Ministerial Statement - China-Australia Free Trade Agreement

Speech

Speaker: The Hon Andrew Robb AO MP, Minister for Trade and Investment

17 June 2015

Mr ROBB (Goldstein—Minister for Trade and Investment) (15:09): by leave—It gives me great pleasure to table the China-Australia Free Trade Agreement, known as ChAFTA, and the accompanying national interest analysis for parliament's consideration here this afternoon.

Earlier today, Chinese Commerce Minister Gao and I had the privilege of signing the agreement and I join with you, Madam Speaker, in formally welcoming Dr Gao to the House.

Honourable members: Hear, hear!

Mr ROBB: I would like to warmly acknowledge the professionalism, common sense and decency that Minister Gao brought to the negotiating table; it was fundamental to building the sense of trust necessary to get such an outstanding outcome.

ChAFTA is indeed a landmark agreement. It is also a high-quality agreement, one that will deliver lasting mutual benefits for our economies, and our societies in the years and decades ahead. China is already Australia's largest trading partner, with two-way trade worth around $160 billion, an amount far exceeding our next highest trading partner. We have an important economic relationship with resources and energy trade as its ballast and vibrant trade in services, agriculture and manufacturing.

This economy-wide agreement not only locks in and provides for a very strong future trade in goods; it also provides a springboard for wide-ranging, two-way trade and investment in services, manufacturing, logistics and environmental management. The agreement will take our already strong relationship to another level, and provide a road map which helps both our economies contribute as best we can to the economic phenomena and the social miracle in terms of the billions being released from poverty that we are all seeing across the Asia-Pacific region.

Let me focus on services. Mostly with these free trade agreements, the focus is on goods; I want to shift to services for a moment. Australia's services are world-class, and are recognised as such in the Asia-Pacific region and within China. Services such as financial; legal; engineering; health and aged care; secondary, tertiary and vocational education; project management; construction; design; architecture; tourism and hospitality; IT; pharmaceuticals; medical research; water management; agricultural production and processing; resources and energy; film and theatre; and so many others, if you get my point. The thing is, we have literally hundreds of services that are needed by China and by much of the rest of the region.

There are so many people who will need jobs, coming out of agricultural areas and moving into the cities not only in China but in many parts of the region. They will need jobs and the jobs are in services. Nine out of 10 of Australia's jobs are services jobs. That is where the Chinese economy is moving and that is what this free trade agreement, amongst lots of good things for goods, can deliver: many wonderful things in terms of the services that we can provide.

The full range of our services make up around 70 per cent of Australia's economy; yet directly contribute only 17 per cent to our exports. This landmark free trade agreement with China opens a huge door for so many of our service providers. To enable this, trade and investment concessions not yet available to many other countries, if any, are open and accessible to the millions of small, medium and large businesses in Australia, opening a market of 1.36 billion people—a huge number, a huge market opportunity.

With the digital economy, with the connectivity that exists now, even compared with 15 or 20 years ago, there is an opportunity now for not just our large businesses to take advantage of these concessions but for our small and medium businesses to be in there and establish themselves, even with a very small presence, to make an investment themselves in China and to develop a market not within 23 million people but within 1.36 billion people—a wonderful opportunity.

For our part Australia is an important trade partner for China. What surprises many people is that we are China's sixth largest source of imports and 14th largest export market. So a country of 23 million people is the sixth largest source of imports and the 14th largest export market for China.

ChAFTA provides better access to our respective markets. For example, ChAFTA will remove significant barriers to Australian agricultural exports to China across a wide range of products including beef, dairy, lamb, wine, hides and skins, horticulture, barley and seafood, and much more.

Under ChAFTA, China will remove tariffs on 99.9 per cent of Australia's resources, energy and manufacturing exports, worth more than $80 billion, or 30 per cent of Australia's total merchandise exports in 2014.

ChAFTA will restore Australia's exporters' competitive position against producers from countries that already have free trade agreements with China—in other words, this deal is as good as any other deal that China has done with anyone and better than most deals done with any other country—as well as advance Australia's commercial interest in a range of new and existing sectors. In turn, the free trade agreement gives the growing numbers of Chinese middle-class consumers better access to Australia's safe, high-quality agricultural produce.

And you can see it happening. Two years ago, we sold 60,000 tonnes of meat to China. Last year, we sold 260,000 tonnes of meat to China. China went from our 12th biggest market to our third biggest market in one year. This is happening now. This phenomenon is taking place now. It is not for decades in the future. We have got to grasp it while we can, as a country, and ChAFTA really, in many respects, is going to give us the first-mover advantage in many of these areas, especially in services.

