0
Contents
Executive Summary ..................................................................................................................................... 3
1.
Introduction ......................................................................................................................................... 6
2.
Trade in Goods ................................................................................................................................... 7
2.1
Bilateral Trade between Australia and China .............................................................................. 7
2.2
South Australian Trade with China .............................................................................................. 8
2.2.1
Disaggregated Analysis of South Australian Trade with China ........................................... 8
2.2.2
South Australia’s trade and comparative advantage ........................................................... 9
2.2.2.1 South Australia’s Revealed Comparative Advantage in comparison to other States and
Territories .......................................................................................................................................... 12
3
2.2.2.2
Disaggregated Analysis of Key Non-agricultural Goods ................................................... 14
2.2.2.3
Disaggregated Analysis of Key Agricultural Products ....................................................... 18
2.2.2.4
Possible Impacts of ChAFTA Commitments on Agriculture for South Australia ............... 20
2.2.2.5
Wine Sector ....................................................................................................................... 22
Trade in Services and Investment .................................................................................................... 23
3.1
Restrictiveness of services trade sectors in China – An overview ............................................ 23
3.1.1
Service Trade Restrictiveness Index – OECD................................................................... 24
3.1.2
Service Trade Restrictiveness Index – World Bank .......................................................... 27
3.2
Services Sector Coverage in ChAFTA: China’s Commitments to Australia in Comparison to
Other Main Liberalizing Trade Agreements .......................................................................................... 31
3.2.1
Services Liberalization ....................................................................................................... 31
3.2.2
Service Sectors Included in the Agreements..................................................................... 31
3.3
Detailed Analysis of Service Provisions under ChAFTA with focus on SA sectors of interest .. 36
3.3.1
Mining Services Sector ...................................................................................................... 36
3.3.2
Agriculture (Wine) .............................................................................................................. 37
3.3.3
Audiovisual Services Sector .............................................................................................. 38
3.3.4
Education Services Sector................................................................................................. 40
3.3.5
Financial Services Sector .................................................................................................. 43
3.3.6
Health Related and Social Services (services for the aged) ............................................. 52
3.3.7
Tourism and Travel Related Services Sector .................................................................... 53
3.4
Foreign Direct Investment ......................................................................................................... 56
3.4.1
FDI in China: Foreign Direct Investments: China’s Foreign Investment Industries Guidance
Catalogue .......................................................................................................................................... 56
3.4.2
3.5
FDI in ChAFTA: Chapter 9 Investment .............................................................................. 58
Chinese Free Trade Zones ........................................................................................................ 61
3.5.1
Shanghai Free Trade Zone (SFTZ) ................................................................................... 61
3.6
Labour Mobility .......................................................................................................................... 68
3.7
Conclusion ................................................................................................................................. 69
1
APPENDIX 1: GOODS .............................................................................................................................. 71
The Gravity Model ................................................................................................................................. 72
Revealed comparative advantage index for Australian States and Territories in 2014 ........................ 88
SA exports of agricultural products to China in 2014 (AUD) ................................................................. 92
Agriculture provisions under ChAFTA in comparison to other FTAs .................................................... 96
ChAFTA’s Impact on Agribusiness: A case study of wine .................................................................. 104
APPENDIX 2: SERVICES & INVESTMENTS ......................................................................................... 137
A.
Service Sectors Included on the Five Compared Trade Agreement and the Comparison of
Service Sector Differences with ChAFTA in regards to China’s Commitments .................................. 138
China-Australia Free Trade Agreement (ChAFTA) ........................................................................ 138
New Zealand – China Free Trade Agreement ................................................................................ 142
Sector differences between ChAFTA and ChNZFTA – China’s schedule ..................................... 145
ASEAN-China Free Trade Area .......................................................................................................... 146
Trade in Services Agreement (TIS Agreement) ............................................................................. 146
Sector differences between ChAFTA and ASEAN-China TISA – China’s schedule ...................... 146
China-South Korea Free Trade Agreement (ChKFTA) ....................................................................... 149
Sector differences between ChAFTA and ChKFTA China’s schedule ........................................... 152
The Mainland and Hong Kong Closer Economic Partnership Arrangement....................................... 153
Mainland’s liberalization measures in the service sectors .............................................................. 153
Sector differences between ChAFTA and ChHKG CEPA – China’s schedule .............................. 160
B.
Commitments on Foreign Direct Investment Set on the Other Compared Agreements ......... 162
ChAFTA - Investment (Chapter9) ................................................................................................... 162
ChKFTA - Investment (Chapter 12) ................................................................................................ 164
ChNZFTA Investment (Chapter 11) ................................................................................................ 165
ASEAN-Ch TISA Investment .......................................................................................................... 166
2
Executive Summary
The China-Australia Free Trade Agreement (ChAFTA) is a comprehensive agreement that includes 17
Chapters over 161 pages that set out the rules by which liberalised trade will be facilitated between
Australia and China, six side letters, two related Memoranda of Understanding (MoUs) and approximately
1000 pages of specific trade commitments from both Australia and China. As China is the world’s second
largest economy and still one of the fastest growing, and is Australia’s largest trading partner with nearly
$160 billion in two-way trade in 2013-14, this agreement represents the largest in terms of potential value
for Australia of any of Australia’s current bilateral trade agreements. Further, as one of only a few bilateral
trade agreements that China has concluded with developed countries, ChAFTA not only liberalises trade
with a huge partner, but provides early access for Australia to the Chinese market, while equalising
imbalances that may have existed with China’s other FTA partners.
The provisions in ChAFTA cover not only goods, services and investment, but also procedural and
regulatory controls, including such areas as Sanitary and Phytosanitary Measures (SPS), Technical
Barriers to Trade (TBT), Rules of Origin (ROO) and Intellectual Property (IP). Further, ChAFTA also
contains administrative provisions crucial to the implementation and ongoing exploitation of the agreement,
such as institutional provisions (setting up an FTA Joint Commission) and Dispute Settlement. Together,
all of these provisions are crafted to work together to fully facilitate the operation of ChAFTA, and allow
stakeholders to access and take advantage of the benefits offered under the agreement.
China is also South Australia’s largest trading partner, and ChAFTA has the potential to have a significant
positive impact on the South Australian economy. In goods, services and investment, whether in
established two-way markets or by creating new opportunities for Australian and Chinese businesses and
investors, ChAFTA provides unprecedented, broad-based opportunities across many sectors, including:











Wine
Meat and edible offal
Aquaculture products
Copper
Lead
Iron Ore
Education services
Financial Services
Health and Social Services
Creative Industries
Tourism and related services
Trade in Goods
South Australia has exhibited positive economic impact from the implementation of previous FTAs,
particularly in regard to manufactured goods, but also in certain agricultural areas as well. What ChAFTA
provides is the potential to augment areas where South Australia currently enjoys a comparative advantage
and can potentially increase important exports, as well as highlight areas where comparative advantage
has been created or increased where export opportunities to China have been limited to date but have real
potential for growth.
