The China-Australia Free Trade Agreement (ChAFTA) entered into force on 20 December 2015, enhancing Australia’s economic relationship with its closest trading partner. Currently, Australian businesses enjoy a competitive advantage over other countries in China, as Australia is one of the few developed nations to secure a free trade agreement with our northern neighbour.
If you are an importer or exporter looking to use the ChAFTA to your advantage, this is the right article to read.
The ChAFTA is one of Australia’s many free trade agreements struck with countries around the world. Australia and China have for many years had a strong economic partnership, and this only improved with the signing of the 2015 Agreement.
China sees free trade agreements as a way to open up their market to external pressures and rapidly reform their domestic markets. They view agreements as an effective method of integrating into the international economy, strengthening their cooperation with other nations on both political and economic fronts. China currently has 24 agreements in the works, 16 of which have already come into effect.
The benefits of ChAFTA to importers are expansive. Some of them include:
There’s also a range of benefits enjoyed by exporters and other businesses seeking to expand in China, such as:
You can read more about the benefits in the discussion of the ChAFTA in our blog on Australia’s free trade agreements.
This Agreement is important for Australian businesses largely due to the sheer number of advantages it offers for companies seeking to do business, or already doing business, in China. A huge number of industries were granted significantly improved Chinese market access. These included banks, insurance companies, law firms, healthcare providers, telcos and education service providers. Furthermore, China has committed to removing barriers to Australians working in China.
Businesses will need to take advantage of this as China’s and Australia’s economies are now undeniably interlinked. It was estimated by PriceWaterCoopers chief economist Jeremy Thorpe in August 2019 that, if China’s GDP growth declined by 3-5 percentage points, Australia would lose over half a million jobs and around $140 billion in income. This may seem surprising, as Australia is only China’s 13th largest trading partner (coming after countries such as the United States, Japan, South Korea and Germany).
There are already a number of large Australian companies that operate in China in industries like mining, financial services, retail, media and healthcare. Mining giant BlueScope is currently the largest Australian employer in China with around 1,500 staff members in four cities. Woolworths has also operated in China for a number of years, launching its online stores and allowing for Chinese customers to directly order their goods. Even Australian surfing brand Billabong predominantly manufactures its goods in China.
E-commerce exports into China were one of the first markets to take advantage of ChAFTA.
In January 2016, only a month after ChAFTA came into effect, Woolworths announced that it had launched its online store Tmall Global in China.
It initially hired eCargo, an online commerce company, to construct its Woolworths brand on Tmall Global. At the time, eCargo’s chief executive commented that “the food and groceries segment will experience huge growth in the coming years between Australia and China as cross border trade restrictions ease and the China Australia free trade agreement takes effect”.
The company has enjoyed significant success since its inception, with 20% of all retail sales online in China (compared to just a mere 7% in Australia) as of August 2018.
In order to benefit from the ChAFTA, Australian companies need to satisfy a number of documentation requirements.
The most important of these is supplying a Certificate of Origin. These certificates declare the details of the country in which the goods you are importing were made. They must be issued by the country of origin’s authorised agent and will need to be given to a customs authority in the receiving country.
Note that, for exporters to China, Australia’s authorised bodies are:
For importers of goods into Australia, China’s authorised bodies are:
If you have been exporting to China after the Agreement was signed in 2015 but have not been benefiting from features such as reduced tariffs, you may be entitled to the benefit of a duty refund.
You can only claim a refund on the if:
Even if you meet the above criteria, you cannot claim a refund on the Scheme if:
Asialink Chairman The Hon Andrew Robb AO of the University of Melbourne said that ChAFTA was a reflection of China’s offering to Australia of “its best-ever market access commitments on services, other than China’s agreement with Hong Kong and Macau”.
It’s therefore no surprise that the Agreement offers Australian business a perhaps unprecedented level of opportunity for growth. Whilst the recent Coronavirus epidemic has unfortunately stifled free trade with China, this will pass. Australian businesses should consider the Agreement’s terms and get in touch with their customs broker to discuss what opportunities they can seize.
If you’d like to learn about the benefits ChAFTA has to offer your business, please feel free to get in touch with one of our China specialists at ICE today!
