Free trade agreement: Dairy farmers set to be big winners in deal between Australia and China

Updated

Tariffs on Australian resources, dairy products, beef and live animal exports to China will be scrapped under a free trade agreement (FTA) agreed by the two countries.

Signing a Declaration of Intent with his Chinese counterpart, Trade Minister Andrew Robb said the deal was the most significant China had ever signed with a developed country.

The Government said 14 commercial agreements were signed, covering projects potentially worth more than $20 billion in total.

However, Australia has failed to gain a deal for cotton, wheat, sugar, rice and oilseed farmers after the two sides could not agree on China's demand for greater access for its state-owned enterprises.

Among the big winners will be the mining sector, dairy farmers and wine exporters.

The FTA also eliminates all of China's tariffs on Australian resources and energy products.

The 3 per cent coking coal tariff is expected to be removed immediately and the 6 per cent tariff on thermal coal should be phased out within two years.

FTA: Who wins? Dairy Dairy tariffs phased out over 4-11 years

15 per cent tariff on infant milk formula phased out over four years Beef Tariffs of between 12 and 25 per cent phased out over nine years

Exports to China currently worth $722 million Sheep and goat meat 23 per cent tariff phased out over eight years

Exports to China currently worth $385 million Barley and sorghum Immediate removal of 3 per cent tariff on barley and a 2 per cent tariff on sorghum

Exports currently worth almost half a billion dollars Live bovine exports 5 per cent tariffs phased out over four years

Exports currently worth $136 million Skins, hides and leather Two-to-seven-year phasing out of up to 14 per cent in tariffs

Exports currently worth $896 million Horticulture All tariffs eliminated within four years Seafood A wide range of tariffs eliminated within four years

Includes abalone, rock lobsters, prawns, scallops and oysters Wine exports The 14 to 30 per cent tariffs will go within four years

Exports currently worth $217 million Sugar and rice No deal - but can be revisited in three years Mining Tariffs on minerals commodities such as alumina, zinc, nickel, copper and uranium eliminated

Immediate removal of 3 per cent coking coal tariff and 6 per cent tariff on thermal coal should be phased out within 2 years Foreign investment Threshold for screening by Foreign Investment Review Board (FIRB) quadrupled from $248 million to $1.087 billion

Agricultural land FIRB scrutiny threshold lowered to $15m for farm land, $53m for buying an Australian agribusiness

All investment proposals by government owned companies will be scrutinised by the FIRB Services sector New access to Australian businesses such as private hospitals and nursing homes

Tourism operators will be able to buy restaurants and hotels

Australian insurance providers will get access to third party insurance market

Seen as the best deal China has given any foreign country in an FTA

In the services sector banks, insurers, lawyers and universities will find it much easier to operate in China with Australian companies able to open hotels, restaurants and nursing homes.

The Australian dairy sector is expected to get an equal, if not better, deal than New Zealand, with tariffs to be phased out by 2025.

Prime Minister Tony Abbott said the agreement is a great deal for China and Australia.

"In particular it's a very good day for Australia," he said.

"And this agreement is the first that China has concluded with a substantial economy, with a major economy and it's the most comprehensive agreement that China has concluded with anyone."

Chinese president Xi Jinping also welcomed the long-awaited deal.

"As the Chinese saying goes it takes 10 years to sharpen a sword, so we are very glad to see that after nearly 10 years of negotiation our two sides have announced this substantive conclusion to the bilateral FTA negotiation," he said.

"This will provide a bigger market, more favourable conditions and better institutional support for our cooperation."

Parliamentary Secretary to the Prime Minister, Josh Frydenberg, said the deal would be worth up to $18 billion to the Australian economy over the next few years.

He said in return for scrapping tariffs, China wanted greater access to invest in Australia.

Under the deal, the threshold for screening by the Foreign Investment Review Board (FIRB) quadrupled from $248 million to $1.087 billion.

All investment proposals by Chinese government-owned companies will be scrutinised by the FIRB.

"Up to 95 per cent of our exports over time will enter the Chinese market tariff-free," Mr Frydenberg said.

"When you consider China is Australia's major trading partner, $150 billion worth of two-way trade, this is great news for the Australian cultural sector, the services sector.

"Services make up 70 per cent of Australia's economy, but only 17 per cent of Australia's exports."

Agriculture Minister Barnaby Joyce said a free trade deal with China would help Australia get its budget back in the black as the mining boom winds down.

"New Zealand has basically redeveloped their economy and is rebalancing their books on the back of basically one commodity - dairy," he said.

"If Australia can match that, then that's a great assistance to our nation and how we pay our bills and rebalance the books, especially in the current downturn in some of the rocks we sell - coal and iron ore."

Mr Joyce said farmers would not be the only ones to benefit from the deal.

"You don't have to be on the land to be a benefactor of soft commodity exports," Mr Joyce said.

"If you're walking Pitt Street or Collins Street, you need our farmers to make a buck so that we can rebalance our books and my role as part of this government is to do my very best to see that that happens, and the only way it happens is if farmers get more return through the farm gate for their produce."

Shadow treasurer Chris Bowen said Labor was reserving judgement for now.

"We want to see the substance, then we'll make an assessment," he said.

Government announces FTA talks with India

Trade minister Andrew Robb said the agreement with China is "part of the trifecta".

"We've got the Japanese one concluded in May and we've got the Korean one concluded before that," Mr Robb said.

"The three countries themselves, in north Asia, represent 52 per cent of our current exports. So we have got a big spread.

"We are now starting to talk to India about a free trade agreement over the next 12 months.

"That's another 1.2 billion people, and we've got a big effort going on in Indonesia, and the Gulf States.

"So there is a lot of other activity happening and I think you will find that, you know, we will be providing [for] as we do now, so many parts of the world for decades and decades to come."

China keen to expand investment in Australia

Mr Frydenberg said China wanted greater access to invest in Australia.

With a country of 1.3 billion people, he said China had a lot of money to invest in safe countries like Australia.

"The main message out of this G20 summit when it comes to trade is that you can simultaneously pursue bilateral free trade agreements, regional free trade agreements," he said.

"We saw that discussion at APEC [earlier this month] – but also the multilateral level, particularly the movement we are seeing through the WTO (World Trade Organisation) with the trade facilitation agreement, which was pushed at Bali which continues, if it can be settled, to deliver a really big dividend for the world.

"They reckon it is about $1 trillion worth of economic benefits and 20 million jobs that will flow from this WTO trade facilitation agreement, which cuts some of the barriers to trade behind the tariff walls.

"If that can be agreed to, that will be good news for Australia and the world," he said.

Mr Robb has described this FTA as "the dairy deal", but farmers have been cautious.

Australian dairy farmers hope a free trade agreement with China could help them deal with plummeting prices.

The dairy industry, which is worth about $13 billion to the economy, has been lobbying the Government about the importance of the agreement.

Topics: trade, foreign-affairs, world-politics, federal-government, australia

First posted