China trade deal boon for WA

President Xi Jinping of China is poised to sign a free trade agreement with Australia on Monday following the G20 summit in Brisbane, after nearly a decade of negotiations.

After almost 20 rounds of negotiations, it would be a major deal with Australia’s top trading partner, with bilateral trade for the 2014-15 financial year alone worth $150 billion.

It follows the federal government successfully reaching free trade agreements with South Korea and Japan earlier this year.

An agreement with China is expected to be of most benefit to the agricultural sector, which comprises the majority of non-minerals exports, tourism and education exporters. It will also increase foreign direct investment and ensure cheaper imports.

New Zealand signed an FTA with China in 2007, and has since seen a fivefold increase in agricultural exports to the Asian superpower.

That agreement has been highlighted as the driving force behind the success of New Zealand dairy giant Fonterra, which exports a substantial volume of its milk products to China.

Economic analysis by HSBC predicts tariff reductions would help Australian agribusinesses increase access to the Chinese market, with tariffs on many agricultural imports at 15 per cent, and up to 65 per cent on some food products.

The impact is likely to be strong in Western Australia, with China the state’s largest sheep meat destination, at a fifth of the state’s export market, according to the WA Department of Agriculture and Food.

Wool exports are also substantial, with China representing more than 80 per cent of the WA market.

Service exports were also expected to benefit as rising incomes in the expanding Chinese middle class increased demand, HSBC said.

In the past four years alone, tourism from China has more than doubled, from 400,000 to 850,000 annually, making it the fastest-growing market for Australian tourism exports, according to HSBC.

The bank also predicted waiving of regulations on financial flows could be beneficial for Australia, with China only accounting for 9 per cent of net foreign investment in 2013.

Lower restrictions would lead to deeper capital flows, improved productivity and construction financed, to dampen shortages in the residential real estate market.

The feasibility study commissioned in 2005 found that over a decade, the agreement could improve Australia’s gross national product by almost $30 billion.