In quantitative terms, all goods exported from South Australia to China in 2014 were exported under
specific tariff lines, with 83% of those tariff lines subject to Chinese tariffs (having a tariff rate higher than
0). Once ChAFTA is fully implemented, that percentage will drop to 5%, and that does not take into account
any products that may be exported under tariff lines that were not utilised in 2014 (potentially including
new export opportunities).
In qualitative terms, a drop in tariffs does not automatically equate to an increase in exports. It is important
to identify products and sectors where the trade liberalisation measures instituted under ChAFTA can lead
to a real and positive effect on exports, and where more work is necessary to remove non-tariff barriers to
market entry.
3
Horticulture
Certain tariffs for horticulture products will reduce to zero under ChAFTA. However, China has traditionally had very
closed markets to products such as stone fruits (peaches, cherries, etc.). Traditionally, the barriers faced have been
not only in tariffs, but in non-tariff measures such as sanitary and phytosanitary (SPS) regulation. Accordingly,
although markets exist, South Australia to date has seen no significant exports to China.
The South Australian Government can petition the Commonwealth Government to engage their Chinese counterparts
under ChAFTA to seek the loosening of these non-tariff measures, in order to gain access to the Chinese market for
South Australian horticulture products such as stone fruits. If this is not achieved, the continued operation of non-tariff
measures to block imports of stone fruit and other products will constitute a nullification and impairment of the benefit
of the tariff reduction, and no real benefit from the removal of tariffs will be achieved under ChAFTA.
Source: Horticulture Exports Australia (HEA)
For example concerning wine, we have identified that full implementation of ChAFTA, including a reduction
in Chinese tariffs to 0% in five years, would equate to an additional 10 megalitres of Australian wine
exported to China by 2018, offsetting what would have been a 1megalire loss to NZ and Chile, pursuant
to implementation of their respective free trade agreements with China. While Australia is already China’s
second largest wine supplier, and South Australia is the largest supplier to China in Australia Supplying
two-thirds of Australian wine exports to China), this implies that not only will South Australia’s comparative
advantage be increased against other regions exporting wine to China, but also that South Australia has
the potential to maintain its strong position against its domestic counterparts and capture a proportional
measure of the expected increase in exports. Further, as the trend in exports is towards premium wine,
the 10 megalitres translates to approximately $135million for Australian producers, and approximately
$90million for South Australian producers.
While meat is a large South Australian export to China, in a subcategory that may not get public attention,
guts, bladders and stomachs, China accounts for almost 93% of all South Australian exports, equal to
$14.2 million in 2014. This sector currently incurs a 19.3% tariff, which will be reduced to 0% upon full
implementation of ChAFTA, indicating an area where we can grow our only substantial export market for
these meat by-products.
In the mining sector, aside from products regularly discussed in public forums, South Australia is a world
leading exporter of lead (holding nearly 10% of the world market), with only 1.5% of our exports already
going to China (with much more going to another potential FTA trading partner, India). The significant drop
in Chinese tariffs on lead can strengthen South Australia’s comparative advantage, and grow our exports
to China as well as our share of the world market.
With primary products such as those listed above, and specifically including mining, meat and wine
currently constituting the largest export sectors from South Australia to China, South Australia needs to
focus on these areas as having a good potential for continued growth. However, the future may evolve
around what are currently minor or even non-existent exports that can grow and become important
economic drivers under ChAFTA.
In this category might be included a broader range of agricultural goods, beyond wine, where South
Australia has strong capabilities that have not translated into significant exports to China. Here, tariff
reductions, in the context of the comprehensive framework of ChAFTA (including regulatory liberalisation
aimed at addressing behind-the-border issues), can potentially provide opportunities for market access
and growth for South Australian agricultural exports.
Live Lobsters
Until now, South Australian live lobster exports, for which there is demand in China, have mainly
travelled via Hong Kong, and often entered China indirectly via grey market channels. ChAFTA
opens the aquaculture markets in China, and will not only facilitate direct imports to serve local
markets, but can also open a broader market to legitimate trade, potentially simultaneously
raising demand and streamlining market access for South Australian live lobsters.
Source: Focus Group discussion with Seafood Industry, conducted by the Institute for International Trade, The
University of Adelaide
4
Trade in Services
The fact that trade in services accounts for approximately 70% of Australia’s productive activity highlights
its importance to the South Australian economy. As distinct from goods, the factors affecting trade in
services have less to do with tariffs, and more to do with the regulatory framework under which service
providers can act. For this reason, a comprehensive FTA like ChAFTA is necessary to address the factors
necessary to liberalise trade in services.
Services can act as enablers for trade, facilitating both trade in goods, by reducing trade costs and
administrative burdens associated with trade, as well as for other services. Good examples of services
which act as enablers are financial services, telecommunications and transport. For example, the opening
of the financial services market in China may have the most significant direct impact in Australia’s East
Coast financial centres, but will also facilitate South Australian businesses to more easily and securely
deal with Chinese businesses and customers, including in the making and receiving of payments.
Other collateral benefits of a robust services market include the contribution of services as inputs in
production for other services, manufacturing and agriculture. The benefit of the services contribution to
productivity acts in both directions, with Australian services expertise now more readily exploitable in the
Chinese market to boost their capabilities in such sectors as mining and wine production, and Chinese
services available to help Australian enterprises more competitive, including in specialised infrastructure
projects.
Services of particular interest to South Australia, in the context of ChAFTA, include education, tourism,
mining-related services, agricultural services (including wine), financial services (in particular financial
planning and wealth management), health and aged care services and the creative industries.
Education is South Australia’s most valuable services export, with China being by far the largest source of
foreign students, and growing in number by 75% per annum. Importantly, 90% of inbound Chinese
students attend institutions included on the Chinese Ministry of Education’s “White List”, and under
ChAFTA, within one year of entry into force, a further 77 Australian institutions will be added to that list.
Conversely, another way for South Australian educational institutions to reach Chinese students is by
establishing operations in China, which under ChAFTA will be much more easily accomplished, with the
facilitation of investment and movement of education service professionals.
Tourism is another important sector for the South Australian economy, and the Chinese domestic sector
has opened up for South Australian investment. While providing international travel services in China for
Chinese nationals has been excluded, continuing to act in concert with key Chinese providers will remain
an important avenue to attract inbound visitors. Meanwhile, investment in Chinese hotels and restaurants
has been liberalised for Australian investors, creating opportunities to enter new markets offshore.
Mining-related services have been identified by some of our largest industry participants as a growing
market in China. This market may provide a steady market in a field in which Australia has vast expertise,
but that has otherwise been dominated, for better or worse, by the fluctuating world market prices for
mining products.
South Australia has provided wine production related services in China for over a decade. With more
acreage under grapes than Australia, China’s domestic wine production is growing rapidly, and keeping
pace is the need for quality wine production services. With the nascent stage of development of the
Chinese wine industry, the rapid growth in the rate of consumption and the large and growing Chinese
middle-class continuing to raise demand, the provision of wine production services can likely coexist with
our ambitions in wine exports without fear of cannibalisation of markets, particularly where Chinese
domestic wine production will inevitably grow in volume and quality regardless of who provides the
expertise.
