China is Australia’s largest export destination for both goods and services and is fast becoming a significant source of foreign direct investment. The completed negotiations for a China-Australia Free Trade Agreement (ChAFTA) signals the start of an even more prosperous economic relationship between Australia and China. Briefing on how the China Australia Free Trade Agreement (ChAFTA) will unlock significant two-way trade and investment between Australia and China. Discusses how the ChAFTA can unlock bilateral trade opportunities in agriculture, resources, energy, manufacturing, financial services, human capital and other sectors of the Queensland economy. Thoughts on how the ChAFTA may be harnessed for building growth and prosperity.

1. Briefing
Brisbane, 10 December 2014

3. Today – we will cover
• FTA Overview
• Agriculture and processed food
• Resources & Energy
• Manufacturing
• Investment & FIRB
• Services
• People movement issues
• Implementation Timeline

4. FTA Overview
• Free trade agreements are used by businesses, large and small, by exporters,
importers and investors.
• FTAs offer preferential treatment in partner countries for Australian goods, in the
form of tariff elimination or reduction.
• This increases the competitiveness of products in those markets, especially
compared to competitors from countries that do not receive preferential
treatment under an FTA.
• Accessing goods benefits requires compliance with the rules of origin under the
agreement. Step-by-step guides are available for each agreement on entry into
force.
• FTAs may also address customs and trade facilitation matters, to provide
expeditious, predictable, transparent and simplified customs administration for
importers and exporters.

5. Conclusion of
China-Australia FTA negotiations
• On 17 November China & Australia signed a Declaration of
Intent formalising the conclusion of the China-Australia
Free Trade Agreement (ChAFTA)negotiations.
• Both sides have undertaken to prepare legal texts of the
Agreement for signature.
• It is hoped that the Agreement will unlock significant
commercial opportunities for Australia.
• China is Australia's largest export market for both goods
and services, accounting for nearly a third of total exports,
and a growing source of foreign investment.

6. Agriculture and processed food
• China buys more of Australia’s agricultural produce than any other market.
• In 2013, this market was worth around $9 billion to Australian farmers and
the broader agricultural sector.
• The Australian Bureau of Resource Economics and Sciences predicts China
will account for 43 per cent of all growth world-wide in agricultural
demand to 2050.
• ChAFTA provides Australia with an advantage over our major agricultural
competitors, including the United States, Canada and the European Union.
• It also counters the advantage Chile and New Zealand currently enjoy
through their FTAs with China reached in 2006 and 2008.

7. Agriculture and processed food
• The removal of all tariffs on our dairy products (which can be as high as 20
per cent) within four to 11 years.
• The removal of tariffs of 12 to 25 percent on beef over nine years.
• The removal of tariffs on live animal exports of 10 per cent within four
years.
• The removal of tariffs on sheepmeat of 12 to 23 per cent over eight years.
• The removal of tariffs of 14 to 20 per cent on wine over four years.
• The removal of tariffs on all horticulture products, ranging up to 30 per
cent, most within four years.

8. Agriculture and processed food
• The immediate elimination of the three per cent tariff on barley.
• An Australia-only duty free quota for wool in addition to continued
access to China’s WTO wool quota.
• The removal of tariffs on seafood, including of 15 and 14 per cent
respectively on rock lobster and abalone, over four years.
• The removal of tariffs across a range of processed foods including
fruit juice and honey.
• The removal of tariffs of 5 to 14 per cent on hides, skins and
leather over two to seven years.

9. Agriculture and processed food
• There are no changes to Australia’s risk-based quarantine measures as a
result of ChAFTA.
• As part of China joining the World Trade Organization (WTO) in 2001,
Australian exporters have unrestricted access to allowances in rice, wheat,
cotton and sugar.
• China has not provided further liberalisation of these products in any of its
FTAs, on the basis they are significantly sensitive staples.
• It has also not granted Australia, or any of our competitors, additional
access for rapeseed and vegetable oils, on the same basis.
• However, China has agreed to a built-in review process three years after
entry into force to review the Agreement, including market access.

