Understanding the China-Australia Free Trade Agreement (ChAFTA)

sptradeline chaftaEarlier this year Trade and Investment Minister, Andrew Robb, and Chinese Commerce Minister, Gao Hucheng, signed the China-Australia Free Trade Agreement (ChAFTA). China is Australia’s largest trading partner, so this agreement was welcomed with open arms. However, recent statistics show that 52% of SMEs are unaware of how the FTA will affect them.

This month we lay out the facts of the ChAFTA, and highlight the trading opportunities created by the agreement.

Why Create an FTA?

Trade between China and Australia is worth more than $150 billion. China buys almost a third of all Australian exports, and over 85% of these exports will enter duty free, rising to 93% after four years and 95% when ChAFTA is fully implemented.

This agreement will remove many tariffs on agriculture exports and provide a competitive advantage to Australia over their main competitors, including the USA Canada and the EU.

Tariff Breakdown

Australia is already China’s main supplier for beef, but once the tariffs are decreased then eventually eliminated, beef exporters have the opportunity to capitalise on the growing demand for high quality beef among China’s middle class. The following reductions will be implemented across agricultural products:

  • Dairy: tariffs up to 20 per cent eliminated within 4 to 11 years.
  • Beef: tariffs of 12 to 25 per cent eliminated over 9 years.
  • Wine: tariffs of 14 to 20 per cent eliminated over 4 years.
  • Wool: a new Australia-only duty-free quota, in addition to continued access to China’s WTO quota.

ChAFTA will also eliminate many of the tariffs on resource and energy products, processed food and manufactured goods.

  • Iron ore, gold, crude petroleum oils and liquefied natural gas (LNG): ChAFTA locks-in existing zero tariffs on these major exports providing greater certainty for Australian exporters.
  • Coking coal: tariffs of 3 per cent eliminated on entry into force.
  • Thermal coal: tariffs of 6 per cent eliminated over 2 years.
  • Refined copper and alloys (unwrought), aluminium oxide (alumina), unwrought zinc, unwrought aluminium, unwrought nickel and titanium dioxide: tariffs of up to 10 per cent eliminated, many on entry into force.
  • Pharmaceuticals, including vitamins and health products: elimination of tariffs up to 10 per cent, either immediately on entry into force or within 4 years.
  • Car parts and engines, plastic products, opals and other precious stones: elimination of tariffs on these and some other manufactured products will take place within 4 years of entry into force.

What about Importers?

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.

Where does Tradeline come in?

Tradeline is a leading supporter of SMEs in regards to purchasing stock and equipment from overseas suppliers. Our team has a wealth of experience in international trade and can help you make the most of opportunities afforded by agreements like the ChAFTA. If you’d like to learn how you can enhance your buying power or find out more about factors influencing international transactions then don’t hesitate to contact us on 1300 872 331.

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