News Analysis: Historic China-Australia FTA enters into force, benefiting both countries

The free trade agreement between China and Australia has officially entered into force on Sunday, giving competitive advantages for exporters and investors from both countries into each other's market.

Hailed as "historic" and "landmark" by the Australian Minister for Trade and Investment Andrew Robb, the China-Australia Free Trade Agreement (ChAFTA) enables more than 86 percent of Australia's goods exports to China duty free, worth more than 90 billion AU dollars (65 billion U.S. dollars).

Once the agreement is fully implemented, 96 percent of Australian goods will enter China duty free, while 100 percent of Chinese exports to Australia will enjoy zero-tariff treatment.

"The signing of the ChAFTA will provide a better platform and an improved institutional guarantee for the two countries to complement each other with advantages and conduct close win-win cooperation," Chinese President Xi Jinping said in a message to then Australian Prime Minister Tony Abbott when the deal was inked in Canberra in June.

While addressing the signing ceremony, Chinese Commerce Minster Gao Hucheng said the ChAFTA has "monumental significance" in bilateral relations and will "boost economic cooperation and provide strong impetus to the economic growth of the two countries."

Of all such agreements involving China, it contains "the highest level of overall trade and investment liberalization," Gao noted.

Iron ores and concentrates, coal, gold, education-related travel services and copper are China's top five imports from Australia, while clothing, telecom equipment and parts, computers, furniture, toys and sporting goods are the top five exports to Australia.

Chinese enterprises and consumers will have greater access to natural resources and finished products like high-quality food. Australians will also benefit from cheaper China-made garments and electronic gadgets.

Trade Minister Andrew Robb said tariffs have been cut on a range of important Australian exports including dairy, beef, lamb, wine, seafood, fruit and vegetables, processed foods, vitamins and health products.

Tariffs on coking coal (with exports worth 4.8 billion U.S. dollars in 2014-15) have been eliminated, while the phased elimination of tariffs on non-coking coal also starts on Sunday.

"This historic agreement with our biggest trading partner will support future economic growth, job creation and higher living standards through increased goods and services trade, and investment. China, with its population of 1.3 billion people and rapidly rising middle class, presents enormous opportunities for Australian businesses well into the future," Robb said.

"The government's determination to see ChAFTA's commencement before the end of this year will quickly produce a double benefit for our exporters, with another round of tariff cuts to follow on Jan. 1, 2016. This will significantly enhance our competitive position in the Chinese market."

The trade minister said ChAFTA also opened up a range of new opportunities for Australian service providers with significantly enhanced market access for financial services companies, law firms, professional services suppliers, education services exporters, as well as health, aged care, hospitality, construction and manufacturing businesses.

Minister for Tourism and International Education Richard Colbeck said in a statement on Sunday that ChAFTA is a boost for tourism.

"Not only will ChAFTA strengthen Australia's inbound tourism industry but it will also create new opportunities for Australian tourism providers in China," Colbeck said.

In 2014-15, 927,700 Chinese nationals visited Australia and spent almost 7 billion AU dollars (5 billion U.S. dollars), more than any other country. Tourism Research Australia forecasts that by 2022-23, 1.5 million Chinese will visit Australia annually and spend over 10 billion AU dollars (7.2 billion U.S. dollars).

Under ChAFTA, the Chinese Ministry of Education will promote 77 Australian private higher education institutions for students who want to study in Australia.

"More Chinese students studying in Australia will have enormous flow-on effects for our local tourism industry," said Colbeck.

The agreement will also inevitably stimulate new levels of growth in the two-way investment which is currently worth around 121 billion AU dollars (87 billion U.S. dollars).

"ChAFTA will also help drive innovation as Australian businesses, big and small, increasingly exploit e-commerce and other emerging technologies to connect with Chinese consumers," Robb said. "For example, earlier this year, vitamin supplements manufacturer Blackmores and meat exporter Sanger Australia each signed agreements with JD.com to sell their products on China's largest online shopping website."

Australia China Business Council (ACBC) National President John Brumby welcomed ChAFTA's entry into force on Sunday.

"Today marks a watershed in Australia-China relations, with ChAFTA now in operation after nearly 10 years of negotiations. The competitive advantages ChAFTA accords Australian businesses in the China market are immense and will be immediate, with a first round of tariff cuts on entry into force followed by a second round on Jan. 1, 2016," Brumby said.

"ChAFTA is a substantial achievement for both Australia and China, an important expression of confidence in our economic relationship. The agreement will be the platform that will take our relationship to a new level," he added.

The trade deal was reached after decade-long talks that began in 2005. The process was greatly accelerated after Chinese President Xi paid a state visit to Australia in November 2014 and brought about the signing of the Declaration of Intent. Enditem