What the China Free Trade Agreement means for your business: All the nitty gritty details

What the China Free Trade Agreement means for your business: All the nitty gritty details

Australia’s historic free trade agreement with China was signed yesterday by Prime Minister Tony Abbott and Chinese President Xi Jinping. The deal provides unprecedented access to Chinese markets for many Australian businesses.

Here are the details of exactly what the China-Australia Free Trade Agreement means for your business:

Agriculture

  • The removal of all tariffs on Australian dairy products (which can be as high as 20%) within four to 11 years.
  • The removal of tariffs of 12% to 25% on beef over nine years.
  • The removal of tariffs on live animal exports of 10% within four years.
  • The removal of tariffs on sheep meat of 12% to 23% over eight years.
  • The removal of tariffs of 14% to 20% on wine over four years.
  • The removal of tariffs on all horticulture products, ranging up to 30%, most within four years.
  • The immediate elimination of the 3% tariff on barley.
  • An Australia-only duty free quota for wool in addition to continued access to China’s WTO wool quota.
  • The removal of tariffs on seafood, including of 15% and 14% respectively on rock lobster and abalone, over four years.
  • The removal of tariffs across a range of processed foods including fruit juice and honey.
  • The removal of tariffs of 5% to 14% on hides, skins and leather over two to seven years.

Resources, Energy and Manufacturing

  • The removal of tariffs on all resources and energy products: including on coking coal (metallurgical coal for steel making) (currently subject to a 3% tariff) on the first day of the FTA, and non-coking coal (thermal/steam coal for power generation) (6%) within two years.
  • The removal of tariffs on transformed resources and energy products, such as refined copper and alloys (unwrought) (currently subject to 1% and 2% tariffs), aluminium oxide (alumina) (8%), nickel mattes and oxides (3 %), unwrought zinc (3%), copper waste and scrap (1.5%), unwrought aluminium (5% and 7% tariffs), aluminium waste and scrap (1.5%), unwrought nickel (3%), other mineral substances (3% and 5% tariffs), and titanium dioxide (6.5% and 10% tariffs).
  • The removal of tariffs of up to 10% on pharmaceuticals, including vitamins and health products, either on entry into force or phased out over four years.
  • The removal of tariffs within four years for other manufactured products, including car engines (currently subject to a 10%), plastic products (6.5% to 14%), diamonds and other precious stones (3% and 8% tariffs), orthopaedic appliances (4%), aluminium plates and sheets (6% and 10%), make-up and hair products (6.5% to 15%), centrifuges (10%) and pearls (21%).

Services

China has offered Australia its “best ever services commitments” in an FTA (other than China’s agreements with Hong Kong and Macau).  It includes:

  • Australian law firms will be able to establish commercial associations with Chinese law firms in the Shanghai Free Trade Zone (SFTZ).
  • China has committed to deliver new or improved market access to Australian financial services providers in the banking, insurance, funds management, securities, securitisation and futures sectors.
  • China will list on an official Ministry of Education website all Australian private higher education institutions registered on the Commonwealth Register of Institutions and Courses for Overseas Students.
  • China has agreed to guarantee new access for Australian companies investing in value-added telecommunications services in the SFTZ with improved foreign equity limits, now allowing for wholly Australian-owned companies supplying domestic multi-party communication services, application store services, store and forward services, and call-centre services.
  • Australian tourism and travel-related service suppliers will be able to construct, renovate and operate wholly Australian-owned hotels and restaurants in China.
  • Australian travel agencies/tour operators are also able to establish wholly Australian-owned subsidiaries in China for tours within China for both domestic and foreign travellers.
  • Wholly Australian-owned hospitals and aged care institutions can be established in China.
  • China will provide new market access to Australian telecommunications companies undertaking joint construction projects with Chinese counterparts in Shanghai. Australian companies will be exempted from business scope restrictions, allowing them to undertake a wider range of commercially-meaningful projects.

Investment

  • The FTA guarantees access for wholly Australian-owned companies to provide contract manufacturing services covering a wide range of manufactured products.
  • China will take into account Australian experience in assessing applications for higher-level qualifications, allowing Australian architectural and urban planning firms to obtain more expansive business licences to undertake higher-value projects in China.
  • China will permit Australian maritime transport service suppliers to establish wholly Australian-owned ship management enterprises in the SFTZ.
  • The FTA raises the screening threshold at which investments in non-sensitive sectors by private sector entities from China are considered by the Foreign Investment Review Board from $248 million to $1,078 million.
  • The government has retained the ability to screen Chinese investments at lower thresholds for sensitive sectors, including: media, telecommunications and defence-related industries. The government will be able to screen investment proposals by private investors from China in agricultural land valued from $15 million and agribusiness from $53 million.
  • Investment obligations in the FTA can be enforced directly by Australian and Chinese investors through an Investor-State Dispute Settlement mechanism, helping to promote investor confidence.

Work and Holiday Arrangement

  • Australia will grant visas for up to 5,000 Chinese work and holiday makers annually.

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