17 June 2015
Australia set to reap $20 billion export boost
China’s tumbling trade barriers will stimulate billions of dollars of growth for Australian goods and services, with exports to northern Asian markets expected to grow in value by $20 billion over the next 20 years.
Trade Minister Andrew Robb will today formally ink the landmark free-trade agreement with China after more than 10 years of negotiation. A new government-commissioned report predicts the Chinese deal, combined with similar FTAs with Japan and Korea, will boost exports by more than 11 per cent to 2035.
Tony Abbott said the signing of the Chinese deal marked a “historic day”. “I am delighted that, as promised, the Coalition has finalised this agreement. Trade means jobs, and more trade means more jobs,” the Prime Minister said.
The final sealing of the trade pact will also trigger the release of its full text, with the deal to be tabled in parliament later today for scrutiny. Labor has said it will “methodically work through the detail” of the agreement, raising concerns about labour mobility clauses that will make it easier for migrants to work in Australia.
Signing the deal with China’s Commerce Minister Gao Hucheng in Canberra, Mr Robb will release new modelling outlining the forecast benefits of the deals struck with China, Korea and Japan. But the report from the Centre for International Economics also finds that a surge in cheap imported goods expected under the agreements will see the country’s trade deficit widen.
The government-commissioned CIE report shows the three north Asian deals, primarily driven by China, will stimulate total exports to northern Asian markets by up to 11.1 per cent by 2035, growing in value by about $20bn.
But given the expected diversion from other markets, total Australian exports will increase 0.5 per cent compared to what would be the case without the FTAs in force by 2035.
At the same time, an abundance of cheaper consumables available to Australians will result in a 8.3 per cent surge in imported goods from the three Asian markets, underpinning a total increase of imports of 2.7 per cent by 2035.
The forecast jump in imports comes after Australia’s trade deficit hit a record $3.9bn in April, highlighting the country’s exposure to the softening Chinese economy and lower demand for Australia’s resources. Mr Robb said about 70 per cent of those imports would translate to cheaper inputs for Australian businesses such as high-end manufacturers.
“The world has changed and we need to get away from this mindset that exports are good and imports are bad. Cheaper products are also good for households and consumers, they increase buying power which translates into higher living standards,” he said.
The modelling revealed “substantial economic gains” flowing to Australia from the trifecta of trade agreements sealed by the government which will result in 95 per cent of Australian exports being tariff-free when fully implemented.
The modelling finds that as a result of the trade stimulus on the economy, households will spend $46bn more over the next 20 years, equating to nearly $4500 per household.
The government also claims that between 2016 and 2035 there will be 178,000 additional jobs as a result of the FTAs; averaging almost 9000 more jobs a year.
Beef, dairy and wine industries are seen the big winners from the agreement, with dramatic tariff reductions across agricultural exports. But other new markets are also set to be unlocked, with tariffs to be reduced on boutique whiskey, sea cucumbers, opal products and deer velvet.
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