Australia has recently finalised free trade agreements with its three largest trading partners in Asia – Korea, Japan and China. These agreements account for over 50% of Australia’s total export market and provide significant opportunities for two-way trade.
The key benefits of each North Asia Free Trade Agreement and current status of implementation are summarised below.
Korea - Australia Free Trade Agreement
Signed: April 2014
Enforced: 12 December 2014
The KAFTA has significantly improved market access for Australia’s agricultural sector. As a result of the agreement, tariffs have been and will continue to be reduced. 99.8% of Australian goods will enter Korea duty free following full implementation of the agreement.
Importantly, the KAFTA will improve market access for Australian service providers. They will now enjoy the same level of access into Korea as the US and the EU.
Japan - Australia Economic Partnership Agreement
Finalised: July 2014
Enforced: 15 January 2015
Under the JAEPA, more than 97% of Australian exports to Japan will be duty-free or receive preferential access. JAEPA provides Australian services exporters with treatment as favourable as Japan has agreed with any other trading partner.
This agreement therefore provides Australia with a significant advantage over its competitors.
China - Australia Free Trade Agreement
Signed: 17 June 2015
Implementing legislation approved: 9 November 2015 Once domestic process completed in China (anticipated to be December 2015)
China is Australia’s largest export destination and largest source of imports. ChAFTA will implement tariff cuts by both countries across a wide range of industries. According to recent calculations, on day one of the ChAFTA, more than 85% of Australian goods exports will be tariff free. This will rise to 95% on full implementation.
The benefits the energy sector will gain from ChAFTA include:
- The removal of Chinese tariffs on all resources and energy products (including coking coal)
- The removal of Chinese tariffs on transformed resources and energy products (such as refined copper, alloys and other metals)
- Locking-in of zero tariffs on major Australian exports such as iron ore, gold, crude petroleum oils and liquefied natural gas
ChAFTA will ensure that Australia’s agricultural industry receives the same market access as Chile and New Zealand. The improved access will mean that Australian exporters retain an advantage over the US, Canada and the EU.
The Australian services sector, which currently accounts for about 72% of Australia’s economic activity and AUD 7 billion in exports, will also benefit from significantly improved market access into China.
Finally, under ChAFTA, a “future work program” will be established to provide a platform for ongoing liberalisation between China and Australia, particularly in the services and investment context.
There is no doubt that these free trade agreements are game changers for Australian businesses operating in North Asia. With the recent completion of the Trans-Pacific Partnership and discussions also underway with India and Indonesia, Australia’s economic integration with the Asia-Pacific region will continue to go from strength-to-strength.
What are the benefits?
Korea - Australia free trade agreement
- KAFTA will eliminate Korean tariffs on beef products incrementally over 15 years
- Korean tariffs on raw sugar, wheat and wine were eliminated on entry into force
- All tariffs on Australian manufacturing, resources and energy exports will be eliminated within 10 years
- Access to the education, telecommunication and financial services sectors will be increased
Japan - Australia economic partnership agreement
- Will halve the 38.5% Japanese tariff on Australian beef over 15 years
- Tariffs will be eliminated on all of Australia’s current minerals, energy and manufacturing exports
- Australian financial services providers will be able to supply services on a “cross-border” basis, without the need to open a full commercial presence
- Provides a framework to move towards enhanced mutual recognition of professional services
China - Australia free trade agreement
- Australia will gain access to China’s third party liability motor vehicle insurance market
- Australian services providers can open wholly foreign-owned hospitals in several Chinese provinces and aged care facilities throughout China
- Australian hotel operators will be permitted to construct, renovate and operate hotel and restaurant establishments through wholly foreign-owned subsidiaries
- ChAFTA will reduce tariffs on key Australian exports such as coal, refined copper and alloys
- For Chinese manufacturers, ChAFTA provides for the complete reduction of Australian tariffs over 5 years in respect of steel, aluminium, plastics, clothing, footwear and processed food imports