On 17 November 2014, Australia and China concluded a historic free trade agreement (ChAFTA) that has been under negotiation since April 2005.1
Although the full text of ChAFTA is not likely to be released until late 2015, the Australian Trade Minister Andrew Robb has confirmed that the investment and services chapters of ChAFTA will include "most favoured nation" provisions (MFN).
Mr Robb has stated that the MFN provisions mean that Australia "will automatically receive the same treatment provided by China to any other country in the future including the EU and the United States".2
Consistent with Mr Robb’s comments, one of the biggest advantages for Australia as a result of the MFN provisions in ChAFTA is that Australia will benefit from trade negotiations currently underway between China and the United States. This means Australia will be entitled to the same treatment as that provided to the United States under any future bilateral trade agreement between China and the United States.
It is also likely that Australian investors will gain the benefit of the MFN provisions in respect of their treatment under the Investor State Dispute Resolution procedures (ISDS) which are contained in the investment chapter of the agreement.3 This will require China to treat all Australian investors at least as favourably as investors and investments from other States. This means that Australian investors will be entitled to the ‘best’ of the investment protections afforded by China to other foreign investors. This will allow Australians to invest with greater confidence in China. Similarly, the MFN provisions are likely to encourage further Chinese investment in Australia as a result of the safeguards provided under ChAFTA.