The two nations signed a free trade agreement in 2015 that reduced tariffs and improved access to dozens of goods. “The targeted nature of Chinese government action on Australian products is a source of concern for China`s compliance with the letter and spirit of its free trade agreement with ChAFTA and WTO commitments,” he told the Australian Senate. Australia has accused China of undermining its free trade agreement because of a series of measures taken by Beijing against Australian export products. More broadly, King said, “I think the spirit between the two nations is a little broken in relation to our overall relationship.” In his strongest comments to date, Trade Minister Simon Birmingham said China had “targeted” a dozen Australian products amid tensions between countries. The current tariffs on Australian beef imports into China is between 12 and 25 per cent, and our modelling is based on a total removal of duties within a decade. There is also a 10% tariff for live cattle. However, according to the Department of Foreign Affairs and Trade, many of Australia`s livestock imports to China are purely high and this type of import of live cattle currently does not attract any tariffs. Therefore, the removal of the tariff on beef (unlike live cattle) has the greatest direct impact on the Australian beef and beef industry. ChAFTA will strengthen export momentum and give Australia`s exports an advantage over major competitors from the United States, Canada and the EU.

In addition, Australia is likened to competitors from countries such as New Zealand and Chile, which have already negotiated trade agreements with China. After nearly a decade and 21 rounds of intense negotiations, Australian Prime Minister Tony Abbott and Chinese President Xi Jinping this week launched a sweeping free trade agreement. ChAFTA exports 85% of Australia`s exports to China duty-free after entry into force, with an increase of 93% in four years and 95% if fully implemented. Although many details are not yet complete (official documents will be signed in 2015), the government estimates that the agreement will generate $18 billion in economic benefits (1.1% of GDP) over a decade. But a free trade agreement with China will also boost Australia`s export competitiveness and promote export diversification. As expected, ChAFTA benefited from better access, particularly to emerging markets in China`s agriculture and services. This should help Australia rebalance growth towards non-resources – a major economic cushion after the end of the mining boom. Others, who have succeeded in securing free trade agreements with China, have benefited from a sharp increase in trade flows. For example, China`s imports from New Zealand have increased by more than 450% since the China-New Zealand Free Trade Agreement came into force in October 2008. China`s total imports increased by only 50% over the same period (Chart 6). Between 2007 and 2050, China is expected to account for nearly half of a 75% increase in global food demand. While the shortage of resources will limit Australia`s ability to become an “Asia food bowl,” there could be a competitive position for Australia as an “Asia delicatessen.” Already, Australian companies are gaining niche sales in high-end markets by chartering the clean, green image of the “Made in Australia” label.

Australia`s agricultural exports to China have almost tripled over the past five years to a record $8.7 billion (Chart 4).