How will the China Australia Free Trade Agreement affect manufacturing?

| December 2, 2014

Australia’s relationship with China has been cemented with the signing of a Free Trade Agreement between the two nations. Peter Roberts, convenor of the Australian Manufacturing Forum outlines what it means for business.

There are some clear winners and some areas of concern apparent from the China Australia Free Trade Agreement (ChAFTA) signed between the two countries in November.

The big positives begin with the very strong indications from China that it values a further deepening of our trading relationship which has already been responsible for super-charging the Australian economy.

There will be greater flows of investment possible between the two countries and there are many measures which will simply make doing business with and in China easier.

Restrictions to trade and tariffs covering some important sectors ranging from dairy products, wine, processed foods and pharmaceuticals, to processed metals, plastics, medical devices, cosmetics are lifted.

There is also a new mechanism for resolving non tariff barriers to trade which have caused so many issues with the implementation of previous FTAs. Of course the detail and effectiveness of this mechanism is yet to be seen.

The question of anti-dumping also remains a concern with ChAFTA only preserving ” full access for Australian producers to trade remedies available under the WTO, including anti-dumping and countervailing measures.”

The agreement also appears to leave unresolved the position of Australian Intellectual Property which is regularly abused by Chinese firms.

However, China’s own transition to IP producer suggests a natural evolution towards more rigorous protection of IP as that becomes one of China’s own strengths.

Australia will certainly face further imports from China of cheap manufactured goods but his continues to trend of recent years and underlines the urgency of local firms to transition to higher value, more innovative products and services. And cheaper inputs can also be seen as a benefit.

The big inroads likely to be made by Australian services providers into the Chinese market is good news for manufacturers as they will often be able to incorporate Australian manufactured products in their offerings.

Architects, for example can partner with local suppliers ranging from BlueScope in coated steels to Clipsal in building automation to offer broader solutions to Chinese needs. Healthcare providers can similarly partner with the Australian bio-medical industry to tackle the China market. And relaxation of restrictions on services in resources processing will clear the way for Australian mining equipment and technology suppliers.

So wins for services will also be translated into wins for innovative technology and product suppliers through this land mark agreement.

One area of both opportunity and concern is the easing of restrictions on the use of Chinese labour.

While imported labour has clearly been used to undermine workers’ conditions and the competitiveness of firms operating under Australian law, many will welcome the prospect of increased competition in engineering construction and infrastructure.

Free trade agreements often fail to be exploited effectively by Australia and there is no doubt China benefits greatly from this agreement and with that will come greater competition and threat to locals.

The federal government, which has often failed to vigorously pursue and defend the benefits of FTAs, must lift its game and follow up on industry concerns as the details of the agreement are revealed and issues emerge.

But there are also clear opportunities that can be exploited by innovative firms including small and medium sized enterprises prepared to collaborate with each other, with Australia’s research community and with services providers to tackle the China market.

First 5000 members, what do you think of the agreement?

Peter Roberts has over 40 years’ experience as a business journalist. He is currently the convenor of the Australian Manufacturing Forum.


One Comment

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    January 30, 2015 at 8:22 am

    Thanks for update, the
    Thanks for update, the agreement between Australia and China is really beneficial for us.