10. Resources, Energy and Manufacturing
• In 2013, Australia exported over $85 billion worth of
resources, energy and manufactured products to China.
• On entry into force of the Agreement, 92.9 per cent of
China’s current imports of these products from Australia
will enter duty free, with most remaining tariffs removed
within four years.
• On full implementation of the Agreement, 99.9 per cent of
Australia’s current resources, energy and manufacturing
exports will enjoy duty free entry into China.

11. Resources & Energy
• The removal of tariffs on all resources and energy products:
including on coking coal (metallurgical coal for steel making)
(currently subject to a 3 per cent tariff) on the first day of the
Agreement, and non-coking coal (thermal/steam coal for power
generation) (6 per cent) within two years.
• The removal of tariffs on transformed resources and energy
products, such as refined copper and alloys (unwrought) (currently
subject to 1 and 2 per cent tariffs), aluminium oxide (alumina) (8
per cent), nickel mattes and oxides (3 per cent), unwrought zinc (3
per cent), copper waste and scrap (1.5 per cent), unwrought
aluminium (5 and 7 per cent tariffs), aluminium waste and scrap
(1.5 per cent), unwrought nickel (3 per cent), other mineral
substances (3 and 5 per cent tariffs), and titanium dioxide (6.5 and
10 per cent tariffs) - many upon the Agreement entering into force.

12. Resources & Energy
• Locking-in zero tariffs on major exports such as iron ore,
gold, crude petroleum oils, and liquefied natural gas (LNG).
• ChAFTA improves the transparency of non-tariff measures
(NTMs) and ensures such measures do not create
unnecessary obstacles to bilateral trade.
• A specific mechanism to review and address NTMs on a
case-by-case basis will be established.
• ChAFTA preserves full access for Australian producers to
trade remedies available under the WTO, including anti-dumping
and countervailing measures.

13. Manufacturing
• The removal of tariffs of up to 10 per cent on
pharmaceuticals, including vitamins and health products,
either on entry into force or phased out over four years.
• The removal of tariffs within four years for other
manufactured products, including car engines (currently
subject to a 10 per cent tariff), plastic products (6.5 to 14
per cent), diamonds and other precious stones (3 and 8 per
cent tariffs), orthopaedic appliances (4 per cent),
aluminium plates and sheets (6 and 10 per cent), make-up
and hair products (6.5 to 15 per cent), centrifuges (10 per
cent) and pearls (21 per cent).

14. Investment
• Chinese investment in Australia has been growing strongly in recent years
up from $3 billion, 10 years ago, to around $32 billion today.
• Total Chinese investment in Australia is now nearly as much as the total
Chinese investment in the United States.
• ChAFTA improves opportunities for investors in both countries.
• The investment obligations in ChAFTA can be enforced directly by
Australian and Chinese investors through an Investor-State Dispute
Settlement (ISDS) mechanism, helping to promote investor confidence.
• The ISDS mechanism includes safeguards to protect governments’ ability
to regulate in the public interest and pursue legitimate public welfare
objectives such as public health, safety and the environment.

15. Investment - FIRB
• ChAFTA will promote further growth of Chinese investment into Australia, in
particular by raising the screening threshold at which investments in non-sensitive
sectors by private sector entities from China are considered by the Foreign
Investment Review Board (FIRB) from $248 million to $1,078 million.
• The Government has retained the ability to screen Chinese investments at lower
thresholds for sensitive sectors, including: media, telecommunications and
defence-related industries.
• The Government will be able to screen investment proposals by private investors
from China in agricultural land valued from $15 million and agribusiness from $53
million.
• FIRB will continue to screen all investment by Chinese State-Owned Enterprises,
regardless of the transaction size. ChAFTA does not change these arrangements in
any way.

