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OK, let s cut through the crap and bring a few facts to the China Free Trade Agree
ment debate
September 19, 2015 3:39pm
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ANTHONY SHARWOODnews.com.au
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AUSTRALIA, all is not what it seems.
This is a story about biggest economic achievement of the Liberal government sin
ce it came power in 2013, at least it is, according to the Liberal government.
More importantly, this is a story about why it matters to all of us.
And we re going to break this thing down into 20 easily digestible points and sort
the wheat from the ChAFTA (China Free Trade Agreement), so to speak.
NO DOZING OFF!!!
Wake up!!! Free trade agreements are exciting! Pic: Gary Ramage
Wake up!!! Free trade agreements are exciting! Pic: Gary RamageSource:News Corp
Australia
Let s start at the absolute beginning.
1. A free trade agreement (FTA) is an agreement that removes trade barriers betw
een countries. The most common type of barrier is a tariff, which is a tax on im
ported goods. Tariffs encourage people to consume local goods and services rathe
r than imported ones, whose prices become artificially inflated due to tariffs.
2. But sometimes, it suits two or more countries to do away with tariffs and oth
er barriers to free trade. That s when FTAs are negotiated.
3. Australia currently is signatory to nine operational FTAs. You can see the li
st here. We have also signed a tenth, the China Australia Free Trade Agreement,
with finer points being debated in parliament this week. It s controversial in som
e ways, which we ll get to in a moment.
Photo: @LiberalAus.
Photo: @LiberalAus.Source:Twitter
4. When Tony Abbott made his final speech as PM on Tuesday, he opened with a few
commendably humble remarks, then said the following:
I m proud of what we ve achieved over the past two years. 300,000 more people are in
jobs ... and we ve signed Free Trade Agreements with our largest trading partners,
with Japan, with Korea and with China.
Jobs and FTAs. Those are the big economic achievements our 28th Prime Minister p
ins his legacy on.
Now, it just so happens that unemployment was running at 5.8 per cent when the L

iberals came to power and that is now at 6.2 per cent, so the jobs boast smells
like a case of creative accountancy. But the FTAs? Yep, Mr Abbott was absolutely
right to claim them as an achievement.
5. Having said that, it s worth noting the ChAFTA was first mooted by John Howard
in 2005, while the Korea and Japan agreements were first floated by Kevin Rudd i
n 2007. But, yep, Tony Abbott s government got them over the line.
6. So why do FTAs matter? Are they the economic equivalent of sunshine, lollipop
s, rainbows and unicorns that the government claims?
Government illustration of the economic effects of ChaFTA. Pic: Adam Head
Government illustration of the economic effects of ChaFTA. Pic: Adam HeadSource:
News Corp Australia
7. In its slick promotional video, the government says:
This powerful trifecta of agreements opens up unprecedented trade and investment
opportunities just waiting for Australian companies to seize them ... The agreem
ents protect and strengthen our ability to compete against other countries, help
ing Australian businesses reach new heights.
Australian companies now enjoy enhanced competitive advantages in sectors where i
n our goods and expertise are in demand. The agreements encourage two way invest
ment and will attract vital new capital into Australia.
8. By now you get the idea. FTAs, in principle, are good for business. And when
you re talking about three countries that together, accounting for 61 per cent of
Australia s total exports, that s got to be good, right?
Right.
9. Well, mostly right. One man who sees both the good and the bad is Dr Jeffrey
Wilson, a Fellow of the Asia Research Centre and Senior Lecturer in Internationa
l Political Economy in the School of Management and Governance at Murdoch Univer
sity. (We need a glass of water after writing all that.)
As Dr Wilson told us overnight in an email message we hope he doesn t mind us repe
ating: I have recently made a minor career out of explaining free trade agreement
s to media audiences that normally don t know or care about them , he said.
We love you already, Dr Wilson. So tell us, what s the deal here?
10. Basically, the main reason we want these agreements is for agriculture, Dr Wil
son explains. We export lots of food, Asia has a growing middle class and we can
feed them. The second thing we wanted were services. So if a lawyer or an archit
ect want to open an office in China, now they can and their legal certificates a
nd so on will be recognised.
So we ll export more agricultural products, more services and we re basically giving
up on manufacturing. That what this is about.
HALFTIME. HAVE A DUMPLING ON US.
Seems like as good a time as any to insert a gratuitous picture of some deliciou
s dumplings. Well they re more interesting to look at than legal services. Pic: Ni
cole Cleary
Seems like as good a time as any to insert a gratuitous picture of some deliciou
s dumplings. Well they re more interesting to look at than legal services. Pic: Ni
cole ClearySource:News Corp Australia

