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Policy > Interpretation for the China-Australia Free Trade Agreement
Interpretation for the China-Australia Free Trade Agreement
2015-11-25

  1. What are the main contents of the China-Australia Free Trade Agreement (the "ChAFTA")?

  2. When was the ChAFTA officially signed?

  3. When will the ChAFTA come into force?

  4. What has the ChAFTA experienced during a decade of negotiations?

  5. What efforts have Australia and China made from the substantive conclusion of the negotiations to the formal signing of the ChAFTA?

  6. What is the important significance of the signing of the ChAFTA?

  7. Compared with other free trade agreements signed by China, what are the main characteristics of the ChAFTA?

  8. Why should China negotiate and sign the ChAFTA with Australia?

  9. What influence will the ChAFTA have on bilateral economic and trade relations?

  10. What roles will the ChAFTA play in the economic integration in the Asia-Pacific region?

  11. What liberalization level has the ChAFTA generally reached in the area of trade in goods?

  12. What are the highlights of the ChAFTA compared with the free trade agreements having recently signed by Australia with Japan and South Korea?

  13. What specific arrangements have been made in respect of tariff reduction period?

  14. What is the specific level of trade liberalization of the ChAFTA on industrial products?

  15. Which industrial sectors of China may benefit more from the ChAFTA?

  16. What liberalization level has the ChAFTA reached in the area of agricultural products?

  17. How does the ChAFTA handle the issues concerning the trade liberalization of sensitive products of China and Australia?

  18. What industries and products of China may be challenged by the ChAFTA?

  19. What changes will take place in the life of ordinary people thanks to the ChAFTA?

  20. What important breakthroughs have been made by the ChAFTA in the area of trade in services?

  21. What achievements have been made by the ChAFTA in the area of service?

  22. What are the specific contents of the convenience provided by the ChAFTA for Chinese enterprises to "Go Out"?

  23. What favorable conditions has the ChAFTA created for the Chinese youth to go to Australia?

  24. What "Green Channel" has the ChAFTA pioneered for professionals with Chinese characteristics to go to Australia?

  25. What benefits will the ChAFTA bring to overseas study for Chinese students?

  26. Under the framework of the ChAFTA, what kinds of cooperation will be carried out by China and Australia in the financial sector?

  27. How will the ChAFTA further promote the liberalization level of bilateral trade in services?

  28. The ChAFTA includes part of autonomous and open measures of China taken in the China (Shanghai) Pilot Free Trade Zone (the "SHFTZ"). Can you tell us about the relevant situation?

  29. Is the ChAFTA making pre-arrangements for "upgraded" negotiations between China and Australia in the future?

  30. After the conclusion of the ChAFTA, domestic service industry may encounter some shocks and challenges. Do you have any comments on this?

  31. It can be noted that Australian service providers will be allowed to establish foreign-invested or sole for-profit pension institutions in China. How do you interpret the open measure?

  32. In the ChAFTA, traditional Chinese medicine services "Going out" have made a series of achievements. Can you tell me about the relevant situation?

  33. At present, what is the current situation of bilateral investment? What influence will the signing of the ChAFTA have on bilateral investment?

  34. What are the main contents of the ChAFTA in the area of investment?

  35. The ChAFTA stipulates that China and Australia will carry out the second-phase negotiations in respect of issues concerning investment. How about the specific situation?

  36. What are the main contents of the Investment-specific State to State Dispute Settlement (ISDS) of investors and host countries included in the ChAFTA? What significance do they have in Chinese enterprises?

  37. What are the main contents of the ChAFTA in the part of rules?

  38. What highlights does the ChAFTA have in terms of rules of origin?

  39. What convenient arrangements has the ChAFTA made for enterprises of China and Australia in respect of performing customs procedures?

  40. What provisions has the ChAFTA specified in respect of animal and plant inspection and quarantine and technical barriers to trade?

  41. After the ChAFTA comes into force, if large quantities of Australian imports have an impact on China's domestic industries, are there countermeasures and protective measures?

