European Union, and Canada.
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Benefits to Australian agriculture
The China-Australia Free Trade Agreement (ChAFTA) has been in force since 20 December 2015. The agreement has enhanced Australia's competitive position in the Chinese market, boosted economic growth, and created jobs. China is Australia's largest export market for goods and services, accounting for nearly a third of total exports.
- Market Access and Duty-Free Entry: ChAFTA provides Australian agricultural producers and exporters with improved access to the Chinese market, which is Australia's top overseas market for agricultural goods. On full implementation of ChAFTA, most of Australia's goods exports to China will enter duty-free. This includes the elimination of tariffs on Australian barley and sorghum and a rapid tariff reduction on other agricultural exports, such as seafood, sheep meat, and horticulture.
- Competitive Advantage: ChAFTA puts Australia on a level playing field with other countries that have FTAs with China, such as New Zealand and Chile. It also gives Australia an advantage over major agricultural competitors, including the United States, Canada, and the European Union.
- Increased Investment: ChAFTA promotes the growth of Chinese investment in Australia, particularly in the agricultural sector. The agreement liberalized the Foreign Investment Review Board (FIRB) screening threshold for private Chinese investors in non-sensitive sectors, encouraging more investment into Australia.
- Job Creation: By enhancing Australia's competitive position and boosting economic growth, ChAFTA has contributed to job creation in the agricultural sector. This includes jobs in the production, processing, and export of agricultural goods.
- Innovation and Technology: ChAFTA encourages the use of emerging technologies in agriculture to boost productivity and assist in making strategic decisions. This includes access to new technologies and techniques to improve agricultural practices and increase yields.
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Australia's competitive position in the Chinese market
Australia and China have a long history of diplomatic relations, which were established in 1972, with Australia opening an embassy in Beijing in 1973. The two countries have strong economic complementarities and longstanding community and cultural links.
The China-Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015, after nearly a decade of negotiations. The agreement has been beneficial for both countries, unlocking significant opportunities for Australia in China, which is Australia's largest export market for goods and services. ChAFTA has enhanced Australia's competitive position in the Chinese market, boosted economic growth, and created jobs. Australian businesses have successfully entered the Chinese market, with a 90% utilisation rate of lower tariffs under the agreement.
China is Australia's largest two-way trading partner, accounting for 26% of Australia's goods and services trade with the world in 2023-24. Two-way trade with China increased by 2.6% in 2023-24, totalling $325 billion. Australia's goods and services exports to China totalled $212.7 billion in 2023-24, with services exports up 42.3% in the same period.
China is also a significant investor in Australia, valued at $47 billion in 2023, accounting for 4% of total foreign direct investment. Chinese tourism to Australia is supported by the availability of fast-track visitor visas and the Approved Destination Status (ADS) scheme, which allows Chinese nationals to visit on tours organised by approved travel agents.
The strong relationship between the two countries is further evidenced by the presence of six Austrade offices across China, assisting Australian businesses in entering markets and promoting Australia as a destination for investment, tourism, and education. Most Australian state governments are represented in China's leading commercial centres, and the two countries share around 100 sister-state/province and sister-city relationships.
Looking forward, the medium to long-term growth story of the e-commerce industry in Australia is expected to be attractive, with a projected growth rate of 7.31% annually, reaching US$57.1 billion in 2024. Chinese e-commerce platforms are gaining popularity among Australian online shoppers, with companies like Temu and Amazon investing heavily in the market.
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Australia's largest export market
Australia and China have a free trade agreement, the China-Australia Free Trade Agreement (ChAFTA), which came into force on 20 December 2015. This agreement has significantly benefited Australia, enhancing its competitiveness in the Chinese market, boosting economic growth, and creating jobs.
China is Australia's largest export market for goods and services, accounting for nearly a third of Australia's total exports. In 2024, China was the largest export partner for education-related travel services, accounting for 24.7% of the total. China is also the largest export partner for other personal travel services, accounting for 10.1% of the total. Australia's services exports to China are dominated by educational and recreational travel and have averaged annual growth of 18% over a five-year period. China is also Australia's largest source of imports, with China's total merchandise exports to Australia valued at A$35.8 billion in 2009, an increase of 1.5% from the previous year. Major imports from China include clothing, communications equipment, computers, prams, toys, games and sporting goods, furniture, and televisions.
The Australian government is actively working to deepen and diversify its bilateral economic relationship with China. This includes a major new 'sector-by-sector and province-by-province' trade initiative, with a geographic focus on China's rapidly growing inland provinces. Australian financial institutions have also shown interest in investing in Chinese banks, and there is a growing interest in the mining sector. China is also Australia's largest source of overseas students, with around 155,000 enrolments in Australian educational institutions in 2009.
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Negotiations and signing of the agreement
Negotiations for the China-Australia Free Trade Agreement (ChAFTA) began in May 2005, after Australia granted China 'market economy status' under World Trade Organisation rules. The first round of negotiations took place following a joint feasibility study.
However, discussions entered a stalemate in mid-2007, and it wasn't until 21 rounds of negotiations later, in November 2014, that a formal agreement was reached. On 17 June 2015, the agreement was signed between the two countries.
The treaty-making process was then followed, and the agreement came into force on 20 December 2015, after the Chinese government completed its domestic legal and legislative processes, and the Australian Parliament's Joint Standing Committee on Treaties and the Senate Foreign Affairs, Defence and Trade References Committee finished a review.
The ChAFTA has had a significant impact on the Australian economy, particularly in the agricultural sector. For example, the removal of tariffs on Australian beef exports to China has resulted in a 6% increase in exports, leading to higher prices and higher output, with a consequent overall value-add in beef cattle of approximately $350 million.
The agreement has also put Australia at an advantage over other major competitors in the Chinese market, such as the US, the European Union, and Canada.
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Frequently asked questions
Yes, the China-Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015.
The China-Australia Free Trade Agreement is a bilateral free trade agreement (FTA) between the governments of Australia and China. It was signed on 17 June 2015.
The agreement enhances Australia's competitive position in the Chinese market, boosts economic growth, and creates jobs. It also unlocks significant opportunities for Australian businesses in China, particularly in the agricultural and services sectors.
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