11. So that s the positive side of the equation. What about the negatives? Well, a
s Dr Wilson wrote recently, certain ChAFTA commitments in the transport, constru
ction, telecommunication and legal sectors will only apply in the Shanghai Free T
rade Zone , not the entirety of China.
Other industries like education and hospitals are hindered by the fine print. A
free trade agreement is not always 100 per cent free.
Even agriculture is far from a win across the board. The National Farmers Federa
tion is extremely excited and can t wait to see ChAFTA rushed through parliament t
his week, yet some farmers will be no better off. That s because China can t get eno
ugh Aussie beef and dairy, but is reluctant to remove tariffs on commodities lik
e rice and sugar.
Photo: @NationalFarmers.
Photo: @NationalFarmers.Source:Twitter
12. Paul Schembri is a cane farmer who is Chairman of Canegrowers Queensland. As
Mr Schembri tells news.com.au, the Korea FTA was great for Australian sugar can
e growers. We sell half a million of tonnes of sugar a year to Korea (our total
harvest is around 4 million tonnes).
Sadly, sugar growers have been effectively excluded from ChAFTA.
It s disappointing given that it s a huge market. We only wanted to fill in the gap b
etween their domestic production and consumption, but we didn t gain much traction
except for a framework for further reviews .
China already imports a small amount of Aussie sugar, but will take no more. It
wants to protect its own sugar industry for both economic and cultural reasons.
Again, it shows that free trade is not always so free.
13. But the really big ChAFTA clash this week is over jobs. Trade and Investment
Minister Andrew Robb has repeatedly claimed the government s own modelling says t
hat 178,000 jobs will be created by 2035 thanks to the ChAFTA. It s not clear what
this figure is based on.
14. Unions, meanwhile, are portraying the ChAFTA as a huge threat to jobs. This
is but one example of the sort of rhetoric they re feeding out via social media an
d other channels this week.
Photo: @theamwu.
Photo: @theamwu.Source:Twitter
15. The biggest union beef is that ChAFTA allows Chinese companies to bring in t
heir own workforce for projects over $150 million and removes the requirement th
at jobs be offered to local workers first.
The investor can also bring in lower-skilled workers, with lower-level language s
kills and lower wages than are allowed under the standard visa program, the union
s say.
On the face of it, it s a compelling complaint. How can the government be talking
about extra jobs when the Chinese can bring in their own labour force in big inv
estment projects here?
16. Well, surprise, surprise, it s not quite that simple.
In a legal sense the unions are correct, but the ChAFTA doesn t automatically open

that up, explains Dr Jeffrey Wilson. Chinese companies have to negotiate a special
deal with the government [to import their own labour forces] and the government
of the day doesn t have to say yes. All it does is set up a system where the gove
rnment has to review the case.
17. But Labor polling suggests the they ll take our jobs line is working well, espec
ially in the WA electorate of Canning where this weekend, the much anticipated b
y-election will take place. The suburb of Armadale (and surrounding areas) has a
n unemployment rate of more than 15 per cent. For this reason, some in the union
movement have declared the by-election to be a referendum on ChAFTA .
18. But there is no wave of Chinese immigrant workers set to swamp Australia. In
theory there might be, but it s actually quite unlikely. As Dr Wilson explains, t
he last thing Chinese companies are worried about is Australian labour costs whe
n they build a new grain port or hotel or mine in Australia. That s because labour
costs are a fraction of the capital costs of big equipment and the like.
In fact, China is more worried about all the regulations we have in this little
democracy of ours. For example, any potential investment project must go before
the Foreign Investment Review Board. The Chinese aren t used to this sort of scrut
iny back home.
Tony Abbott twisted this into a narrative about the Chinese being fearful of inv
esting here due to our excessive union-inflated labour costs.
This was, at best, only true in theory.
Then the unions tweaked the story to make it about a threat to jobs. This, also
is, at best, only true in theory.
19. So basically, the whole ChAFTA debate has become your classic case of spin v
ersus spin. Sigh. The modern world, eh?
20. And here s the irony. The ChAFTA document is written up. It can no longer be c
hanged. Some minor amendments can be made at the edges in documents called side l
etters . But that s about it.
All that remains is for the ChAFTA to be ratified so that Australia s Asian future
can be realised. Yes, that same future first brought into the popular imaginati
on by a Labor Prime Minister Paul Keating.
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