  42. What are the main contents of the ChAFTA in the area of intellectual property?

  43. Does the ChAFTA involve in competition issues? What are the main contents?

  44. Does the ChAFTA involve in electronic commerce? What are the main specific provisions? What effects will have on enterprises?

  45. Under the ChAFTA, do China and Australia have a special mechanism for how to deal with trade disputes? What effects will have on enterprises?

  1. What are the main contents of the China-Australia Free Trade Agreement (the "ChAFTA")?

  Answer: The China-Australia Free Trade Agreement (the “Agreement”) includes the text and four annexes. In addition to the Preamble, the text consists of 17 chapters, which include Initial Provisions and Definitions, Trade in Goods, Rules of Origin and Implementation Procedures, Customs Procedures and Trade Facilitation, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Trade Remedies, Trade in Services, Investment, Movement of Natural Persons, Intellectual Property, Electronic Commerce, Transparency, Institutional Provisions, Dispute Settlement, General Provisions and Exceptions and Final Provisions, and are attached by 11 annexes. Four annexes attached to the ChAFTA are Elimination of Customs Duties for Trade in Goods, Product Specific Rules of Origin, Elimination of Customs Duties for Trade in Services and 5 Side Letters on skills assessment, financial services, education services, legal services and the Rules on Transparency in Treaty-based Investor-State Arbitration.

  In addition to the text and annexes of the ChAFTA, package achievements of negotiations of the ChAFTA also includes two memorandums of understanding of the Government of Australia and the Government of the People’s Republic Of China on the Investment Facilitation Arrangement (IFA) and the Work and Holiday Visa Arrangement as well as cooperative side letters on the Traditional Chinese Medicine Services. The above three documents are simultaneously signed with the ChAFTA.

  2. When was the ChAFTA officially signed?

  Answer: On June 17, 2015, Mr. Gao Hucheng, the Minister of Commerce of the People’s Republic of China, and Andrew Robb, the Minister for Trade and Investment of Australia, on behalf of their respective governments, officially signed the Free Trade Agreement between the Government of Australia and the Government of the People’s Republic of China in Canberra, Australia. Chinese President Xi Jinping and Australian Prime Minister Tony Abbott exchanged congratulatory letters on the official conclusion of the ChAFTA on that day.

  3. When will the ChAFTA come into force?

  Answer: After the ChAFTA is officially signed, China and Australia will respectively perform their domestic approval procedures. After the completion of the approval procedures, the two governments will determine the specific effective time and exchange notes through diplomatic channels so as to make the ChAFTA enter into force as soon as possible.

  4. What has the ChAFTA experienced during a decade of negotiations?

  Answer: From the launch in April 2005 to the announcement of the conclusion of substantive negotiations by the leaders of China and Australia in November 2014, 21 rounds of negotiations and dozens of small-scale consultations for the ChAFTA have been carried out.

  In October 2003, China and Australia signed the Trade and Economic Cooperation Framework between the People’s Republic of China and Commonwealth of Australia and decided to carry out a joint feasibility study in free trade areas. In March 2005, the joint study was completed and the China-Australian Free Trade Zone was deemed feasible and would bring real benefits to China and Australia on the whole. As a result, negotiations were officially launched in April. From May 2005 to July 2013, China and Australia held 19 rounds of talks in total. Although great progress has been made, no breakthroughs in difficult issues were made.

  In April 2014, the President Xi Jinping and the Premier Li Keqiang separately met with Australian Prime Minister Abbott who was visiting China. Leaders of China and Australia reached important consensus on accelerating the negotiating process and striving to reach an early agreement. As a result, the negotiations appeared positive momentum. Thereafter, delegations of both parties carry out continuous and intensive consultations including the 20th round and the 21st round of negotiations. Trade ministers of China and Australia agreed on practically advance the negotiations. As a result, the pace of the negotiations is continually accelerated and the differences between both parties are gradually narrowed. From October to November, delegations of both parties conducted negotiations at the final critical stage. After the work around the clock for more than 20 days, the agreement on the entire contents was finally reached.

