Australia and China signed a landmark free trade deal recently that will open up markets worth billions of yuan to Australia and make it easier for Chinese companies to invest the other way.
It’s been a long time coming and most people in China seem most excited about the prospect of cheaper wine and dairy produce. ChAFTA will also intensify competitive pressures for Irish exporters to China, notably in the food and agricultural sector, and particularly in dairy.
Australia is trying to shift from a reliance on exports of minerals such as coal and iron ore to expanding its food and agricultural exports to China’s growing middle class, what has been termed a shift from a “mining boom” to a “dining boom”.
The agreement gives Australian dairy farmers tariff-free access within four years to China’s lucrative infant formula market, without any of the “safeguard” caps that restrict competitors from New Zealand.
The tariff rate is 15 per cent. Other tariffs on milk powder will be phased out over 11 years.
Trade sources say that market for infant milk formula is so big there is room for everyone. The Chinese dairy market has expanded by 40 per cent in the past year as changing consumption patterns see increased demand for milk and other dairy goods.
Australian prime minister Tony Abbott and Chinese president Xi Jinping, surrounded by a phalanx of government ministers, signed the memorandum of understanding during a ceremony in parliament in Canberra.
“ChAFTA will unlock significant opportunities for Australia. China is Australia’s largest export market for both goods and services, accounting for nearly a third of total exports, and a growing source of foreign investment,” the Australian government said in a statement.
Once the agreement is fully implemented, 99.9 per cent of Australia’s current resource, energy and manufacturing exports will enjoy duty free entry into China.
China is already Australia’s top trading partner, with two-way trade of about A$150 billion (€103 billion) last year.
Iron ores topped the list of main exports to China, worth some €36.3 billion, but education-related travel services was the fourth biggest export to China last year, worth €2.78 billion. Imagine if Ireland managed to emulate that kind of success.
Irish dairy companies have been active in China of late.
Glanbia has launched Avonmore UHT milk, while the Irish Dairy Board is selling a liquid milk product under its Kerrygold brand.
Abbot has had a good year for trade deals – this is the third this year after agreements with Japan and South Korea.
One area where we do not match Australia is in wine production. Wine makers currently sell more than €136 million worth of goods to China each year despite tariffs of between 14 and 20 per cent. These tariffs will be eliminated over four years.
“The Australian government has secured the best-ever market access provided to a foreign country by China on services, with enormous scope to build on an export market already worth A$7 billion (€4.78 billion),” said Australian minister for trade Andrew Robb.
