The big Beijing window of opportunity won’t last forever
Australia must take advantage of the trade agreement
Published in the Australian, 27th of May, 2019
Three years on, the China-Australia Free Trade Agreement (ChAFTA) has placed Australian businesses in a highly competitive position, providing unprecedented tariff reductions, preferential rates and access to China’s markets. However, Australian businesses should be mindful that the unique window of opportunity in China will not last forever.
China has recently upgraded its FTA’s with Chile and Singapore, and is in the process of doing so with New Zealand.
Meanwhile, China-US trade negotiations are under way, admittedly with some significant road bumps. However, the out- come has the potential to bring strong US competition right into our current trading strengths of energy and agriculture. It’s likely a matter of when, not if.
Although ChAFTA contains a most favoured nations clause, which ensures China must grant Australia any more preferential rates it grants other countries, this only ensures Australia will be on equal footing in its future trading.
It does not guarantee the comparative advantage on tariffs that has helped until now.
As it stands, ChAFTA allows 98.5 per cent of Australian goods to enter China duty-free or under preferential rates. China is also the top destination for Australian service exports, valued at $15.8 billion, and China provides Australia with the world’s most preferential access to its services markets, save for Hong Kong and Macau.
Speaking at the IHS International Energy Executive Forum in Beijing last December, Woodside Petroleum chief executive Peter Coleman said: “For our industry, the ChAFTA brings stability and certainty, ensuring that we … can get on with the task of providing reliable and clean energy when and where it is needed.”
The agreement also gives Australian healthcare and other service providers unprecedented access to China’s market, which we need in order to take advantage of China’s ageing population, fast-developing healthcare sector. Australia’s reputation in China for being a word-class provider of health and aged-care expertise should be a natural fit.
Some have already come in and taken advantage of the ChAFTA provisions. As explained by Jill Li of Bolton Clarke, a leading Australian senior care provider: “Because of ChAFTA and rising demand for aged-care services in China, now Australian aged- care providers and investors can operate nationwide in China without discrimination.” Professor Craig Anderson of The George Institute for Global Health is another, recommending Australian healthcare providers work in partnership with Chinese businesses to “provide integrated care and use Australia’s leading smart healthcare technology and performance metrics to improve China’s healthcare delivery.”
“Australia’s competitive ad- vantage in health care lies in our collaborative spirit, can-do attitude, and longstanding experience in providing efficient healthcare that balances both primary community care and hospital care,” he said. Prof Anderson is right, but if Australian business isn’t prepared to come in and fill the supply gap, other countries will.
We’ve got to remember that while China is our largest trading partner, and largest inbound investor, China runs a trade deficit with Australia and we invest comparatively little into China.
The neutral observer could argue the economic relationship is a bit one-sided, to Australia’s advantage! Well, President Trump certainly would.
Of course policy in China has been part of the problem, however, the new foreign investment laws are a step in the right direction. The case for higher levels of investment is stronger than ever.
Where to from here? Australian business needs to be taking advantage of ChAFTA, being mindful of increasing competition, seeking to invest long-term and being prepared to take advantage of developing sectors of the Chinese economy.
In the heady days of 2012-14, when ChAFTA was being finalised and implemented, the enthusiasm from Australian business was palpable.
It’s time to remember that the business case has not weakened and the rest of the world knows it.
Nick Coyle is the chief executive of the Australian Chamber of Commerce in China