Australian Trade Agreements With China

Australian Trade Agreements With China

The China-Australia Free Trade Agreement (ChAFTA) will include existing trade and will be the catalyst for future growth in a number of sectors such as goods, services and investment. Separately, Australia and China also signed a Memorandum of Understanding this week for the implementation of formal renminbi compensation agreements (RMB) in Australia. This will make it easier for Australian exporters to conduct cross-border RMB transactions – with the potential to reduce the cost of these transactions by 2 to 3% by reducing the need to hedge against foreign exchange risks. These measures are another asset to Australia`s export competitiveness. For example, Australian beef exports to China are currently taxed at almost 19%, while comparable exports from New Zealand arrive almost duty-free in the Chinese market. In the coming years, ChAFTA will counteract this advantage and offer Australia the same terms as any other country that signs a free trade agreement with China in the future. Even though growth is down from a double-digit rate to about 7.5%, the IMF expects China`s economy to overtake the United States this year and become the world`s largest purchasing power parity. ChAFTA offers significant benefits to Australia`s energy resources and exports. With the entry into force, 93% of Australia`s resources, current energy and industrial exports will enter China duty-free and 99.9% if fully implemented. It is important that the recently introduced 3% coking rate be immediately abolished and that the 6% tariff for thermal coal be abolished within two years. Deloitte has extensive experience in assisting businesses of all sizes to address governance and compliance issues raised by IFRS to achieve best practices. Australia and China signed the China Australia Free Trade Agreement (ChAFTA) on June 17, 2015, which came into force on December 20, 2015. Trade negotiations have secured many future benefits to Australia with Australia`s largest trading partner, China.

The largest beneficiaries are those working in agriculture, manufacturing, services, investment, resources and energy. China also accepted a special clause recognizing Australia as the “most favoured nation” (MFN). This allows Australian companies to access the same agreements that China has in the area of free trade agreements with other nations (such as the United States) that could provide better access to the Chinese market.