China FTA Moves One Step Closer

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China FTA Moves One Step Closer

After weeks of heated political noise, the China Australia Free Trade Agreement (ChAFTA) is a step closer to being implemented with the enabling legislation introduced into the Australian Parliament on Wednesday 16 September.

The introduction of the suite of legislation was unexpected, given the Joint Standing Committee on Treaties has not yet issued its report in relation to the ChAFTA.  The Committee is due to report in mid-October.

However, the Minister stated that in view of the Parliamentary sitting schedule, the benefits to Australian businesses of a double cut to tariffs on exports to China should the Agreement enter into force before the end of the year, and the importance to the Parliament and the community of seeing the changes that are required to be made under this Agreement, the Government decided to introduce the implementing legislation now.

There was significant focus throughout the Explanatory Memorandum (EM) on the benefits to Australian exporters.

The EM really makes the case for benefits to Australia’s exporters.  It notes the significant tariff barriers and limitations that Australian exporters face when seeking to take advantage of the growing Chinese market.

China‘s average applied tariff in 2013 was 9.9%.  However, for agricultural products, this increases to an average tariff of 15.6%.  In respect of pharmaceuticals, mining machinery and medical equipment it increases to tariffs of up to 47%.  The elimination of the most tariffs will give a real opportunity to Australian exporters.

We also have a clear statement about the preferred timing of the Government.  The EM states that “in close consultation with the Government of China, the Australian Government is working towards entry into force of the Agreement before the end of 2015 in order to maximise the business gains” for both countries.  Unless Labor and others in the Senate do move to block the ChAFTA, this gives the first definitive statement that we can expect ChAFTA to be in place by the end of this year.

The political issue of recent times has been the access of Chinese citizens to jobs in Australia.  The enabling legislation will provide guaranteed access to Chinese citizens for the following categories:

  • intra-corporate transferees and independent executives for up to four years (including executives, managers and specialists)
  • contractual service suppliers for up to four years; including guaranteed access for up to a combined total of 1,800 per year in four occupations: Chinese chefs, WuShu martial arts coaches, TCM practitioners and Mandarin language tutors (subject to meeting standard immigration requirements)
  • installers and servicers for up to three months and
  • business visitors for up to 90 days, or six months for business visitors who are service sellers.

Labour market testing will not apply to these categories only.  Otherwise, Australia’s migration laws as they apply to Chinese citizens remain unchanged, as do Australia’s workplace laws and health and safety obligations.

The pressure is now on the opposition and crossbench in the Senate to decide whether they will indeed block this legislation.

The feedback we receive from the business and trading community is overwhelmingly in favour of the ChAFTA.

This is the perfect time for business to take steps to prepare for the introduction of ChAFTA, assess the benefits and opportunities and put in place a strategy to take advantage from day one.   Don’t wait until an actual commencement date is announced as the trade community may only receive a week’s notice.