Australia and China have signed an historic trade agreement
Australia and China have signed an historic trade agreement which will see the two countries more commercially aligned. The initial three-year deal, marked by the signing of a ‘declaration of intent’ by the two trade ministers yesterday, will eventually remove the barriers to Australia exporting dairy products and will open up China’s booming services sector for those Australian companies looking to enter the Chinese market. In return, Australia will immediately remove tariffs on most imported goods, with a phase-in for textiles, car components and steel.
The higher threshold for scrutiny of private investment has also been removed, however, Australia refused to change its practice of having the Foreign Investment Review Board scrutinise all investment by state-owned Chinese businesses. In return, Australia failed to secure tariff reductions on rice, wheat, cotton, sugar and oilseeds.
Chinese president Xi Jinping said the agreement “will provide a higher level platform ... for our economic cooperation”. While Tony Abbott said the agreement would “add billions to the economy and create jobs.” Opposition leader Bill Shorten also welcomed the deal, but he stated that he was keen to see the detail and was disappointed that the tariff on thermal coal was not being immediately removed. Under the agreement, the three per cent tariff on coking coal will be removed immediately, but the six per cent tariff will remain for two years.
While exact details of the deal signed by Trade Minister Andrew Robb and his counterpart, Gao Hucheng, have yet to be revealed or fully modelled, it has been hailed as a win by the president of the National Farmers Federation, Brent Finlay. Mr Finlay said the agreement was at least equal to the deal struck by New Zealand and China six years ago.
However, the Labor opposition could still throw a spanner in the works, with two contentious points remaining which may impede the passage of the legislation. These are the provisions for temporary entry of Chinese workers and those which allow investors to take dispute settlement proceedings against the government of the country in which they are investing.
While some of the tariffs are being removed immediately, the full agreement will not be signed until next year. It is estimated that at this time, the percentage of Australian exports entering China tariff-free will rise to 85 per cent, increasing to 93 per cent within four years and 95 per cent when fully operational within 10 years.
Read more at TheGuardian.com.au
Although the new trade agreement with China may only be a ‘declaration of intent’, we may soon be counting the real cost of any such deal.
I’m a great believer that you get nothing for nothing and while on paper the trade deal with China seems a boon to Australian industry, I can’t help but think the lack of actual economic modelling before signing may come back to bite. Sure, having increased exports of commodities, such as beef and wine, an emerging nation requires may help our struggling dairy farmers and wine producers, but an increase in Chinese investment in Australia doesn’t necessarily translate to an increase in jobs for Australians. Nor does the increase in less expensive imports from China help our already battered manufacturing sector. It will spell the end of the Australian steel industry.
Chinese-owned companies, which invest in overseas countries, are known to simply fly in the staff they need, pay them the commensurate salaries of what they would earn in China and offer little or no employment opportunities for ‘outsiders’. So anyone hoping for an employment boom on the back of Chinese companies investing in Australia may be seriously disappointed.
And given the outcry surrounding our property market being buoyed by Chinese investors, affording a home anytime soon isn’t going to get any easier for your average Australian. The Chinese accounted for 91 per cent of applications and 86 per cent of grantees for Significant Investor Visas last financial year. The visa allows foreigners investing at least $5 million, which can include property investment, to qualify for residency in Australia. With the removal of the higher threshold for investment which is subject to scrutiny by the Foreign Investment Review Board, this basically opens the door for Chinese investors to jump the visa queue.
So, by all means let us enter mutually beneficial trade agreements with other countries, but perhaps we should go into them with our eyes open and the proper economic modelling carried out.
Given the failure of previous Australian trade agreements, do you think that this arrangement is as good as we’re being led to believe? Or does increasing our trade with China leave us vulnerable, with too many eggs in one basket?
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