ChAFTA will restore Australian exporters' competitive position, as I said. ChAFTA also means reduced import costs for Australian businesses and consumers alike. Australia will remove its remaining tariffs on Chinese goods within four years, and most of it will be removed on entry into force. This means Australian consumers and industries that rely on imported Chinese products are set to benefit.

The fact is that, 25 years ago, 20 per cent of all goods and services exported from anywhere around the world ended up as an input into another good or service—20 per cent. Today, just 25 years later, 73 per cent of all goods and services exported from anywhere in the world end up as an intermediate good, so 73 per cent of what we buy from China, on average, will be an input into one of our goods and services. It is very important because it means that we no longer look at exports in one way and imports in another, because the reduction of protection is important at both ends. So, again, this free trade agreement, removing a lot of our own protection against certain products, is giving much cheaper inputs for many, many producers of those products.

For Australia, ChAFTA is the third major trade agreement concluded by this government since coming to office. Independent modelling that has been conducted provides an indication of the significant, combined economic benefits that this powerful trifecta of agreements will deliver for Australia in the years ahead.

For example, between 2016 and 2035, our GDP is projected to be $24 billion larger in today's dollars. There are also those things that cannot be modelled such as substantial increases in investments that will inevitably flow from deeper trade relations and increased investor confidence. That has not been factored into this agreement. We have assumed no increase in investments, yet we look at what happened with the US free trade agreement. Within 10 years, two-way investment went from $653 billion to $1.3 trillion, and that is the effect of opening up investment opportunities.

The linkages that flow from the 140,000 Chinese students studying in Australia today, or the 800,000 Chinese tourists visiting Australia each year, builds mutual understanding and trust. Of course we also have one million Australian citizens who speak Mandarin in the home. In other words, we have 20 per cent of our population who are also enormously powerful linkages into China and a hugely powerful form of introduction to Chinese customs and character that is beneficial to our country. All of these linkages build mutual understanding and they build trust, which are key elements of future peace and prosperity. As trust and relationships grow, with agreements such as ChAFTA, intangible benefits emerge.

For example, in January this year—following the conclusion of ChAFTA—a landmark air services deal was struck between Australia and China that will see a tripling of aviation capacity between our two countries, from 22½ thousand seats per week to 67,000 seats per week by the end of 2016. We—both sides of politics—had been trying for four years to get to the table and have a negotiation. In a matter of three weeks after we had finished this deal, the doors opened; we were there; and the deal was done in about a quarter of the time that was expected.

For our part, today—again as a similar opportunity that emerges outside, really, the construct of the free trade agreement—I can announce, on behalf of my friend and colleague the Minister for Immigration, Peter Dutton, that the number of years applying to multiple entry tourist visas for Chinese citizens visiting Australia will increase from three years to 10 years. We will increase the multiple entry tourist visa for Chinese visitors visiting Australia from three years to 10 years.

This will provide an enormous boost, I think, to our tourism but it will also provide a very significant boost to their comfort in coming to Australia. It is also a sign of how we measure China and the trust that is growing between our countries in a very significant way.

Over the next two years, the Australian government is rolling out the North Asia free trade agreement information seminar series to all Australian capital cities and rural and regional centres, to help explain and encourage takeup of the opportunities the free trade agreements open for Australian businesses.

In tabling ChAFTA, I acknowledge the contribution made by my predecessors on both sides of the House. Negotiations commenced in 2005 during the Howard government, when Mark Vaile was the Minister for Trade. Mark was followed by Warren Truss, Simon Crean, Craig Emerson and Richard Marles; all share in the watershed outcomes of this agreement.

Pleasingly, this demonstrates bipartisan support across successive Australian governments for our relationship with China.

I would also like to acknowledge all of those officials and negotiators from my department who have dedicated so much time, effort and professionalism over a long period to help secure this outcome. After 10 years it is rather a large alumnus.

This includes Jan Adams and her excellent team. It includes our ambassador, Frances Adamson, and her predecessors. I would also like to thank my own staff for their efforts and support.

As with all proposed treaties, the Australian Parliament's Joint Standing Committee on Treaties will now review the text of the agreement and, in due course, provide its report. The Senate Foreign Affairs, Defence and Trade References Committee will conduct a separate review.

Tabling today follows the legal scrub and translation of the text, and I encourage business to prepare for its future entry into force, which I hope will occur later this year after passage of implementing legislation.

I commend this agreement to the parliament and hereby table the China-Australia Free Trade Agreement with its national interest analysis.




Last Updated: 29 July 2015