The China-Australia Free Trade Agreement (ChAFTA) was signed by Australian Trade and Investment Minister Andrew Robb and Chinese Commerce Minister Gao Hucheng on 17 June 2015.  The signing of ChAFTA is politically and economically significant for Australia given that China is Australia’s largest trading partner and accounted for almost one-third of Australian exports in 2013-14.

Goods exports

ChAFTA has secured the elimination or reduction of tariffs on a number of key Australian goods exports, including: Australian dairy, beef and wine; coking coal; thermal coal; refined copper and unwrought alloys; pharmaceuticals; and opals and other precious stones.  ChAFTA will also provide Australia with a new duty free quota for wool exports and lock-in existing zero tariffs on iron ore, crude petroleum oils and liquefied natural gas exports.   

Service providers

In addition to opportunities for Australian goods exporters, ChAFTA provides Australian service suppliers with increased access to a number of key markets in China, including the Chinese legal services, education, telecommunication, financial services, tourism and health care services markets.  ChAFTA also includes a “Most Favoured Nation” (MFN) provision which states that China shall provide certain Australian services and service suppliers with no less favourable treatment than it provides to like services and service suppliers of other countries, and vice versa.

Investment

ChAFTA also improves opportunities for investment between Australia and China.  This includes providing MFN treatment for certain investors and covered investments.  Under ChAFTA, Australia will also increase the monetary threshold for Foreign Investment Review Board (FIRB) notification in respect of private Chinese investment in non-sensitive sectors, from AU$252 million to AU$1,094 million, with lower monetary thresholds to apply to investments in Australian agricultural land, agribusiness and sensitive sectors.  FIRB will continue to screen investment by Chinese state-owned enterprises, regardless of transaction value. 

ChAFTA includes an Investor-State Dispute Settlement mechanism which enables Australian and Chinese investors to bring a claim before an international tribunal on the basis of a breach of investment obligations under ChAFTA, subject to some limitations.  This mechanism may be used by investors to protect investments against discriminatory treatment.

Next steps

It is unclear as to when ChAFTA will enter into force, although it is hoped this will occur before the end of 2015.  Both Australia and China will need to complete their domestic treaty-making processes and exchange diplomatic notes before this can happen.