The Free WHAT Agreement?
What is a free trade agreement? Why do we need them? What do they mean for me? Who are the real beneficiaries of such schemes? These are all questions that arose when the government announced the China-Australia Free Trade Agreement(ChAFTA) in 2014. This article will examine the agreement and the affects it is likely to have on Australians and the Chinese alike. In fact, the vast majority of people, not just us in the land down under, but across the world, are likely to be in the dark about what these deals actually mean and more importantly the implications that come with them.
Despite the significance of these agreements, they are seldom discussed openly and are often drafted and agreed upon behind closed doors in ministerial offices around the globe. By which time it is too late for revision. The Trans-Pacific Partnership (TPP), a similar trade agreement between Australia, Brunei, Chile, Canada, New Zealand, Japan, Malaysia, Mexico, Singapore, Peru, The Unites States and Vietnam has been highly criticised around the world for its secrecy.
The obvious objective of these schemes is simple: to make goods and services cheaper and increase international trade. It sounds like a win-win situation but like most policies written with little public consultation, there comes with it a myriad of smaller clauses that could bring a vast array of outcomes of varying success for both Australians and Chinese. This is not to say that these outcomes will be negative but it is important that Australians are aware of the finer details of the agreement.
MEDIA COVEREAGE
Much of the media coverage surrounding the agreement has centred around mandatory skills assessment for incoming migrant workers from China and the economic benefits of the deal. In sensitive areas like automotive mechanics, carpentry and general and special class electrical profressionals this requirement will be relinquished, inciting many concerns from tradesman and trade unions. A study from Adelaide University argues that the ChAFTA will result in the undermining of Australian migration laws which could affect local wages and working conditions due to the large influx of Chinese workers. The study, undertaken by senior law lecturer and Rhodes Scholar, Dr Joanne Howe, has been dismissed by newly appointed Prime Minister, Malcolm Turnball, who called it a “grossly misleading” union campaign. Federal Trade Minister and the man responsible for the ChAFTA, Andrew Robb, added that the study “is not worth the paper it is written on”. Although the ALP had many concerns regarding this part of the deal, an agreement was made in parliament this week between Robb and opposition trades spokesperson, Penny Wong, allowing the deal to cruise through parliament in december as planned.
INTELLECTUAL PROPERTY & THE INVESTOR-STATE DISPUTE SYSTEM (ISDS)
Before delving head first into the basic rundown of the deal, I must reveal the most contentious issue surrounding the ChAFTA, Intellectual Property Rights. Most trade deals are formed with a mutual agreement around intellectualy property rights named the Investor-State Dispute Settlement (ISDS). Essentially this protects investors from overseas against policy changes that may negatively affect their bussiness. Meaning that they are able to bypass the local court system and take legal action against the state via an international tribuneral for loss of earnings resulted by policy. The latest example of this is Phillip Morris Tobacco, the multi-national tobacco conglomerate currently taking legal action against the Australian Government for its plain-packaging policy. Although the aim of this clause is to encourage innovation and protect Australian interests overseas and vice versa, the issue lies in the power given to corporations wich could in fact restrict policy reform. However, the agreement states that the ISDS will not impact legitimate government reform including those that protect human health or life and policies that the conservation of the environment.
KEY ELEMENTS TO THE DEAL
Warning: this is where this topic tends to get a little dry but I assure you that it is both necessary and beneficial to your understanding of the agreement, it will be over before you know it!
As stated in a letter to Mr Gao, Minister of Commerce in China, mandatory skills assessment for incoming migrant workers is to be removed from the following professions:
Automotive Electricians, Cabinetmakers, Carpenters, Carpenter and Joiners, Diesel Motor Mechanics, Electrician (general), Electrician (special class), Joiner, Motor Mechanic (General), Motorcycle Mechanic.
The problem with this is that potential workers entering on working holiday visas will not need to prove that they have the same level of training as is standard in Australia. Many of these workers are not used to the same high level working conditions that Australian tradesmen have becom accustomed to thus creating an environment where employers may take advantage and preference these workers over their Australian counterparts.
Tariffs that currently range from 3–20% will be elminated gradually on beef, dairy, wine, wool, pharmaceuticals, and most notably on natural resources such as iron ore, coal, crude petroleum, refined copper and alloys, aluminium oxide, unwrought zinc, unwrought nickel, titanium dioxide and natural gas. Did you hear that thump? I think Gina Rhineheart just jumped for joy. All jokes aside there are many positives the ChAFTA brings. Imports and exports will be cheaper and more competitive domestically and internationally. Consumer goods from China will also lose their 5% tariff, which will be passed on to consumers. In just a few years 95% of Australian Exports to China are set to become tariff free.
Furthermore, the Australian service industry will benefit from unprecedented access to Chinese markets. Legal, educational, telecommunication, financial, tourism, health and aged care services will be given freedom to enter China. As for Chinese investors, the ChAFTA will liberalise the Foreign Investment Review board allowing Chinese investors to invest up to $1,094m wihtout mandatory screening by the Foreign Investment Review Board. This is a significant increse from the previous $252m limit. This of course does not include sensitive markets such as telecommunications, agribusiness, media and defence related industries as well as investment from Chinese state-owned enterprises where investment review is much more assiduous. Sensitive markets aside, the fact that a chinese firm can invest over a billion dollars into the country with little more than a swipe of their Platinum Bank of China card is worrying. According to Forbes, China has over 200, US dollar billionaires and over 2 million millionaires most of whom are eager to invest their fortunes in more stable markets abroad making Australia an attractive offshore investment opportunity.
TO CONCLUDE
Obvisouly there are many opportinities as a result of the ChAFTA, especially for large Australian and Chinese businesses which, if all goes to plan, will keep our scarily co-dependent economies on track. Unfortunately due to the secrative nature of these deals coupled with the fact that there exists very little precedent from which to refer to, we are somewhat in the dark about what this agreement could mean in the future. Essentially in theory, its great for Gina and the mining industry, the backbone of our economy. Its great for farmers, who may not be as financially stimulating to the economy as Gina and her friends, but they make up for it with hard work and public admiration. Its good for large companies who drive the local job market. Its good for retailers and consumers alike, with zero tariffs comes lower pricing. Its good for the Chinese, who will have have increased mobility and opportunity in Australia as well as their homeland. All of which points to a positive economic future. However these international agreements will shape the way our global economy will work and citizens around the world need to be well informed on what their governemnts are signing on to.
FURTHER READING GUIDE
Hopefully, if you’ve made it to this point then I’ve done my job and kept your interest, right down here to the bottom of the page. Government policy can be enormously confusing to get one’s head around, and I’m in no way an expert. However, if I’ve sparked you’re interest and you’re keen to know more here are a few links to get you more information on the ChAFTA as well as Australia’s other trade agreements. Thank-you for reading and I hope you enjoyed.
