On 17 November 2014 the Australian Prime Minister, Tony Abbott, and the Chinese President, Xi Jinping, signed a declaration of intent for the China Australia Free Trade Agreement (known as “the ChAFTA”).
Since the signing of the declaration the Australian Government has been releasing highlights of the agreement via drip-fed news releases in an attempt to build enthusiasm among the Australia business community. Generally, this strategy has been successful and most Australian businesses have embraced the ChAFTA as an “historic agreement…that puts many of our most important sectors on a more competitive footing internationally, and gives Australian companies enormous scope to boost trade and create jobs”.1
In this China Messenger, we provide a snapshot of the important provisions of the ChAFTA and look at the key information that is still to be released.
What we know – at this stage it’s good news
The ChAFTA provides opportunities for business in both Australia and China. Chinese private investors will benefit from an increase in the threshold limit of Australia’s Foreign Investment Review Board – Chinese private investments will be given the same treatment as investors from the United States and New Zealand.
On the Australian side, business will benefit from significant reductions in tariffs, especially in the energy, resources and manufacturing sectors. These tariff reductions will be advantageous for business in Australia and China, and should result in increased trade and investment between the two countries.
Critically, the detail of the tariff reductions has not been included at this stage and so Australian businesses will need to be alert to the opportunities for future trade and investment with China.
Here are some of highlights that have been released so far by the Australian Department of Foreign Affairs and Trade:
Investment and tariffs
Chinese businesses will be able to import skilled labour on projects greater than $150 million if there is a skills shortage in that field. This labour will be brought on ‘skilled migrant’ visas and must comply with Australian workplace regulations and standards.
There will be opportunities for Australian and Chinese businesses to use this new mechanisms strategically, although the full detail of this program may be more restrictive in the final version of the ChAFTA.
What you don’t know may actually hurt
The detail of the ChAFTA is still to be released and it is likely that the final agreement will not be formally executed until well into 2015. Following the release of the final agreement, the provisions will not come into effect until they have been enacted through legislation in both China and Australia. The process of enshrining the ChAFTA into domestic law will be a simpler and more efficient process in China than it will in Australia. The Australian parliament will debate many of the provisions and there is likely to be multiple senate committees to investigate the more controversial sections. For example, we anticipate significant debate in relation to the effect that tariff reductions and reduced investment scrutiny will have on Australian agribusiness.
Furthermore, there are significant details of the ChAFTA that are still to be released by the Australian and Chinese governments:
Most importantly, at this stage the information that has been released has been general and does not include the details necessary for businesses to capitalise on the opportunities under the ChAFTA. It is truly a case of “watch this space” for businesses trading and investing (or simply investigating) between Australia and China.
For more information, please contact Christopher Hewitt or Emilie Franklin on +61 7 3367 6900 or firstname.lastname@example.org or email@example.com
This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.
 Jennifer Westacott, China – Australia Free Trade Agreement a Historic Opportunity (17 November 2014) Business Council of Australia <http://www.bca.com.au/newsroom/china-australia-free-trade-agreement-a-historic-opportunity>