In an article entitled “AUD Braces for China CPI Amid Strained Sino-Australian Relations,” I discuss the recent China trade agreement with Australia. Australia has also entered into a free trade agreement with China.
The same day as the China FTA came into force, there was a meeting of the Commonwealth trade ministers in Melbourne. The outcome of this meeting was not exactly positive. It was, however, a positive step forward.
It is no secret that China and Australia have strong economic ties. Many Australians are nervous about this. While the FTA with China is a significant improvement over the bilateral agreement (bilateral agreements are governed by a series of conditions that must be met in order to reach the final agreement), there is still a lot of business that needs to be done.
So how do you read the Australia China FTA? First, Australia and China will need to resolve some issues that could hinder the free flow of commerce. The areas include:
In addition, the quality of Australian labor will be subject to scrutiny. Remember, the FTA has a clause that prohibits discrimination of any kind on the basis of race, religion, gender, sex, age, political opinions, and origin. Under the current Australian law, some protections exist, but they are not perfect.
One aspect of the negotiation that may be of interest to Australians is the following: the AUD Braces for China CPI and AUD Braces for Australian Productivity. If you are an Australian worker or business owner, you should pay attention. The political climate in Australia is very uncertain.
The Australian Labor Party recently made serious mistakes in their negotiations. One of those mistakes was allowing one of the Labor opposition party leaders, Anthony Albanese, to be an advocate for Chinese investment in Australia. You can read more about this in my AUD Braces for China CPI and AUD Braces for Australian Productivity article.
To summarize, the Australian Productivity Agreement with China has been somewhat rosy. Some areas that are contentious have been addressed, but some other areas remain unresolved.
The Australian Productivity Agreement with China has included provisions that prevent foreign direct investment from being used to buy assets or control local business activities. Additionally, the text includes provisions that require third parties to disclose certain facts to relevant parties.
One important component is the requirement that foreign direct investment must increase the productivity of Australian businesses. The terms of the agreement are vague and there are many issues to resolve. These issues include the following:
The agreement states that the Government of Australia and the Financial Service Providers should “endeavor to ensure that at least 75% of the investor’s total ownership interest is attributable to its full-time employees, their spouses, and their dependents.” The agreement also requires the Financial Service Providers to provide business opportunities for Australian residents, Australian company owners, and local, full-time workers.
The next political issue on the agenda is the processing of the bilateral Investment Treaty. Currently, the country’s parliament is conducting hearings on the Investment Treaty. It appears that the Labor government will need to approve a series of legislations for these hearings to take place.