Impacts of China-Australia free trade agreement on Australian agriproducts trade

Richard Culas, Krishna Timsina

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Abstract

The China-Australia Free Trade Agreement (ChAFTA) came into effect on the 20th December 2015 to strengthen the relationship between the two countries with a view to expanding their export and import industries. Specifically, ChAFTA includes the elimination or reduction of trade barriers between the countries in the form of tariffs or quotas. Removal of trade barriers will enable Australian industries to explore new markets and investment opportunities. This paper reviews the potential benefits of free trade with China in relation to major agricultural commodities and their possible impacts on the farm sector and regional Australia. The analysis shows ChAFTA will be beneficial to Australia but the impacts will vary across regions. Overall merchandise export trade is dominated by Western Australia which, together with a low proportion of import merchandise trade with China, shows Western Australia will take more advantage of ChAFTA compared to other States and Territories. However, benefits received by specific sectors will vary across the States and Territories. Victoria will benefit more from dairy, Queensland from beef, and New South Wales from summer crops, sheep meat, oilseed crops, and wool, compared to other States and Territories. This paper also analyses the possible impact of ChAFTA on an excluded commodity (wheat) using the Revealed Comparative Advantage (RCA) index. The result shows higher RCA on Australian wheat to trade with China compared to the world and other countries which have free trade agreements with Australia. In addition, South Australia has more RCA on wheat trade with China followed by Victoria, Western Australia, and New South Wales. This implies that, in the context of increasing population growth and growing demand for wheat in China, Australia has a good scope to increase its wheat exports to China. It would be worthwhile to start negotiations for a preferential FTA on wheat with China based on their requirements.
Original languageEnglish
Article number6
Pages (from-to)128-148
Number of pages20
JournalAustralasian Agribusiness Review
Volume27
Issue number6
Publication statusPublished - 2019

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