Public perception, rightly or wrongly, sees financial services as an Australian East Coast industry, with
Sydney and Melbourne dominating. However, with ChAFTA liberalising wealth management, financial
planning and insurance, a real opportunity exists in South Australia, home of the Self-Managed Super
Fund Association and a critical mass of financial planning service providers. With China’s aging population
planning for the future, this poses real potential for establishing a hub for these services in Adelaide.
A real area for potential growth under ChAFTA arises in the health care and aged care sectors, where all
of China has opened up for wholly Australian owned, for profit aged care facilities, and a great area of
China has opened up for Australian owned hospitals. Further, medical and dental professionals can now
enter into the Chinese market as well, including in partnership or collaboration with Chinese partnerships
and practices.
5
Finally, the creative industries in South Australia can realise benefit from ChAFTA as well. Foreign
investment in film production can be of particular interest, with South Australia’s high-level service
capabilities, including major motion picture production and favourable regulatory conditions making it an
attractive destination. Further, film, sound recording and magazine distribution in China is now open to
Australian investors (subject to Chinese content regulations), and cinema theatre ownership and
construction will be allowed, if done through joint partnership with minority Australian ownership.
Labour mobility, jobs, and 457 visas
ChAFTA provides access to Chinese service providers and skilled workers, under conditions very similar
to those that exist now, including utilising the 457 visa process. While the agreement facilitates access to
the Australian system for application to allow access for skilled Chinese workers, those workers will still
need to have any necessary qualifications recognised, and the positions would most likely still need to be
advertised locally before being made available to a skilled Chinese worker. Further, facilitated access for
work on large infrastructure projects is predicated on the Chinese direct investment of at least $150 million
in Australia. There is no provision for entry of unskilled labour. Accordingly, the provisions of ChAFTA
appear to allow entry of skilled workers only, with provision for requiring appropriate certification of relevant
skills, where equivalent expertise is unavailable in Australia, in order to provide necessary services in
Australia or facilitate the attraction of large foreign direct investment in large infrastructure projects.
Foreign Direct Investment (FDI)
Opportunities for FDI under ChAFTA include both inbound FDI from China and outbound FDI from
Australia. In either case, the identification of areas where Australia has a comparative advantage, or of
opportunities created where ChAFTA has given Australian investors access to a comparative advantage
in China, will be good indicators for potential FDI opportunities.
Australia has made significant adjustments to encourage foreign direct investment from China, including
raising the threshold for Foreign Investment Review Board (FIRB) review to US$1.094 billion dollars,
matching the level already extended to the U.S., New Zealand and Japan. This rule carves out investments
in agricultural land and agribusiness interests, for which the threshold for review is much lower, and
investments from State Owned Enterprises (SOEs) for which any level of FDI is subject to FIRB review. A
further service sector innovation that will encourage FDI will be the creation of an RMB clearing bank in
Sydney, that will facilitate transfers and foreign exchange.
Sectors where inbound FDI into South Australia can be facilitated under ChAFTA include large
infrastructure projects, the creative industries, agriculture, mining, research and development and highend manufacturing services.
Sectors where potential outbound FDI into China can grow under ChAFTA include the health and aged
care services sectors, tourism services including hotel, restaurant and cinema construction and ownership,
and education services.
1.
Introduction
The Free Trade Agreement between the Government of Australia and the Government of the People’s
Republic of China (ChAFTA) was signed on June 17, 2015 in Canberra, after more than ten years of
negotiations were finally concluded successfully. ChAFTA is expected to provide potential for significant
impact upon the South Australian economy. Accordingly, this study will analyse those potential effects
and endeavour to make observations relevant to South Australian economic policy making going forward.
The study begins with a review and analysis of both South Australian agricultural and non-agricultural
exports by analysing the economic mass of the two economies in relation to the distance between them,
as influences by a variety of other relevant factors (the gravity model). Analysis of the results of the model
will highlight categories where South Australia either enjoys a comparative advantage, or can gain such
advantage through utilisation of the provisions of ChAFTA.
We then turn to trade in services, a rapidly growing market in China, where new opportunities available to
South Australia hold real potential to create economic growth and development. The study employs both
the Hoekman Indicators (HI) and OECD and World Bank Services Trade Restrictiveness Index (STRI) to
determine advantage gained under ChAFTA for Australian services trade. Again, compared to China’s
6
other trading partners, analysis of these indices has focused attention on sectors where comparative
advantage may work in South Australia’s favour.
The report turns briefly to labour mobility under ChAFTA, as the topic has been the subject of media
attention, generating abundant heat but little light. This section provides a brief analysis of the provisions
in question, and the implications of their implementation.
Finally, investment, both inbound to Australia and outbound to China, is facilitated under ChAFTA and can
be largely driven by the identification of areas of comparative advantage identified above. The relaxation
of regulation of rules governing foreign direct investment completes the necessary reforms for the
encouragement of bilateral investment.
2.
Trade in Goods
In 2014 SA exported goods to China under 347 different tariff lines, of which 287 were subject to a tariff.
According to the non-official tariff schedule made public (DFAT, 2015), by year five of ChAFTA’s
implementation, only sixteen of those goods will still carry a tariff with another 22 goods unclear at this
stage.1 What will be the impact on SA’s exporters, and what opportunities will there be to develop new
trade or foster existing trade?
This chapter starts with a general overview of China’s role in Australia’s trade. Gravity model (GM) analysis
explains a large part of bilateral trade flows in terms of the size of the two economies and the distance
between them, modified by factors such as a shared colonial background or a common language. The
trade data for 2000, 2004 and 2009-14 also show that two countries in a regional trading arrangement of
having a bilateral trade agreement trade more than is explained by the standard variables. Even more
strikingly, the impact of trade agreements on bilateral trade flows has increased substantially since the turn
of the century.
The gravity model also highlights differences in the determinants of South Australian trade with China,
compared with other states’ and territories’ trade, and between trade in agricultural and non-agricultural
goods. These are related, given the composition of South Australian exports, and justify separate
treatment of agricultural and non-agricultural products. The chapter concludes with deeper analysis of nonagricultural goods of particular interest to SA and its trade relationship with China. In that section, South
Australia’s Revealed Comparative Advantage to China and the world is investigated.
2.1 Bilateral Trade between Australia and China
Bilateral trade flows are determined primarily by the economic mass of the two countries and the distance
between them. This gravity model (GM) can be modified to allow for other influences, such as having a
common border, a common language or historical background, and also to identify significant policy
influences such as a trade agreement. This section reports GM estimates for Australia, and then analyses
the impact of trade agreements and specific features of China-SA trade to gain a baseline idea of the
quantitative impact of ChAFTA and to identify products where the agreement may be especially important
for SA. The text reports the main results, while the technical details are in Annex 1.
The GM has been the workhorse model for empirical studies of international trade over the last two
decades, and it is not surprising that it performs well with Australian data. Australia trades more with larger
or closer economies and less with more distant or smaller economies, other things equal. A shared history
and common language are among the “other things” that explain why Australia trades more than the simple
GM predicts with countries such as New Zealand, Singapore or Malaysia. These determinants all come
out clearly in the GM analysis reported in Annex 1.