  On November 17, the President Xi Jinping, together with the Prime Minister Abbott, confirmed and announced the substantive conclusion of negotiations on the ChAFTA when he paid a state visit to Australia. Witnessed by the leaders of China and Australia, Gao Hucheng, the Minister of Commerce of the People’s Republic of China, and Andrew Robb, the Minister for Trade and Investment of Australia, signed the Declaration of Intent of the Government of Australia and the Government of the People’s Republic of China on Substantial Conclusion of Negotiations on the China-Australia Free Trade Agreement. So far, nearly a decade of negotiations have come to an end.

  5. What efforts have Australia and China made from the substantive conclusion of the negotiations to the formal signing of the ChAFTA?

  Answer: On November 17, 2014, the President Xi Jinping, together with the Prime Minister Abbott, confirmed and announced the substantive conclusion of negotiations on the ChAFTA when he paid a state visit to Australia. Delegations of Australia and China then immediately started to check and confirm the achievements of negotiations and legally examine and approve the texts of the ChAFTA. On February 5, 2015, the check and the confirmation of all achievements of the negotiations were completed and delegations of China and Australia initialed the achievements of the negotiations. In June, the examination and the approval of all the legal texts in Chinese and English of the ChAFTA came to an end and both parties also completed their domestic procedures for the formal signing of the ChAFTA. All preparations for the formal signing of the ChAFTA between the two countries have been made.

  6. What is the important significance of the signing of the ChAFTA?

  Answer: The ChAFTA has achieved the objective for a comprehensive and high-standard agreement with balanced interests, which has very important significance.

  The ChAFTA is an important decision made by the Party Central Committee and the State Council to implement the opening strategy and an important and solid step to carry out arrangements of the 3rd Plenary Session of the 18th CPC Central Committee, to build a new open economic system and to construct global-oriented and high-standard free trade area network. The signing of the ChAFTA indicates that China has full confidence and ability to establish closer trade relations with all trading partners and will continue to unswervingly deepen the reform and promote the opening-up. The ChAFTA will also comprehensively enhance bilateral economic and trade cooperative relations, further facilitate flows of funds, resources and persons of China and Australia, drive complementary economic advantages of China and Australia in a lasting and deep manner and widely benefit producers and consumers of China and Australia. According to the preliminary forecast of Australian Centre for International Economic Research, the ChAFTA will boost the Australian GDP at 0.7% and the China's GDP at 0.1%.

  In addition, both China and Australia are great powers in the Asia-Pacific region and the world's major economies. The conclusion of the ChAFTA lays a solid foundation for the process of building the Asia-Pacific Free Trade Area (APFTA) decided to be launched by the 22nd APEC Economic Leaders Meeting last year and plays an active role in practically promoting the economic integration process in the Asia-Pacific region and achieving lasting stability and prosperity.

  7. Compared with other free trade agreements signed by China, what are the main characteristics of the ChAFTA?

  Answer: The ChAFTA is the first free trade agreement concluded by China with major developed economies with large economic aggregates and is also one of the most progressive free trade agreements in trade and investment liberalization that have ever been signed by China and other countries. In the area of trade in services, Australia is the first country to make commitments to China on trade in services in a negative-list approach. The IFA is the first special facilitation arrangement that developed countries make for engineers and technicians under Chinese investment. Australia is not only the second country that makes commitments to China on the Work and Holiday Visa Arrangement and professionals with Chinese characteristics through the negotiations on the ChAFTA around the world, but also the developed country that accepts the largest number of the relevant people with the right of admission.

  8. Why should China negotiate and sign the ChAFTA with Australia?

  Answer: As China's important trade and investment partner, a western developed economy with GDP ranking No. 12 worldwide and an important member of the OECD and G20, Australia has a mature market economy and the supporting legal system and governance model and has an important influence in the Asia-Pacific region and the world. At present, China is Australia's largest partner of trade in goods, the largest source of imports and the largest destination of exports. Australia is the second largest destination, after Hong Kong, for China's overseas investment. Highly complementary economy of China and Australian shows a great potential of cooperation in mineral energy, agricultural, industrial and other areas. Conclusion of the ChAFTA contributes to closer trade and investment relations between China and Australia and better achievement of mutual benefit and win-win situation.

