China and Australia have sealed a major free trade agreement worth billions of dollars giving the Australian agricultural sector tariff free access to the massive Chinese market, while China will get greater access to investment projects in Australia.
Ministers from China and Australia signed a Declaration of Intent on Monday, culminating over a decade of work towards the deal. The actual agreement will not take effect until after 2015, when all the legal points have been drafted and translated.
"This has been a 10-year journey, but we have finally made it," Australian Prime Minister Tony Abbott said during a ceremony in Canberra.
Chinese President Xi Jinping said in a speech to the Australian parliament that China would deepen cooperation with Australia and other nations.
The agreement would “create a high-level platform and provide better institutional arrangements for our economic cooperation. The Chinese government is ready to enhance dialogue and co-operation with relevant countries to jointly maintain freedom of navigation and safety of maritime rules,” said Mr. Xi.
The big winner from the deal is the Australian agricultural sector, particular dairy farmers and winemakers, who will have tax- and tariff-free access to the Chinese market.
About 85 percent of Australian exports to China will not incur tariffs, with this figure rising to 95 percent when the deal is fully implemented.
Chinese exports to Australia, such as clothes and electronics, will also be tariff-free, while Chinese investors will be given free rein over where they put their money in Australia. The threshold of Chinese investment in Australia will be raised from A$248 million (US$216 million) to A$1.078 billion. (US$939 million).
Australia is hoping the deal with China will transform its economy from reliance on the export of minerals and raw materials like coal and iron ore, and grow the agricultural sector.
"[The agreement] should help to support Australia's great rebalancing act, from mining investment-led growth towards the non-mining sectors of the economy," HSBC economist Paul Bloxham said in a note, as quoted by Reuters.
But the deal is not without its detractors. Australian Senator Bill Hefferman and senior member of the Liberal Party warned that Beijing’s refusal to float its currency could give it an unfair advantage over Australia.
Australia also failed to get a reduction in tariffs on key commodities such as rice, cotton and sugar. And Chinese firms will still be scrutinized by Australia’s foreign investment review board.
Trade between China and Australia has grown substantially over the past few decades and in 2013 was worth A$150 billion (US$130 billion). Australia is heavily dependent on the Chinese economy, with exports to Beijing accounting for 5.3 percent of gross domestic product.