16. Services
• China is Australia’s largest services market, with exports in services valued
at $7 billion in 2013.
• This includes new or significantly improved market access for:
– Legal services
– Financial services
– Education services
– Telecommunications services
– Tourism and travel-related services
– Health and aged care services
– Construction and engineering services
– Manufacturing services
– Mining and extractive industry services
– Architecture and urban planning services
– Transport services

17. People movement issues
• The ChAFTA commitments on the movement
of natural persons are aimed at supporting
increased trade and investment, reducing
barriers to labour mobility and improving
temporary entry access. ChAFTA will provide
improved access for a range of Chinese skilled
service providers, investors and business
visitors.

18. People movement issues - Changes
• Under the ChAFTA Australia will provide guaranteed access to Chinese citizens
under 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; this will include guaranteed access for up to
a combined total of 1,800 per year in four occupations: Chinese chefs, WuShu martial arts
coaches, Traditional Chinese Medicine practitioners and Mandarin language tutors
– 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.
• There is a commitment from both China and Australia to increase transparency
with the procedures and requirements of the immigration process and to process
applications expeditiously.
• To better facilitate the entry of temporary workers associated with trade and
investment, there will also be increased co-operation in the areas of skills
recognition and licensing.

19. People movement issues –
Work and Holiday Arrangement
• Australia and China have also completed
negotiations on a Work and Holiday Arrangement
(WHA) under which Australia will grant visas for up
to 5,000 Chinese work and holiday makers annually.
• The WHA will increase demand for tourism services
and support the development of Australia’s tourism
sector, particularly in rural Australia.

20. People movement issues –
Investment Facilitation Arrangements
• Through a Memorandum of Understanding allowing for Investment Facilitation
Arrangements (“IFA”) Chinese owned companies registered in Australia
undertaking large infrastructure development projects above $150 million will be
able to negotiate certain workforce requirements for specific projects. The
negotiation of these agreements will mirror the arrangements for Australian
business, being done on a case-by-case basis under arrangements similar to the
former Enterprise Migration Agreements.
• IFAs will provide flexibility for companies to respond to the specific economic and
labour market challenges related to large infrastructure development projects.
They reflect the Government’s focus on strengthening infrastructure development
and attracting investment, leading to the creation of jobs and increased economic
prosperity for Australian nationals.
• IFAs will operate within the framework of Australia’s existing Temporary Work
(Skilled) visa (subclass 457) system. The nationalities of eligible overseas workers
under IFAs will be non-discriminatory and an IFA will not allow Australian
employment laws or wages and conditions to be undermined.

21. Other outcomes
• ChAFTA includes additional commitments which:
– Provide a framework for the growth of electronic
commerce between Australia and China.
– Reaffirm existing international intellectual property
obligations and provide a framework for future
cooperation.
– Promote cooperation and coordination between relevant
agencies on competition policy.
– Provide for future negotiations on access to China’s
government procurement market.
– Facilitate trade through streamlined customs processes.

22. Implementation Timeline
• The next steps, in accordance with normal Australian treaty-making processes, are:
– Signature of the Agreement, which will take place once both sides have completed the legal review and
translation of the text of the Agreement.
– The text of the Agreement, accompanied by a National Interest Analysis, will then be tabled in the Australian
Parliament for 20 joint sitting days.
– Following tabling, the Joint Standing Committee on Treaties (JSCOT) will conduct an inquiry into the
Agreement and will report back to Parliament.
– Legislation will be introduced to make any necessary amendments to existing legislation, and will be
considered by the Parliament.
– Relevant Regulations would also be amended in due course.
• During this time, the Chinese Government will undertake its own domestic treaty-making
processes.
• When Australia and China have completed their domestic processes, both countries will exchange
diplomatic notes to certify that they are ready for the Agreement to enter into force.
• 30 days after this exchange or on a date otherwise agreed, ChAFTA will enter into force.

