China Australia FTA - ChAFTA A Model for UK post-BREXIT Free Trade Agreements.

BREXITeers talk a lot about bilateral FTA's, perhaps the China-Australia FTA or CHaFTA will be a model for the UK post-BREXIT.

Here is a summary, from CCTV, of a debate held jointly with SkyNews Australia.




Upon full implementation of the agreement, 95 percent of Australian exports to China will be tariff free. These will include many agricultural products, including beef and dairy. In addition, there will be liberalisation of market access for Australia's services sector, and investments by private companies from China under 1,078 million AUD will not be subject to FIRB approval.

What looks good for the UK from this is:

• Bilateral trade deals work.
• Exports from Australia to China in Lobsters, Wine, Cherries, Iron Ore and Coal are up with this FTA.
• Trade flowed, with help from both Governments, quite quickly once the FTA was signed. 
• Banks and Financial services movement as part of the deal encourages trade.
• Some services liberalisation occurred as part of this deal.
• There has been a lot of foreign direct investment in each other's countries.

What is not so good, from a UK perspective, in terms of replicating this, is:

• It took ten years 2004 to 2014 to and 22 rounds of negotiation to do get this done.
• Australia is there first, and selling products the UK would also want to sell such as milk powder, lobster and meat. And obviously, Australia is closer than the UK so can react to orders more quickly.
• Australia is providing a lot of products the UK cannot replicate, wine (even the most hardened BREXITeer isn't going to say English Wine is better than Australian wine!), cherries, minerals and coal. So a full direct comparison can't be made.
• China has wanted to buy farms in Australia, but this has been resisted by Australian Government and people.
• Australia has invested heavily to support its industry exports to China, though this will inevitable pay off, does BREXIT require more investment in export support than currently? That is something to be considered, which would also eat into that £350m per week saving promised to other areas.
• Even after 10 years of negotiation, barriers don't completely fall on signing the FTA "Australian company Tender Plus has been importing Australian beef to Shanghai for 16 years, providing 5,000 tons a year of processed products to five-star hotels, restaurants and supermarkets. On January 1, the import duty on Australian beef was cut to 9.6 percent from 12 percent, and it will be eliminated altogether in nine years. The company’s general manager says the FTA will save them at least 8 million yuan a year."
• Although BREXITeers insist that FTA's don't involve migration. As with lots of FTA's this also includes Visa allowances. There will be a Work and Holiday Agreement in which Australia will grant up to 5,000 visas to Chinese nationals for work and holiday makers.
• Like all treaties, they need to include a dispute process, which this one does, there will be an Investor State Dispute Settlement mechanism under the treaty. When two countries do a deal, some independent oversight is required which needs to be resolved in line with the UK's sovereignty requirements. 
• Another BREXITeer argument is that FTA's are only about trade in goods and services. Again ChAFTA  shows that this is not the case. This article shows how China wants to push its story via media. China's propaganda arms push soft power in Australian media deals. This is so China can get out its message on Human Rights and the South China Sea islands dispute. Is the UK happy to open up media ownership in the UK to Chinese ownership?

So this is a good video on how Chile and China FTA worked and the importance of financial links.



A point well made here is that its businesses and customers that actually trade not leaders and countries and that Australia relationships with China have been made long before the FTA came into being.

A great question on technology, from a guy in a cowboy hat. Shows you should never judge a book by its cover! This beef farmer, with experience of exporting to China, says Chinese consumers use WeChat and QR codes as part of buying experience. His knowledge of selling in China shows it is not just about sending your goods to a port in China and hoping wholesalers, retailers and consumers will buy them. Instead, marketing, packaging, product development and technology, all have to be invested in by manufacturers, so that local consumers understand your product and can buy it easily.



In summary Australia, without any of the hindrances the UK has, took ten years to sign the deal and it will take another nine years to achieve the maximum "free" trade under the deal. There can be little doubt that this going to repay any investment costs, but nothing here is quick.

Angela Leadsom promised Trillion Dollar deals in 22-24 months, so right now, in August 2016 the UK is 20 months away from our first FTA. So basically BREXITeers will achieve in 22 months what Australia and China managed in 19 years. Everything is possible, let's not be negative. Exciting times!