China-Australia FTA ready to reap the rewards

Australian diary and meat products are already favorite choices for many Chinese consumers. And these farm products and other taxed items will see their import tariffs gradually drop to zero over the coming years, thanks to a FTA between China and Australia. The agreement will give consumers lower prices, and save billions in tariffs for companies from both countries.

New mom Joyce Tang is a loyal consumer of Australian agricultural products. She feeds her son Australian baby formula ordered online, and buys imported beef frequently as well.

"Australia depends on animal husbandry and is famous for its beef and dairy products. They are healthier and safer. I am a mother with a new baby, and I want the best for my child. As a frequent consumer, I will be happy to see Australian products become cheaper," Tang said.

Australian company Tender Plus has been importing Australian beef to Shanghai for 16 years, providing 5,000 tons a year of processed products to five-star hotels, restaurants and supermarkets. On January 1, the import duty on Australian beef was cut to 9.6 percent from 12 percent, and it will be eliminated altogether in nine years. The company’s general manager says the FTA will save them at least 8 million yuan a year.

"For us, tariff reduction is the most direct benefit from the FTA. But beyond that, there will also be agreements on all aspects of the beef trade. Quarantine, for example, has been a big issue in the past decade, and so the import of chilled beef was banned at times. But now the FTA guarantees the continuity of quarantine standards, and removes uncertainties for our business," said Lin Siwei, managing director of Tender Plus China.

Chinese customs forecasts that one year from now, 20 billion dollars worth of Chinese exports to Australia and 15 billion dollars worth of Australian exports to China will benefit from FTA tariff cuts. Specific advantages to consumers may take a little longer to arrive, due to the phased implementation of the tariff reductions across a range of products, and to local taxes and exchange rates.

"When the tariff of a product comes down, its value-added tax will also fall accordingly. These changes will be reflected in the sales price of the product. But the process takes some time. The FTA didn't take effect until Dec 20, so the products imported before that time would not have been eligible for the duty reduction," said Zhao Xiaolei, dean of Institute of FTZ, SUFE.

China is now Australia’s largest trading partner, buying almost a third of all Australian exports. China has currently signed 14 FTAs with 22 countries and regions. Beijing anticipates the country will import goods worth 10 trillion dollars in the coming five years. Official estimates say China will also invest 500 billion dollars overseas in that same period.