The GM analysis also provides evidence that two countries with a trade agreement trade more with one
another than the simple GM prediction. Moreover, this relationship between having a trade agreement
and the level of bilateral trade has, unlike the case with all other variables in the GM, increased in strength
“Please note that this version of China's tariff commitments has been provided solely to aid traders in interpreting and applying the tariff
outcomes contained in the Schedule of China in Section 2 of Part 3 of Annex I to the China-Australia Free Trade Agreement. It is intended
to operate as an indicative guide only and should not be relied upon as representing the tariff commitments contained in the ChinaAustralia Free Trade Agreement. This version of China's tariff commitments is not a legal document and does not form part of the ChinaAustralia Free Trade Agreement.
1
DFAT accepts no liability for any claim, loss or expense arising from use of information contained in this version of China's tariff
commitments and no responsibility for any errors contained herein. Reliance on this information is at the user's risk.”
7
since 2000. There are several possible explanations of this pattern, most likely associated with the twentyfirst century proliferation of trade agreements, especially in the Asia-Pacific region. By 2014, for two
countries belonging to a free or regional trade agreement, bilateral trade flows were higher by 178%.
Finally, the GM analysis provides support for treating trade in agricultural and non-agricultural goods
separately. The drivers of bilateral trade flows have differing impact for the two sectors. Moreover, in our
GM analysis of twenty-first century trade, the impact of trade agreements appears to be greater with
respect to agricultural trade. Therefore, while trade in non-agricultural goods will be analyzed in the
remainder of this chapter, trade in agricultural products will be dealt with separately and in greater depth
in the next chapter.
Such estimates need to be treated with caution. Not all trade agreements are equal; Australia’s Closer
Economic Relations pact with New Zealand is more comprehensive and deeper than, say, the AustraliaChile trade agreement. Precise GM specification affects the regression coefficients, although the Annex
shows that the results are qualitatively robust with only small changes in the major relationships across
different specifications. Finally, our GM results suggest that there may be considerable heterogeneity
across different goods.
In sum, the aggregate GM results provide an evidence-based starting point for expecting that a trade
agreement with Australia’s largest trading partner will have a large impact on Australia-China bilateral
trade. The next steps are to investigate whether that conclusion applies to South Australia’s trade with
China, and for which goods the impact is likely to be strongest. Such analysis can help governments to
identify what policy support will be appropriate for reaching desirable outcomes.
2.2 South Australian Trade with China
Australian trade can be broken down using ABS data on trade by state and territory. As a first step, we
reproduced the GM analysis replacing Australia by the eight states and territories, i.e. instead of 26 trading
units plus Australia there were now 34 trading unites. The results change very little, suggesting that the
model estimates are stable and, at least at the aggregate level the states’ and territories’ trade patterns
are not very idiosyncratic.
Among the differences that do emerge are smaller coefficients for “exporter’s GDP” and “common
language” for SA, compared to, for example, NSW, which reflects greater reliance on primary products
and perhaps less sophisticated products. On the other hand, the coefficient on the trade agreements are
on average larger for SA, implying that the SA economy is on average more responsive than other states
to the signing of trade agreements by Australia. When, however, the GM analysis is further controlled by
agricultural and non-agricultural goods separately, the coefficients differ. For SA, the coefficient for trade
agreements for non-agricultural goods is found to be larger than that for agriculture products. This shows
the opposite effect of trade agreements compared to the aggregated analysis, where agriculture goods
had a stronger coefficient than non-agriculture goods.
For detailed results of the GM analysis, refer to Appendix 1.
2.2.1
Disaggregated Analysis of South Australian Trade with China
South Australian exports to China are heavily concentrated in a few sectors, most of which are based on
primary products (Table XYZ). Mining, meat and beverages (primarily wine) were the only HS 2-digit
products with exports to China worth more than USD100 million in 2014. Thus, as a first pass, we will
focus on these products’ likely performance under the China-Australia Free Trade Agreement. SA should
also be investigating which new or, currently minor, exports can grow in response to new opportunities.
Table 2.1: South Australia’s Top Ten Exports to China In 2014, by HS2-digit category
HS Code
26
74
02
22
12
51
10
41
44
76
Description
Ores, slag and ash
Copper
Meat
Beverages
Oil seeds, straw and fodder
Wool
Cereals
Hides & skins
Wood & wooden articles
Aluminium
Value (USD million)
1,212.11
579.80
120.83
104.80
66.78
41.68
35.77
29.61
17.16
16.95
8
2.2.2
South Australia’s trade and comparative advantage
In our analysis we investigate South Australia’s revealed comparative advantage (RCA) with China and
the world. We look at the gains from trade of the State’s areas of specialization in area where SA is able
to produce relatively more efficiently than other countries and states. The RCA analysis is based on
Balassa (1965) and can be used to discover goods in South Australia in which the state has a revealed
comparative advantage. The RCA is defined as the ratio SA’s share of the good in SA’s total merchandise
exports to the share of world exports of that same in good in total world exports.
SA has a RCA if the value of the RCA index is larger than 1. If the value of the RCA is less than 1, SA is
considered to have a revealed comparative disadvantage.
The first part of this section provides an overview of South Australia’s comparative advantages with the
world and China by looking at the 96 goods of the HS 2-digit classification for the year 2014.
This section is then followed by a detailed analysis of South Australia’s 2014 comparative advantages
compared to other States and Territories.
We then follow with a detailed discussion of Non-agriculture and Agriculture goods.
South Australia’s Revealed Comparative Advantage: an overview
With our RCA analysis we have identified products and goods which do not appear immediately as
significant goods based on a simple evaluation of their share of exports, i.e. in comparison with Table 2.1.
Figure 2.1 provides an overview of the 96 product classifications under the HS classification in which South
Australia has a comparative advantage with China in comparison with the World. The blue lines indicate
South Australia’s comparative advantage with the world, and the red line South Australia’s comparative
advantage with China. If the blue line is larger than the red line, then this is an indication that SA has a
stronger comparative advantage with the world than with its trade with China. In some areas, we identify
a comparative advantage with the world but a relative disadvantage in SA’s trade with China. In both areas,
ChAFTA could be a facilitator to trade by providing additional market access to China.
In summary, South Australia has a revealed comparative advantage with the world and China collectively
in only 22 of the 96 product classifications of the HS 2-digit level. 11 of these are found to be agricultural
nature and another 11 of non-agricultural nature.
