ROSS KELLY17 NOV 2014 4:42AM
Australia and China inked afree-trade pact that eliminates or phases out tariffs on goods ranging from milk-to-copper-and services including education and banking. The historic deal, which will eventually render 95% of goods from Down Under tariff-free, may help Australia cope with a slowing mining boom. For China, the pact will allow it to channel a greater portion of US$1 trillion of planned outbound investment into Australian farms and mines.
1WHAT DOES IT MEAN FOR THE MINING SECTOR?
For miners, the immediate removal of import tariffs on copper, zinc and most aluminum products is good news. Coal producers will benefit from an immediate scrapping of tariffs on coking coal used to make steel, while imposts on thermal coal used to generate electricity will be phased out over two years. The free-trade pact couldn’t have come at a better time for big diversified miners such as BHP Billiton Ltd. that face thinner profit margins.
2WHAT DOES IT MEAN FOR AUSTRALIAN AGRICULTURE?
Australian dairy farmers are the big winners from the deal, with tariffs of up to 15% on cheese, liquid milk, butter and yogurt to be phased out over nine years. It is a development that will have New Zealand, the region’s premier dairy exporter, looking over its shoulder. Other notable farm goods given the tariff-free treatment include beef, lobster, walnuts and wine.
3HOW ABOUT SERVICES?
Services like foreign education, Australia’s third-largest export, will become increasingly important as the country’s mining boom peters out. The trade deal promises to smooth market access for Australian educational institutions into China, as well as for law firms, telecoms and healthcare providers.
The trade deal will smooth market access for Australian educational institutions into China.
4AND DOES THE DEAL HELP THE FINANCIAL SERVICES INDUSTRY?
Yes. A foreign investment quota of 50 billion yuan will be of particular interest to financial institutions, giving them the chance to buy directly into China’s previously restricted capital markets. Australian banks are turning to Asia to increase revenue and profits. It also offers more flexible hedging and investment opportunities to businesses.
5SO WHAT ELSE IS IN IT FOR CHINA?
Tariffs on goods made in China will fall, providing a deeper outlet for Chinese exporters suffering from muted demand in regions including Europe. The deal also promotes Chinese investment in Australia by raising the screening threshold for investments by private companies to A$1.08 billion from A$248 million. Australia, however, will continue to screen investments in agricultural land valued above A$15 million and apply stricter vetting to deals involving state-backed Chinese entities.
A$1.08 BillionAustralia's new screening threshold for investments by Chinese companies.
http://m.wsj.com/briefly/BL-263B-2696
