Australia`s exports of food and fibre to China have increased dramatically in recent years and there is much optimism about the persistence of this belief. Indeed, the increase in Chinese demand was one of the main reasons why Deloitte recently identified the agricultural economy as an important growth sector of the Australian economy in the coming decades. To date, however, Australian producers and exporters have experienced competitive disadvantages in terms of Chinese market penetration compared to countries that already have a free trade agreement with China, such as ASEAN, New Zealand and Chile. A bilateral free trade agreement with China will not only give Australia a level playing field with these nations, but also give Australia an advantage over other major competitors in the Chinese food and fibre market, such as the United States, the European Union and Canada. CANBERRA, December 21 (Xinhua) — Two years after its agreement between China and Australia (ChAFTA), Australian Trade Minister Steven Ciobo believes he continues to bring great benefits to both nations. Even though growth is down from a double-digit rate to about 7.5%, the IMF expects China`s economy to overtake the United States this year and become the world`s largest purchasing power parity. ChAFTA offers Australia significant preferential market access: more than 85% of Australian products exported to China (in value terms in 2013), now come into force duty-free after entry into force and increase to 93% after four years and 95% if chAFTA is fully implemented. ChAFTA gives Australia an advantage over our major agricultural competitors, including the United States, Canada and the European Union. It also countered the benefits that Chile, New Zealand and South Korea currently enjoy from their free trade agreements with China.
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. Others, who have succeeded in securing 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). 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).