Table 2.1 summarises and compares the comparative advantages in further detail:
o
South Australia has a comparative advantage in world trade for 19 products (9 Agricultural and
10 Non-Agricultural)
o
South Australia has a comparative advantage in the trade with China in 14 products (7 each
for Agricultural and Non-Agricultural)
o
In 7 product classifications, South Australia has a revealed comparative advantage in its trade
with the world but not with China
o
In only 3 cases do we find a revealed comparative advantage with China but not with the world
o
In 6 cases, South Australia has a stronger revealed comparative advantage in its trade with
the world than with its trade with China
o
In 5 cases we find a stronger comparative advantage with trade with China than with SA’s
trade with the world
9
Figure 2.1: South Australia’s revealed comparative advantage with China in comparison with trade with
the world at the HS 2-digit level, 2014
- RCA with the world
Source:
- RCA with China
IIT, ABS, UN Comtrade
10
TABLE 2.1
SOUTH AUSTRALIA TO THE WORLD (19)
SOUTH AUSTRALIA TO CHINA (14)
9 agricultural products
7 agricultural products

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







01 Live animals
02 Meat & edible meat offal
05 Product of animal origin
07 Edible vegetable
08 Edible fruits & nuts, peel of citrus, melons
10 Cereals
11 Milling Industry Products
12 Oil Seeds, Oleagic fruits, grain, seed, fruit
etc.,other
22 Beverages





02 Meat & edible meat offal
03 Fish, crustaceans, molluscs, aquatic invertebrates,
other
05 Product of animal origin
10 Cereals
12 Oil Seeds, Oleagic fruits, grain, seed, fruit
etc.,other
20 Vegetable, fruit, nut etc., food preparations
22 Beverages
10 non-agricultural products
7 non-agricultural products


















26 Ores Slag & Ash
28 Inorganic chemicals, precious metal compound,
isotope
33 Essential oils, perfumes, cosmetics, toiletries
41 Raw hides and skins (other than furskins) and
leather
51 Wool, animal hair, horsehair yarn and fabric thereof
70 Glass and glassware
74 Copper and articles thereof
78 Lead and articles thereof
79 Zinc and articles thereof
93 Arms and ammunition, parts and accessories
thereof
26 Ores Slag & Ash
33 Essential oils, perfumes, cosmetics, toiletries
41 Raw hides and skins (other than furskins)
51 Wool, animal hair, horsehair yarn and fabric thereof
74 Copper and articles thereof
76 Aluminium and articles thereof
78 Lead and articles thereof
Table 2.2 shows the 12 common products which South Australia has comparative advantage with both
the World and China. It also indicate which of the 12 has China has the higher or lower comparative
advantage in relation to the World, which is also shown in the charts by either a half or full vertical line.
TABLE 2.2
PRODUCT
HIGHER/LOWER COMPARED TO WORLD
5 Agricultural products





02 Meat & edible meat offal
05 Product of animal origin
10 Cereal
12 Oil Seeds, Oleagic fruits, grain, seed, fruit etc.,other
22 Beverages
Lower
Higher
Lower
Lower
Higher
7 Non-agricultural products









26 Ores Slag & Ash
33 Essential oils, perfumes, cosmetics, toiletries
41 Raw hides and skins (other than furskins)
51 Wool, animal hair, horsehair yarn and fabric thereof
74 Copper and articles thereof
76 Aluminium and articles thereof
78 Lead and articles thereof
Lower
Higher
Higher
Lower
Lower
Higher
Higher
Nine of of 10 of SA’s top 10 exports to China appears the list of SA’s comparative advantage to China.
The remaining product which SA is exporting no comparative advantage with China (or the World)(i.e.
Wood).
One product which SA has comparative advantage with China and the world is 78 Lead and articles
thereof
11
2.2.2.1
HS
South Australia’s Revealed Comparative Advantage in comparison to other States and Territories
Description
1 Live animals
2 Meat and edible meat offal
Fish and crustaceans, molluscs and other
3 aquatic invertebrates
Products of animal origin, not elsewhere
5 specified or included
Edible vegetables and certain roots and
7 tubers
Edible fruit and nuts; peel of citrus fruit or
8 melons
10 Cereals
Products of the milling industry; malt;
11 starches; inulin; wheat gluten
Oil seeds and oleaginous fruits;
miscellaneous grains,seeds and fruit;
industrial or medicinal plants; straw and
12 fodder
Preparations of vegetables, fruit, nuts or other
20 parts of plants
22 Beverages, spirits and vinegar
26 Ores, slag and ash
Inorganic chemicals; organic or inorganic
compounds of precious metals, of rare-earth
28 metals, of radioactive elements or of isotopes
Essential oils and resinoids; perfumery,
33 cosmetic or toilet preparations
Raw hides and skins (other than furskins) and
41 leather
Wool, fine or coarse animal hair; horsehair
51 yarn and woven fabric
74 Copper and articles thereof
78 Lead and articles thereof
79 Zinc and articles thereof
Arms and ammunition; parts and accessories
93 thereof
SA to
World
5.2
16.8
SA to
China
0.0
16.7
NSW to NSW to
World China
2.1
0.2
9.7
14.8
WA to
World
2.8
0.7
WA to
China
0.1
0.3
NT to
World
56.9
0.0
NT to
China
0.0
0.0
VIC to
World
11.7
18.4
VIC to
China
159.1
30.4
TAS to
World
0.0
1.0
3.7
0.4
0.1
2.9
21.6
6.3
TAS to QLD to QLD to
China World China
0.0
5.0
0.5
20.7
1.8
13.5
0.0
0.6
0.0
0.0
0.0
1.2
0.3
0.8
10.9
0.7
0.2
1.7
10.2
0.3
0.7
0.2
0.9
7.1
59.1
0.1
2.3
0.7
0.8
0.0
1.0
0.0
0.2
0.0
0.0
0.0
3.5
0.0
0.3
0.0
1.9
0.0
2.5
20.9
0.4
4.7
0.7
3.8
1.1
7.3
0.0
4.8
0.0
0.6
0.1
0.0
0.0
0.0
5.1
7.1
1.9
8.5
0.2
0.0
2.5
0.0
0.4
1.1
0.4
3.9
7.1
0.3
11.3
1.1
1.7
0.0
0.0
0.0
5.7
0.4
0.0
0.0
1.1
0.0
6.3
1.2
0.7
0.4
1.4
0.1
0.2
0.0
3.3
1.0
0.2
0.1
0.5
0.0
0.5
17.2
1.6
28.4
13.5
7.2
0.3
2.4
5.4
0.0
2.9
2.4
0.0
0.1
40.3
0.0
0.1
12.0
0.0
0.0
19.8
0.0
0.0
13.9
0.8
1.5
0.2
1.1
10.1
0.2
0.0
0.0
1.8
0.0
1.1
7.3
0.3
0.1
5.4
0.1
0.1
2.0
1.0
0.1
0.1
0.1
0.7
0.1
1.5
0.0
0.2
0.2
0.0
0.0
0.1
0.0
1.1
3.2
1.0
0.7
0.0
0.0
0.0
0.0
1.0
0.6
0.0
0.0
0.2
0.1
1.9
2.9
4.5
6.4
0.3
0.2
1.1
0.0
11.8
26.1
0.2
4.2
4.1
6.7
13.4
15.0
96.6
2.9
9.9
9.9
64.8
0.0
19.5
0.7
9.9
0.1
33.9
0.6
0.8
0.0
4.6
0.0
0.0
0.0
3.3
0.0
0.0
0.0
0.1
0.0
0.0
0.3
0.0
0.0
0.0
0.0
76.2
0.7
0.3
0.2
139.5
0.6
0.0
0.0
1.2
0.0
2.0
29.7
19.8
0.0
9.0
218.8
0.6
7.3
21.1
13.4
0.9
5.4
0.6
13.9
1.1
0.0
1.0
0.0
0.0
0.0
0.0
0.0
3.5
0.0
0.0
0.0
0.1
0.0
12
This section provides additional details on the extent of South Australia’s RCA in its trade to the world
and its trade relationship with China in comparison to the other States and Territories.
