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China and Australia signed a free trade agreement on Wednesday after a decade of negotiations, covering areas including a simplified review procedure for investments, most-favored-nation status and easier market access to service sector.
Under the agreement, 85.4 percent of goods traded between both sides will cut tariffs to zero immediately. About 97 percent of Australian exports to China will be tariff free following the designed timeline step by step. There will include many agricultural products such as beef, dairy and wine. Australia will eventually reduce tariffs to zero on all goods imported from China.China's major exports to Australia are machinery, telecommunication equipment, computer, furniture and garment product, and its main import from Australia are iron ore, coal, gold, copper, education-related travel services and agricultural products, according to the Customs data.Official figures show trade volumes between China and Australia jumped from $88.1 billion in 2010 to $136.9 billion in 2014. Australia had $9.4 billion trade surplus with China last year.
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Australia's service businesses, such as education, tourism, telecommunications, healthcare and financial services, will gain more market access into China, either by partnering up with Chinese companies, or in certain situations being able to access those markets directly.Private Chinese investment under $830,000 will not be subject to the approval of Australia's Foreign Investment Review Board. There also will be an Investor State Dispute Settlement mechanism under the agreement.China was Australia's largest export market for both goods and services in 2014, accounting for nearly a third of total exports, and a growing source of foreign investment.Eager to seek more new market growth points with close trade partners together, China also signed its largest bilateral free trade agreement in terms of volume with South Korea earlier this month.Under the deal, China will remove tariffs on 91 percent of all products from South Korea within the next 20 years, while Seoul will eliminate tariffs on 92 percent of all goods in the other direction.
FTA signals new era in trade ties
The China-Australia Free Trade Agreement (FTA), agreed upon by President Xi Jinping and Australian Prime Minister Tony Abbott last November, is set to start a new era in trade ties between the two countries.
Under the FTA, Australia will eventually reduce tariffs to zero on all goods imported from China, and China will remove tariffs on the vast majority of Australian goods. It will also include opening-up of numerous service sectors, a simplified review procedure for investments, most-favored-nation treatment, favorable market access rules and market transparency.
Australia's agricultural, mining, manufacturing and tourism industries will see a steady growth. Products like wine or seafood, scheduled for zero tariffs within four years, will have undergone two reductions by next year - once when the FTA is signed and once at the start of next year – resulting in their tariffs being halved.
Beef, Australia's largest agricultural export to China valued at A$722 million ($551 million) in 2013, will have its current tariffs of 12-25 percent abolished within nine years. China is also Australia's third-largest wine export market, worth A$217 million in 2013.Service trade will be a key cooperation field for the two nations including banking, insurance, legal service, education and senior health care. The two countries will also relax the visa application process for an easier talent exchange.It is believed that 93 percent of imported goods from Australia will have zero tariff by 2019.
Statistics from 2013 shows that the trade between the two nations can see a growth more than $16 billion, a 10 percent growth from that total volume of 2013.
Highlights of China-Australia trade
Top 5 export to Australia 2013-14
1. Clothing - $3.95 billion
2. Telecommunication equipment and parts - $3.79 billion
3. Computers - $3.72 billion
4. Furniture - $1.7 billion
5. Daily necessities - $1.39 billion
Top 5 exports to China 2013-14
1. Iron ores and concentrates - $44.3 billion
2. Coal - $7.2 billion
3. Gold - $6.3 billion
4. Education-related travel services - $3.17 billion
5. Copper - $1.63 billion
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