  9. What influence will the ChAFTA have on bilateral economic and trade relations?

  Answer: The ChAFTA has significantly lowered the threshold for bilateral trade and investment and has made more open, convenient and standard institutional arrangements for the future development of bilateral economic and trade relations. It helps tap the potential of bilateral cooperation in depth, further promote the bidirectional flows of funds, resources and persons, comprehensively promote and deepen bilateral economic and trade relations and enhance the level of cooperation to provide important contents to enrich the comprehensive strategic partnership of China and Australia.

  10. What roles will the ChAFTA play in the economic integration in the Asia-Pacific region?

  Answer: The 22nd APEC Economic Leaders Meeting decided to launch the process of building the Asia-Pacific Free Trade Area (APFTA). As both China and Australia are important countries in the Asia-Pacific region, the ChAFTA will provide a solid basis for the Asia-Pacific Free Trade Area and help promote the economic integration process in the Asia-Pacific region as well as deeper integration and common development of the Asia-Pacific economies.

  11. What liberalization level has the ChAFTA generally reached in the area of trade in goods?

  Answer: The ChAFTA shows a substantially high liberalization level in trade in goods. 96.8% of tariff lines of China will be liberalized by such a straightforward way as linear tariff reduction. Among them, the tariffs of 95% of tariff lines will be reduced within five years and the tariff reduction transition period of the remaining products will not exceed 15 years. All products of Australia are completely tariff-free for China and the liberalization level reaches 100%. Among them, tariffs of 91.6 percent of tariff lines will be reduced to zero at the time of entry into force of the ChAFTA, those of 6.9 percent of tariff lines will be reduced to zero at the third year after the ChAFTA enters into force and those of the remaining tariff lines will be reduced to zero at the fifth year after the ChAFTA enters into force.

  From the point of view of trade volume, the volume of liberalized imports of China from Australia accounts for 97% of total volume of liberalized imports from Australia. Among them, the volume of imports of which tariffs will be reduced to zero at the time of entry into force of the ChAFTA accounts for 85.4% and that of imports of which tariffs will be reduced to zero within 5 years accounts for 92.8%. The volume of imports of Australia from China of which tariffs will be reduced to zero at the time of entry into force of the ChAFTA also accounts for 85.4% of total volume of liberalized imports from China and the volume of imports of which tariffs will be reduced to zero within 3 years accounts for 98.4%. Tariffs of all products will be reduced to zero within 5 years.

  12. What are the highlights of the ChAFTA compared with the free trade agreements having recently signed by Australia with Japan and South Korea?

  Answer: Compared with the Japan-Australia Free Trade Agreement and the Korea-Australia Free Trade Agreement, Australia's liberalization arrangements for Chinese products are superior to those for Japanese and Korean products, which is mainly reflected by the facts that tax reduction period for Chinese products does not exceed 5 years while that for Japanese and Korean products 8 years; among Australia's products subject to tariff reduction through tariff reduction period, the proportion of tariff lines subject to 3-year tariff reduction period is higher than that of the similar products in the Japan-Australia Free Trade Agreement and the Korea-Australia Free Trade Agreement.

  The longest tariff reduction period of China for Australian products is shorter than that for Japanese and South Korean products. The longest tariff reduction period of China is 15 years, while that of Japan is 16 years and that of South Korean is 20 years. In addition, all products of China subject to tariff reduction through tariff reduction period have taken such a straightforward tariff reduction way as linear tariff reduction. In addition to linear tariff reduction, Japan also has the way of postponed tariff reduction and South Korea has such complex ways as partial tariff reduction and seasonal tariff reduction.