Of the 22 product sections identified in which South Australia has a comparative advantage in only 8
of those, South Australia has a relative absolute advantage compared to the other Australian States
and Territories.
The table summarizes the results for 2014.
Accordingly, South Australia carries a relative absolute comparative advantage in the following
product classifications which are highlighted with blue font colour. In areas where SA has a relative
lower comparative revealed advantage or a disadvantage, the best performing States are highlighted
in red font colour as SA’s main competitors:
-
-
-
-
-
-
-
-
HS 03: Fish and crustaceans, molluscs and other aquatic invertebrates
o With a RCA of 3.7, SA carries a relative absolute advantage in its trade with the world
compared to the other States and Territories.
o SA has a relative revealed comparative disadvantage in its trade with China (0.4).
Tasmania with 10.9 is the leading State in Australia.
HS 07: Edible vegetables and certain roots and tubers
o SA has a relative comparative absolute advantage with a RCA of 6.3 compared to
other States in its trade with the World.
o SA has a comparative disadvantage in its trade with China. No other State has a
comparative advantage is this sector.
HS 10: Cereals
o SA has a strong revealed relative absolute comparative advantage in its trade with
the world (20.9) compared to other states (Victoria is next best with a world
comparative advantage of 7.1).
o Surprisingly, SA is not taking advantage of its RCA with its trade with China as much
as it should. Instead, other States outperform SA (NSW and Victoria).
HS 12: Oil seeds and oleaginous fruits; miscellaneous grains,seeds and fruit; industrial or
medicinal plants; straw and fodder
o SA has a relative revealed comparative absolute advantage in both trade with the
world and trade with China in comparison to other states
HS 20: Preparations of vegetables, fruit, nuts or other parts of plants
o SA has a small comparative advantage in its trade with China
HS 22: Beverages, spirits and vinegar
o SA has a strong relative comparative absolute advantage in trade with the world and
in the trade with China compared to other States and Territories
o The next best competitor in trade with China is Victoria
HS 33: Essential oils and resinoids; perfumery, cosmetic or toilet preparations
o SA has a small but absolute relative comparative revealed advantage in its trade with
the world and with China in comparison to other states
o Only Victoria has a revealed comparative advantage in this sector in the state’s trade
with the world
HS 74: Copper and articles thereof
o SA has a relative absolute revealed comparative advantage in Copper etc in both
trade with the world and with China in comparison with other states
o Queensland is the only state with a comparative advantage and is therefore SA’s
main competitor
HS 78: Lead and articles thereof
13
o
o
2.2.2.2
With a revealed comparative advantage of 96.6 and 64.8 in its trade with the world
and China, respectively, Lead etc is SA’s strongest comparative advantage of all
products and a very solid relative absolute advantage compared to other States.
Tasmania and Queensland are competitors with much smaller RCA figures.
Disaggregated Analysis of Key Non-agricultural Goods
The following section looks specifically at the key non-agricultural export commodities of South Australia
to China. The section looks in detail at the export values to China, to the world, the Chinese average
tariff rates in 2015 and in 2020 according to the information provided by DFAT, 2015. Furthermore, the
discussion includes South Australia’s revealed comparative advantage with its trade with the world and
with China.
TABLE 2.3 - Non-agricultural goods
HS
Description
Exports
to
China
(mn
AUD)
1,342.6
Exports to
the World
(mn AUD)
Exports
to China
as % of
total
T
2015
T
2020
RCA
World
RCA
China
2,122.7
63.2
1.4
0.0
13.5
7.2
26
Ores, slag and ash
74
Copper and articles thereof
642.2
1,420.0
45.2
6.9
4.5
15.0
9.9
51
46.2
114.0
40.5
12.3
4.8
13.4
9.9
32.8
40.4
81.2
9.3
7.0
1.9
2.9
19.0
26.8
70.8
3.7
1.2
0.3
0.6
18.8
34.7
54.2
8.5
6.3
0.3
1.7
13.1
258.0
5.1
5.6
3.5
0.1
0.0
12.2
72.4
16.9
14.6
11.7
1.1
3.2
11.2
119.9
9.3
9.5
7.4
0.1
0.0
8.2
108.3
7.5
7.8
5.3
0.3
0.1
6.7
371.4
1.8
16.1
13.3
0.4
0.1
78
Wool, animal hair, horsehair
yarn and fabric thereof
Raw hides and skins (other
than furskins) and leather
Wood and articles of wood,
wood charcoal
Aluminium and articles
thereof
Mineral
fuels,
oils,
distillation products etc.
Essential oils, perfumes,
cosmetics, toiletries
Electrical,
electronic
equipment
Optical, photo, technical,
medical etc. apparatus
Vehicles other than railway,
tramway
Lead and articles thereof
6.3
420.9
1.5
4.5
2.7
96.6
64.8
72
Iron and steel
4.4
145.9
3.0
5.0
2.8
0.6
0.2
39
Plastics and articles thereof
4.0
52.6
7.6
7.9
6.3
0.1
0.0
41
44
76
27
33
85
90
87
Observations – Top 15 South Australian Non-Agriculture exports to China
From Table 2.3: Top 15 South Australian non-agriculture exports to China (analysis based on HS-2
digit, 2014); the following observations can be made:
 The top 15 exports all have varying degrees of revealed comparative advantage with China and the
World.
 Analysis confirms two Mining product categories as key exports with revealed comparative
advantage with both China and the World:
o 26 Ores, slag and ash
o 74 Copper and articles thereof
Copper’s RCA indicator for China slightly higher than Ores. Tariffs are expected to zero by 2020
for Ore products and reduced from 6.9% to 4.5% for Copper. This is expected to further enhance
South Australia’s comparative advantage with, and export to, China.
 Further analysis at HS-4 digit reveals (Table 2.4) that Copper ores falls under the 26 Ores, slag and
ash category, thus further highlighting the importance of copper as an export commodity for South
Australia.
14



All but two product categories have stronger revealed comparative advantage with the World in
comparison with China. The two categories where China has higher comparative advantage when
compared to the World are:
o 33 Essential oils, perfumes, cosmetics, toiletries
o 76 Aluminium and articles thereof
Both are expecting to have their tariff rates reduced by between 2-3%, combined with their overall
percentage of exports to China as a percentage of world total of 16.9% and 54.2%, South Australia
could explore opportunities to increase export of both products.
