Article – Chinese free-trade deal opens door to exports

by 18 November 2014

17 November 2014
The Australian

TONY Abbott has won a dramatic increase in market access for ­Australian farmers, services and manufacturers in a trade deal worth at least $18 billion over a decade that maintains full scrutiny of investments by Chinese state-owned ­enterprises.

The Prime Minister and ­Chinese President Xi Jinping will sign a memorandum of understanding in Canberra today on an Australia-China free-trade agreement, strengthening the nation’s relationship with its biggest trading partner.

Mr Xi will address parliament today and will visit Tasmania tomorro­w to inspect agricultural operations expected to receive a significant boost in Chinese investment as part of the agreement.

Under the deal, 85 per cent of all Australian exports will enter China tariff-free.

This is expected to rise to 93 per cent within four years and 95 per cent when the deal is fully in force in more than a decade.

The deal has put to one side any changes to contentious issues, such as the requirement that all Chinese state-owned enterprise investments in Australia are subject to Foreign Investment Review Board approval, and increased access­ to the Chinese market for Australian rice, sugar, wheat and cotton.

These issues will be revisited in three years when the deal is reviewed by both governments.

The deal will ease the concerns of some coalminers; the newly imposed­ 3 per cent tariff on coking coal exports worth $6bn will be abolished as soon as the agreement takes effect. But surprisingly, the 6 per cent tariff on thermal and other coal will be phased out over two years instead of immediately.

As revealed by The Australian, the deal, negotiated by Trade Minister Andrew Robb after agreements with Japan and South Korea, provides new opportunities for Australian services and phases down tariffs on metals, resources exports and agricultural products.

Beef and dairy producers are set to win a phase-down in Chin­ese tariffs, with dairy exports moving to a similar tariff reduction schedule as New Zealand.

The wool quota will be increased and tariffs will be phased down over four years on a range of horticultural exports from mangoes to nuts and potatoes.

The Australian understands beef exports to China are set to gain a multi-billion-dollar boost.

The deal will allow direct investment in China by hotel and tourism operations in Chinese hotel­s and restaurants. Australian health and aged-care providers will be allowed to own Chinese hospitals and aged-care facilities.

Australia held the line on its requirement that all investments by state-owned enterprises be examined by the FIRB, despite China’s request for an exemption. In turn China has held firm against increased access for Australian rice, sugar, wheat and cotton.

However, Australia has lifted the threshold for FIRB review of investment by privately held Chin­ese firms from $248 million to $1.087bn in line with concessions in other such deals. The agreement with China allows room for Australia to impose a $15m FIRB threshold for agricultural land and a $53m threshold for agribusiness.

The deal will include some relaxing of the threshold for the size of projects that will be able to import Chinese labour.

But in line with existing regulations, Chinese companies conducting major projects in Australia will have to prove there is a skills shortage and will be required to give imported Chinese workers Australian wages and conditions.

Today’s deal comes after 10 years of negotiations with China and gives the government a trifecta of trade agreements this year, after the deals with Japan and South Korea.

It will cement China’s relationship as Australia’s biggest trading partner, with two-way trade worth more than $150bn a year.

Initial feasibility studies for an agreement with China indicated a deal would increase the size of the Australian economy by $18bn over a decade. However, this figure is now seen as “conservative’’.

The deal will dramatically expand opportunities for bankers, insurance companies and legal firms. Banks will gain increased transparency and streamlining in financial services licence applications, including reduced approval times for firms wanting to trade in the Chinese currency.

Legal firms will be able to establish commercial operations in the Shanghai free-trade zone that will be allowed to service the whole of China.

Architectural and urban planning professionals will gain recip­rocal recognition of their qualifications.

Educational institutions and training providers will win increased promotion from the Chin­ese government.

The number of educational providers that will be promoted by the Chinese government will be increased from 77 to 105 under the agreement.

The Australian understands that the deal will eliminate tariffs on 99.9 per cent of resources ­exports to China when it is fully impleme­nted.

China FTA opens door to exports

Courtesy of The Australian

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