  13. What specific arrangements have been made in respect of tariff reduction period?

  Answer: In the ChAFTA, tariffs of Australia will be reduced in the following three ways: First, tariffs have been zero or will be immediately reduced to zero at the time of entry into force of the ChAFTA; second, tariffs will be reduced to zero at the third year after the ChAFTA enters into force; and third, tariffs will be reduced to zero at the fifth year after the ChAFTA enters into force. The tariff lines subject to the above tariff reduction ways respectively accounts for 91.6%, 6.9% and 1.5% of total tariff lines of Australia and the volume of imports of the relevant products of Australia from China respectively accounts for 81.5%, 16.9% and 1.6% of total volume of imports from China.

  Tariffs of China will be reduced in the following five ways: First, tariffs have been zero or will be immediately reduced to zero at the time of entry into force of the ChAFTA; the proportion of tariff lines subject to tariff reduction in this way is 29.2% and the proportion of the corresponding volume of imports from Australia accounting for total volume of imports from Australia (hereinafter referred to as the "proportion of volume of imports") is 85.3%. Second, tariffs will be reduced to zero through tariff reduction period for 3 years, 5 years, 6 years, 8 years, 9 years, 10 years, 12 years or 15 years; the proportion of tariff lines subject to tariff reduction in this way is 67.6% and the proportion of volume of imports is 8.7%. Third, tariffs will be reduced to zero through tariff reduction period with special safeguard measures taken; the proportion of tariff lines subject to tariff reduction in this way is 0.1% and the proportion of volume of imports is 0.9%. Fourth, country and tariff quota products are implemented; the proportion of tariff lines subject to tariff reduction in this way is 0.1% and the proportion of volume of imports is 2.1%. Fifth, exceptional products, namely they are not subject to tariff reduction; the proportion of tariff lines subject to tariff reduction in this way is 3.1% and the proportion of volume of imports is 3%.

  14. What is the specific level of trade liberalization of the ChAFTA on industrial products?

  Answer: In the ChAFTA, trade in industrial products has reached a high liberalization level. For industrial products of China, the proportion of product tariff lines of which tariffs have been zero or will be immediately reduced to zero at the time of entry into force of the ChAFTA and the volume of imports from Australia are respectively 32.4% and 92.9%; the proportion of tariff lines of industrial products of which tariffs have been zero through tariff reduction period and the volume of imports are respectively 65.1% and 7%; for 171 tariff lines of industrial products of which tariffs will not be reduced, the proportion of tariff lines are 2.5% and the proportion of the volume of imports is only 0.1%. After the implementation of the ChAFTA, average tariff rate for industrial products of China will be reduced from 8.8% to 0.2% and the maximum tariff from 47% to 20%.

  For industrial products of Australia, the proportion of product tariff lines of which tariffs have been zero or will be immediately reduced to zero at the time of entry into force of the ChAFTA and the volume of imports from China are respectively 89.9% and 81%; the proportion of tariff lines of industrial products of which tariffs will be reduced to zero at the third year after the ChAFTA enters into force and the volume of imports are respectively 8.2% and 17.3%; and the proportion of tariff lines of industrial products of which tariffs will be reduced to zero at the third year after the ChAFTA enters into force and the volume of imports are respectively 1.9% and 1.7%.

  15. Which industrial sectors of China may benefit more from the ChAFTA?

  Answer: Industrial sectors of China may benefit from the ChAFTA in terms of tariff reduction and exemption as well as trade creation. In terms of tariff reduction and exemption, it is estimated that the implementation of the ChAFTA will make China obtain tariff reduction and exemption of USD 1.66 billion for products exported to Australia. China will obtain tariff reduction and exemption of USD 1.02 billion (representing 61.5% of total reductions and exemptions) when the ChAFTA enters into force and will obtain tariff reduction and exemption of USD 1.6 billion (representing 96.4% of total reductions and exemptions) with 3 years after the ChAFTA enters into force. China's products subject to large sums of tariff reductions and exemptions mainly include garment and leather, electronic and mechanical products, other manufactured goods, steel and metal, and chemical products with amounts of tariff reductions and exemptions of USD 1.53 billion (accounting for 91.9 percent of total reductions and exemptions).

