Virginia, US
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| Teresa Liu

ChAFTA Now in Force: Are You Reaping the Benefits?

The China Australia Free Trade Agreement (ChAFTA) came into force on 20 December 2015. A total of 7,289 individual Chinese tariffs were cut (including 1,710 tariffs completely eliminated) on this date, with further second year agreement tariff cuts made on 1 January 2016.

Of course, the benefits of ChAFTA are beyond tariff cuts, and are aimed to more broadly stimulate growth between the countries, where investments are currently already worth around $121 billion. Importantly, the agreement gives Australia un-precedent access to the China market where China is already Australia’s largest export market for both goods and services. Under most-favoured nation treatment (MFN) provisions in ChAFTA’s, China has also committed to extend to Australia more favourable treatment it might provide to other trade partners in certain sectors in the future.

As further details have become clearer since ChAFTA was signed on 17 June 2015, Australian business can now look with more certainty at the opportunities that this brings. While there is a tendency to view our economic relationship with China and Australia through our exports of iron ore, coal and LNG, the benefits from ChAFTA extend to sectors like health care, education, financial services and legal services, as well as agriculture, processed food, resources, energy and manufacturing.

More particularly, ChAFTA will allow Australian businesses to take full advantage of e-commerce and other emerging technologies in a deep and expansive market, and it is hoped it will assist in driving Australia’s agenda in innovation and science, R&D and entrepreneurial activity, as recently announced by Australia’s Prime Minister the Hon Malcolm Turnbull MP on 7 December.  China is already well ahead in this global game and already accounts for 50 per cent more patent applications per year than the United States.

What can you expect from Australia’s immigration program?

As part of ChAFTA, there is a commitment by both Australia and China to reduce barriers to labour mobility and in improving temporary entry access within the existing immigration and employment frameworks.

During the last 6 months, a number of concerns about labour mobility were raised by sectors of the Australian community. There was a concern that the agreement allowed for unrestricted access to Chinese workers and therefore threatened Australia jobs. The government has sought to clarify that ChAFTA will not remove the need for employer sponsorship under the 457 visa programme and its usual rules but does allow access to the same rules as most other countries.  

The proposed Investment Facilitation Arrangements (IFAs) which have been made available under a separate MOU and which applies to Chinese companies making significant investments in Australia (more than $150 million in specific types of infrastructure development projects) also came under some level of scrutiny.

Australia is already the second largest country for Chinese overseas investment outside Hong Kong. It is expected that IFAs will strengthen infrastructure development and investment (with resultant economic benefits) and will lead to the creation of local jobs. Again, the Government has sought to clarify how the more flexible entry of foreign Chinese workers in these large scale projects would be applied within its existing immigration framework.

Australia's immigration and compliance framework otherwise remains to be a tightly controlled and strict one for all employers, business and investors, so it is critical to ensure there is proper advance planning and management where foreign workers are required, whether for work or business. This is particularly the case for businesses seeking to take advantage of IFAs where it is critical to be well across and up to date as to how the IFA will be practically applied and as further details become known.

We have also seen increased scrutiny by the Department of Immigration on employers and sponsor’s regarding their obligations towards their employees and to the immigration rules more generally. This has particularly become more apparent since 1 July where Australian Border Force, the new agency which combines the front line operations of immigration and customs was formed.

ChAFTA is a significant pin in Australia's longer term economic strategy and it is critical for business and investors to continue to keep appraised of its development and to look towards how it can participate and reap the benefits of this agreement.  As Andrew Robb indicated in his media release of 20 December 2015 noted, “ChAFTA, along with this Government’s ground-breaking trade deals with Korea and Japan, forms a powerful trifecta of agreements with our three biggest export markets. We encourage Australian businesses to take full advantage of the opportunities they present…”.

If you have not already done so, this is the time to look at opportunities. Fragomen is there is advise and support you each step of the way.