Only one product category in the top 10 will have their tariff rate zeroed compared to 50% of the
top 10 agriculture products (see Table XYZ). The tariff reductions for non-agriculture products are
in general smaller than agriculture goods.
Key highlight observed is product category 78 Lead and articles thereof where South Australia very
high revealed comparative advantage to both the World and China, in fact higher than Copper –
SA’s second largest non-agriculture export to the World and China. While lead is South Australia’s
3rd largest export (in dollar terms)to the World and despite the significant revealed comparative
advantage to China, lead export to China is small accounting for less than 2% of total lead export.
There are significant opportunities of SA export of lead products to China in addition to China,
particularly with the already low tariff (4.5%) expected to be further reduced to 2.7%
TABLE 2.4 – Analysis at HS-4 digit level
HS
Description
Exports to
the World
(mn AUD)
Exports
to China
as % of
total
T 2015
T 2020
Iron ores and concentrates, roasted iron pyrites
Exports
to
China
(mn
AUD)
1,167.4
2601
1,192.9
97.9
0.0
0.0
7403
Refined copper and copper alloys, unwrought
625.5
1,396.3
44.8
1.7
0.0
2603
Copper ores and concentrates
175.2
928.6
18.9
0.0
0.0
5101
Wool, not carded or combed
46.2
113.9
40.5
38.0
0.0
4102
Raw hides and skins of bovine, equine animals
32.1
32.9
97.5
10.2
3.3
7602
Aluminium waste or scrap
18.6
32.5
57.2
1.5
0.0
4403
Wood in the rough or roughly squared
17.6
17.6
100.0
0.0
0.0
7404
Copper, copper alloy, waste or scrap
16.4
22.5
72.6
1.5
0.0
2710
Oils petroleum, bituminous, distillates, except
crude
Beauty, make-up and skin care preparations
13.1
156.9
8.4
6.6
0.0
10.0
54.0
18.5
10.3
0.0
Parts and accessories of bicycles, motorcycles
etc.
Unwrought lead
6.5
28.8
22.8
12.8
0.0
6.3
420.3
1.5
3.0
0.0
Parts for electrical switches, protectors,
connectors
Ferrous waste or scrap, ingots or iron or steel
5.0
8.5
59.1
7.5
0.0
4.3
113.9
3.8
0.9
0.0
3.3
42.3
7.8
4.5
0.0
4707
Instruments etc. for medical, surgical, dental
etc.
Waste or scrap of paper or paperboard
3.0
17.3
17.2
0.0
0.0
9027
Equipment for physical and chemical analysis
2.0
7.4
27.2
1.6
0.0
7326
Articles of iron or steel, other
2.0
7.7
25.3
12.5
0.0
5201
Cotton, not carded or combed
1.9
2.8
69.7
40.0
0.0
8544
Insulated wire and cable, optical fibre cable
1.9
5.2
36.4
6.8
0.0
3304
8714
7801
8538
7204
9018
15
Observations: Top 20 Non-Agriculture Exports to China (HS-4 digit, 2014)
Analysis at HS-4 digit, 2014 reveals results that are generally consistent with the HS-2 digit analysis,
as expected. That is, the majority of the top 20 exports to China falls under the HS-2 digit analysis’ top
15 export product categories.
Some key observations include:
 4403 Wood in the rough or roughly squared, a product which South Australia does not have a
revealed comparative advantage with both China and the World, yet it is the top 7 export to China,
in fact 100% of all export of wood is to China.
 One of the top 20 Non-Agriculture exports identified by the HS-4 digit analysis did not appear in the
top 15 HS-2 digit analysis (5201 Cotton, not carded or combed)
 Mining related commodities are in the top 3 exports to China and the World. Iron ore is confirmed
as South Australia’s largest export commodity to China and the World. Almost all of South
Australia’s iron ore is exported to China (98%).
 Wool and Cotton currently has the two highest tariffs at 38% and 40%. Both are expected to be
reduced to zero by 2020. This will bring significant opportunities to expand South Australia’s export
of both to China, particularly Wool which is South Australia’s 4th largest export commodity to China
(in dollar value).
 Copper and copper related products - as described above – are distributed over two HS-2 digit
categories (see Table 2.4):
o 26 Ores, slag and ash
o 74 Copper and articles thereof
HS-4 digit analysis shows that 3 copper and copper related products fall in South Australia’s top
10 exports to China. The value of exports is over A$817million and each of the three currently has
low or no tariff imposed.
o 7403 Refined copper and copper alloys, unwrought
o 2603 Copper ores and concentrates
o 7404 Copper, copper alloy, waste or scrap
 Commodity 39 Plastics and articles thereof appears as a top 15 export product in the HS 2 digit
analysis but not HS-4 digit analysis. This occurs because when HS-2 product category is broken
into HS-4 subsectors, export trade is possibly widely dispersed and individual subsectors do not
amount to a high volume of trade.
 The 5th highest export to China is 4102 Raw hides and skins of bovine, equine animals with almost
all of South Australian export is to China (98%).
16
Multiple Metals: Market Access, Research & Development, Infrastructure and FDI under ChAFTA
Magnetised Iron Ore
South Australia has tremendous reserves of magnetite that can serve Asian markets for decades. Unlike
other reserves in Western Australia and around the world, while containing a relatively high iron
concentrate, SA magnetite contains relatively low concentrations of silica, phosphorous, aluminium and
sulphur, which means processing can be cleaner for the steel producer.
In combination with the advantages of ChAFTA, South Australia can do more than take advantage of
available markets. Tariff elimination and encouraged and enabled FDI for research and development
and infrastructure from China can work together to create an enabled production capacity and strong,
lasting market for a premium raw product, that will also allow China to achieve a goal of achieving
cleaner, more environmentally friendly steel production.
The South Australian Government contribution would therefore be less onerous to make the venture
successful. China looks to governments to make and endorse big deals. The South Australian
Government’s imprimatur of support for a scheme of South Australian business combining with
Chinese investment to develop and grow a niche and lucrative export market can be the catalyst, with
FDI funding the growth and expansion of the trade in magnetite.
Source: SACOME
Copper
Copper is a main focus currently in South Australia, and with good reason. With rich reserves, a market
set to expand, and favourable tariff treatment under ChAFTA, the export market is set to expand. One
constraining element is the fact that much of the copper reserve is found in conjunction with uranium.
The ability to “clean” copper, removing uranium from the copper, can lift South Australian production
to a level as much as four times the current level of production.
Under ChAFTA, not only will we have a more open market due to tariff elimination, but again our
comparative advantage makes the industry a prime target for FDI from China. Chinese FDI in research
and development of production methods for clean copper can incentivise and grow the sector to its full
potential, without the need for great expenditure on the part of the South Australian Government.
Chinese investment in business based solutions here can expand South Australia’s capacity to serve
growing markets in China and beyond.
Sources: SACOME; Institute for Mining and Energy Resources, The University of Adelaide
Lead
Lead is a commodity seldom spoken of in policy circles, for various reasons. However, it is important
to point out that South Australia has a large competitive advantage in the sector, supplies nearly 10%
of the lead in the world market, and sells relatively little in China.