  In terms of trade creation, after the implementation of the ChAFTA, the proportion of China's exports to Australia accounting for China's total exports is expected to increase from 1.7% to about 2.1%. Products with the potential of significant increase in China's exports mainly include textiles, garment, leather products, electrical and mechanical equipment, steel and metal products, mineral products, chemical products and transport equipment, etc.

  16. What liberalization level has the ChAFTA reached in the area of agricultural products?

  Answer: According to the arrangements of the ChAFTA and supported by moderate and reasonable protection, agricultural products of China and Australia has achieved a high level of liberalization. After the end of the tariff reduction transitional period, average tariffs of agricultural products of China will decrease from 12.94% before the implementation of the ChAFTA to 0.51% and tariffs of products accounting for 93.7 percent of tariff lines of agricultural products will be zero. 99.4% of agricultural products of Australia will be zero immediately after the entry into force of the ChAFTA. The volume of such agricultural products of Australia accounts for 99% of total volume of agricultural products imported from Australia and the remaining products will complete all the process of liberalization within three years.

  17. How does the ChAFTA handle the issues concerning the trade liberalization of sensitive products of China and Australia?

  Answer: China and Australia have their own sensitive products. For China, the strong agricultural competitiveness of Australia will bring some competitive pressures to partial agricultural products of China. In this regard, by setting a longer tariff reduction period and being supplemented by special safeguard measures as well as country quotas and other special arrangements, China provides the related industries with some protection and implements moderate opening-up. In addition, China also makes exceptional arrangements for grain, cotton, vegetable oil, sugar and other products, which are not subject to tariff reduction.

  For Australia, due to the relative competitiveness of industrial products of China, Australia sets a three-year or five-year tariff reduction period for some sensitive industrial products to provide a certain grace period for the related industries.

  18. What industries and products of China may be challenged by the ChAFTA?

  Answer: Australia is an agricultural power and the world's leading agricultural producer and exporter. There is a gap in the competitiveness of agricultural products between China and Australia. For the agricultural industry, the ChAFTA moderately protect key agricultural products by exceptions of partial products, by arranging a long transition period and by setting special safeguard measures and country quota measures for agricultural products. Hence, a long time is available for the adjustments and countermeasures of the relevant domestic industries. Meanwhile, in the spirit of "promoting reform with openness", China will promote the development of domestic industries and constantly improve the competitiveness.

  19. What changes will take place in the life of ordinary people thanks to the ChAFTA?

  Answer: With the implementation of the ChAFTA, the masses will get more high-quality imported sources, such as beef and mutton, dairy products, wine, lobster, fruit and other consumer goods, so differential choices of high-end products will be better met.

  20. What important breakthroughs have been made by the ChAFTA in the area of trade in services?

  Answer: The ChAFTA is the first high-level free trade agreement signed by China and main western developed countries. Both parties have made high-level achievements of negotiations in the service sector. The level of openness of Australia to China's services is higher than that of the Japan-Australia Free Trade Agreement and the South Korea-Australia Free Trade Agreement recently reached. Main breakthroughs are reflected in the following three aspects:

  First, the ChAFTA is an agreement where the first partner makes opening commitments on trade in services in a negative-list approach. Australia has agreed to open its service sectors in a negative-list approach and becomes the first country that makes commitments on trade in services to China in a negative-list approach. China, based on its WTO accession commitments, will open part of its service sectors in a positive-list approach.

  Second, major breakthroughs have been made on personnel exchanges of both parties. Australia has agreed to establish an investment facilitation mechanism to specifically provide a "Green Channel" for applying for Australia visa and work permits for engineers and technicians under the Chinese investment so as to promote investment activities of Chinese enterprises in Australia. The mechanism is the first special facilitation arrangement that developed countries make for China in the area. Australia will work and holiday visas to 5,000 young persons from China every year through "Work and Holiday Visa Arrangement" to promote the exchanges of young persons between China and Australia. Australia will also offer an annual entry quota of 1,800 people for occupations with Chinese characteristic, including TCM practitioners, Chinese language teachers, Chinese chefs and martial arts coaches.

  Third, pre-arrangements have been made for "upgrading" the opening of bilateral trade in services. Both

 

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