Following the G20 conference in Brisbane, earlier this week, amongst much fanfare, the signing of a free trade agreement between Australia and China was announced.

This was the centrepiece of the serious of meetings and events recognising the renewed relationship between our two countries.

I am somewhat of a skeptic when it comes to free trade agreements and I’ll explain why in a moment; but the reality is that, usually, free trade between countries does not exist. Liberalisation of trade may occur but free trade, no, unless you remove all tariffs, all trade protections, and the trading currencies are subject to the same market forces.

The China-Australia Free Trade Agreement (ChAFTA) has been ten long years in the making; and it has delivered more than we might have hoped for. This agreement will open bilateral investment opportunities in agriculture that have eluded us for far too long.

China is Australia’s largest agriculture and fisheries market, worth around $9 billion in 2013. China’s demand for high-quality agriculture and food products is growing rapidly. The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) predicts that China will account for 43 per cent of global growth in agricultural demand by 2050.

Until now, the absence of a bilateral FTA with China has meant Australian producers and exporters have faced significant tariffs on agricultural products and have been at a competitive disadvantage with respect to countries that already have an FTA with China – including New Zealand, Chile and the ASEAN nations. The Kiwis have had a six year head start on us in this market – something we’ve been continually reminded of. The Agreement will give Australia a significant advantage over larger players in the Chinese agriculture market – the US, EU and Canada. It will also provide a base for further liberalisation through a review of market access outcomes three years after entry into force.

The signing of this FTA makes it clear that agriculture is seen by both governments as a pillar of the Australian economy. Australian farm exports have doubled in five years to be valued at over $7 billion. The National Farmers’ Federation says agricultural exports to China could triple within the next 10 years. The ramifications of growth on that scale are immense.

Tasmanian farmers already have strong relationships with Chinese customers. In 2011/2012, they exported product worth more than $120 million to ASEAN countries. Major products exported to ASEAN countries included dairy ($42 million); seafood ($32 million) and wood products ($20 million estimated from private forestry sector). More than 20% of those exports were headed to China.

The signing of this FTA will enable our farmers to grow these relationships, and to open new markets.

Tasmania’s beverage, seafood, fruit, dairy, beef, lamb, honey and fine wool producers are expected to benefit from the agreement. After being left out of the last two FTAs (with Japan and Korea) it is good to see that dairy will also gain improved access.

Tariffs on dairy products such as cheese, milk powder and butter will be phased to zero. China represents 30 per cent of global dairy imports and is Australia’s fastest growing dairy market. Tariffs for products like strawberries, potatoes, cut flowers and other horticulture products will be reduced to zero over five years. In the red meat sector, Australian lamb and beef producers will eventually see an elimination of tariffs across the board.

Having said that, it is important to understand that Free Trade Agreements must deliver benefits to both parties. Tasmania is well placed to benefit from the expansion – through increased production, increased Chinese financial investment here, and our input to Chinese domestic production techniques.

In return, we will be able to provide knowledge and technology to assist Chinese farmers in improving their own productivity. The fact that we are in the southern hemisphere means that our main production season is mainly counter-seasonal with that in the northern hemisphere and therefore adds scope for us expand product availability in the Chinese markets.

No matter how pleasing the results of this FTA are, and no matter the hype that has surrounded our renewed relationship with China, we need to be clear that it is not a silver bullet and that people should not anticipate instant results.

In some cases, Chinese tariffs on Australian goods are being reduced, not eliminated; investment thresholds are being adjusted not abolished. Plus, the Chinese yuan is not subject to the same exchange rate volatility and uncertainty as the Australian dollar.

This FTA clearly opens many doors for Tasmanian producers. It underscores the fact that agriculture will continue to be a stabilising influence to our economy. Tasmania is in a prime spot to benefit.
TFGA chief executive Jan Davis