The Impact of ChAFTA on Australia’s Economic Relationship with China

Australia’s biggest trading partner is China, while Australia is a leading source of resources for China. Australia-China relations are characterized by strong trade bonds. More recent trends show that Australian exports are now expanding well beyond the resource sector. Maintaining a solid relationship with China is crucial for Australia’s economic growth, job creation and higher living standards. The China–Australia Free Trade Agreement (ChAFTA) is offering enormous possibilities when importing goods from China. This trade agreement will encourage investment in Australian industry and infrastructure and provide greater access of cheap Chinese goods in Australia.

The Impact of ChAFTA on Australia’s Economic Relationship with China 1

Increasing numbers of Australian businesses are entering the Chinese market with great success. Because of ChAFTA, more than 98 percent of Australian goods exported to China enter either duty-free or at a preferential rate. Traditional Australian exports such as coking coal, wine, beef, and dairy are expected to grow substantially as tariffs are gradually eliminated under ChAFTA. Australia’s commodities exports, driven by Chinese demand, sustain unparalleled growth. Similarly, new opportunities will likely open up for exports such as whiskey, pharmaceuticals, vitamins, and health products — goods that will have their tariffs eliminated come January 1, 2019. ChAFTA signals the aspirations of the Chinese government to play a leading role in the free trade push.

Given China is Australia’s most significant trade partner, the stakes are very high. The biggest boon to come from the ChAFTA has been for exporters, but importers are also set to benefit. Australia has committed to eliminating the remaining tariffs on imports from China, which is great news for SMEs. This change will promote competitiveness and profitability within the marketplace. As stock becomes cheaper to procure, we can expect to see lower prices for consumers and greater opportunities for SMEs in the lucrative trade industry with China. Economic growth is making the country a key trading and investment partner for Australia and its success is increasing Beijing confidence in asserting its position in regional and global affairs.

The Most-Favoured Nation (MFN) clause is included in the ChAFTA agreement under which China is liable to protect Australia’s competitive position in services into the future to other trade partners in the areas such as travel and tourism services, education, securities, construction, environmental services, engineering and certain scientific and consulting services.

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