23. Appendices
– Legal services
– Financial services
– Education services
– Telecommunications services
– Tourism and travel-related services
– Health and aged care services
– Construction and engineering services
– Manufacturing services
– Mining and extractive industry services
– Architecture and urban planning services
– Transport services

24. Legal services
• Australian law firms will be able to establish
commercial associations with Chinese law
firms in the Shanghai Free Trade Zone (SFTZ).
• This will allow them to offer Australian,
Chinese and international legal services
through a commercial presence, without
restrictions on the location of clients.

25. Financial services
• China has committed to deliver new or improved market access to
Australian financial services providers in the banking, insurance, funds
management, securities, securitization and futures sectors.
• A future work program will deliver on-going market access in the financial
services sector as China pushes ahead with economic reform and
liberalisation.
• Alongside these new financial services commitments, the respective
central banks of China and Australia have also signed a Memorandum of
Understanding facilitating the establishment of an official renminbi (RMB)
clearing bank in Sydney. The clearing bank provides a more direct means
of facilitating cross-border RMB transactions between Australian and
Chinese entities than was previously available, and will improve the
efficiency of cross-border RMB transactions.

26. Education services
• Within one year of commencement, China will list on an official Ministry
of Education website all Australian private higher education institutions
registered on the Commonwealth Register of Institutions and Courses for
Overseas Students (CRICOS).
– This will add 77 institutions to the existing 105 Australian institutions on the
website providing an important and trusted source of information to potential
Chinese students who today make up 29 per cent of our international student
market, injecting $4 billion to the Australian economy.
• In addition, Australia and China will continue to discuss options to:
– Facilitate student and teacher exchanges between both countries.
– Increase marketing and recruitment opportunities for Australian education
providers in China.

27. Telecommunications services
• China has agreed to guarantee new access for
Australian companies investing in value-added
telecommunications services in the SFTZ with
improved foreign equity limits, now allowing
for wholly Australian-owned companies
supplying domestic multi-party
communication (DMPC) services, application
store services, store and forward services, and
call-centre services.

28. Tourism and travel-related services
• China has guaranteed that Australian service
suppliers will be able to construct, renovate
and operate wholly Australian-owned hotels
and restaurants in China.
• Australian travel agencies/tour operators are
also able to establish wholly Australian-owned
subsidiaries in China for tours within China for
both domestic and foreign travellers.

29. Health and aged care services
• China will permit wholly Australian-owned
hospitals and aged care institutions to be
established in China.

30. Construction and engineering services
• China will provide new market access to
Australian companies undertaking joint
construction projects with Chinese
counterparts in Shanghai.
• Australian companies will be exempted from
business scope restrictions, allowing them to
undertake a wider range of commercially-meaningful
projects.

31. Manufacturing services
• China guarantees access for wholly Australian-owned
companies to provide contract
manufacturing services covering a wide range
of manufactured products.

32. Mining and extractive
industry services
• China will allow Australian service suppliers to
provide technical consulting and field services in coal
bed methane and shale gas extraction.
• China has also guaranteed access for consulting
services related to exploiting oil and gas resources, as
well as iron, copper and manganese resources in
cooperation with Chinese partners.

33. Architecture and urban
planning services
• China will allow Australian architectural and
urban planning firms to obtain more
expansive business licences to undertake
higher-value projects in China.

34. Transport services
• China will permit Australian maritime
transport service suppliers to establish wholly
Australian-owned ship management
enterprises in the SFTZ.
• China has also committed on air transport
services, including the coverage of ground
handling, airport operation and specialty air
services.

35. Other services sectors
• Australian providers will benefit from new
Chinese commitments allowing them to offer a
range of services, including through subsidiaries
based in China that can be wholly Australian-owned,
in the following sectors: software
implementation, research and development,
services incidental to manufacturing, building
cleaning, printing of packaging materials,
translation and interpretation services, real
estate, and environmental services.