While lead brings with it obvious environmental factors of which to remain aware, lead is also still a
prominent commodity in the manufacture of such environmentally friendly technologies as power cells
and batteries for use in hybrid and electric cars and elsewhere. Further the technology around those
products is advancing, making them safer and with a view towards recycling of materials.
South Australia can not only take advantage of the growing global need for lead, but is in a prime
position to do so, traditionally holding advantage in the market, and taking advantage of eliminated
tariff status under ChAFTA.
Sources: SACOME
17
2.2.2.3
Disaggregated Analysis of Key Agricultural Products
The China-Australia Free Trade Agreement (ChAFTA) has led to significant tariff reductions in a number
of Australian agricultural exports. But significant exclusions also remain, and the schedules of
implementation are also relatively long in some cases.
To place these commitments into context, Table XYZ shows the top 10 exports from South Australia
agricultural products, ranked by the value of exports to China in 2014. The table also provides South
Australia’s revealed comparative advantage indicator for its trade with the world and with China, the
current tariff rates applied in China and the proposed tariff rates under the non-official tariff schedule as
provided by DFAT.
The following section looks specifically at the key agricultural export commodities of South Australia to
China. The section looks in detail at the export values to China, to the world, the Chinese average tariff
rates in 2015 and in 2020 according to the information provided by DFAT, 2015. Furthermore, the
discussion includes South Australia’s revealed comparative advantage with its trade with the world and
with China.
Table 2.5: Top 10 South Australian agriculture exports to China at HS 2-digit, 2014
HS
Description
Exports
to China
(mn
AUD)
02
Meat and edible meat offal
22
12
10
05
04
15
03
08
20
Exports to
China as
% of total
T
2015
(ave)
T
2020
RCA
World
RCA
China
133.8
Exports
to the
World
(mn
AUD)
1,166.1
11.5
18.4
1.9
16.8
16.7
Beverages, spirits and
vinegar
Oil seed, oleagic fruits,
grain, seed, fruit etc., other
Cereals
116.1
1,157.2
10.0
21.6
0.0
17.2
28.4
74.0
417.1
17.7
9.5
0.0
6.3
1.2
39.6
1,238.9
3.2
28.5
n.a
20.9
4.7
Products of animal origin,
other
Dairy products, eggs,
honey,
edible
animal
product, other
Animal, vegetable fats and
oils, cleavage products
etc.
Fish,
crustaceans,
molluscs,
aquatic
invertebrates, other
Edible fruit, nuts, peel of
citrus fruit, melons
Vegetable, fruit, nut etc.,
food preparations
14.2
17.3
82.5
12.5
0.0
2.9
21.6
4.0
37.8
10.6
14.6
3.2
0.7
0.4
3.9
29.7
13.1
13.0
0.0
0.5
0.3
3.4
237.4
1.4
10.5
0.0
3.7
0.4
2.5
165.3
1.5
18.3
0.5
2.5
0.4
1.7
18.5
9.0
20.3
0.3
0.5
1.6
Source: ABS (2015).
n.a. = not available
Observations – Top 10 South Australia Agriculture exports to China
From Table 2.5: Top 10 South Australian agriculture exports to China (analysis based on HS-2 digit,
2014), the following observations can be made:
 The top 10 exports all have varying degrees of revealed comparative advantage with China and the
World.
 All, except 3 categories have stronger revealed comparative advantage with the World in
comparison with trade with China as shown on the RCA World column. The 3 product exceptions
are:
o 05 Product of animal origin
o 22 Beverages, spirits and vinegar
o 20 Vegetable, fruit, nut etc., food preparations
18
Their current average tariff rates are 12.5%, 21.6% and 20.3% and are expected to be reduced to
between 0% to 1.9%. This is expected to enhance South Australia’s revealed comparative
advantage with, and export to, China.
3 key product categories stand out with significant revealed comparative advantage with China:
o 02 Meat and edible meat offal
o 05 Product of animal origin
o 22 Beverages, spirits and vinegar
Their current average tariff rates are 18.4%, 12.5% and 21.6% and are expected to be reduced to
between 0 to 1.9% where 2 of the 3 products are expected to have their tariffs reduced to 0% by
2020 while the other to 1.9%. This is expected to enhance South Australia’s comparative advantage
with, and export to, China.
Product category 10 Cereal reveals an RCA World indicator is significantly larger than RCA China.
Further and more detailed analysis reveal that China imposes under this category a very high tariff
rate, that is at the HS-2 level the average 2015 tariff rate is 28.5%. Moreover, at the HS-4 level
(see Table ABC), it is revealed that over 90% of exports are wheat and meslin which has an even
higher tariff rate imposed on them at 65%. This explains lower RCA indicator for China in
comparison to the World. Despite the 65% tariff, wheat and meslin is one of the key exports to
China, constituting 3.1% of total exports into China. Depending on the final negotiated tariff
reduction over the next 5 years (current no tariff reduction schedule is available), there is significant
trade potential for wheat export into China.


Table 2.6: Disaggregated analysis at HS-4 digit level
HS
Description
Exports to
China (mn
AUD)
2204
0204
1205
1001
0202
1214
0504
Grape wines, alcoholic grape must
Meat of sheep or goats, fresh, chilled or frozen
Rape or colza seeds
Wheat and meslin
Meat of bovine animals, frozen
Animal fodder and forage products, roots etc.
Guts, bladders and stomachs of animals except
fish
Edible offal of domestic animals
Cheese and curd
Bovine, sheep and goat fats, raw or rendered
Citrus fruit, fresh or dried
Fish, frozen, whole
Waters, non-alcoholic sweetened or flavoured
beverage
Fruit and vegetable juices, not fermented or
spirited
Molluscs
Seed, fruit and spores, for sowing
Olive oil and its fractions, not chemically modified
Barley
Milk and cream, concentrated or sweetened
Meat of bovine animals, fresh or chilled
Food preparations, other
114.2
88.5
54.3
38.6
32.0
18.2
14.2
0206
0406
1502
0805
0303
2202
2009
0307
1209
1509
1003
0402
0201
2106
12.7
2.9
2.6
2.5
1.8
1.6
Exports to
the World
(mn AUD)
Exports to
China as %
of total
T 2015
T 2020
1,130.2
627.5
216.2
1,236.5
296.3
121.6
10.1
14.1
25.1
3.1
10.8
15.0
19.5
17.0
4.5
65.0
16.3
7.0
0.0
7.6
0.0
n.a
8.2
0.0
15.3
67.2
32.7
25.4
63.3
125.0
92.8
18.9
8.8
10.1
3.9
1.4
19.3
15.3
12.6
8.0
14.3
10.8
0.0
2.4
4.8
0.0
6.3
0.0
4.5
35.9
27.5
0.0
15.5
21.6
65.2
1.5
0.9
4.2
146.9
2.1
9.8
6.0
1.9
83.1
99.1
19.4
0.4
25.0
19.1
9.3
0.0
10.0
1.5
10.0
14.7
16.9
1.1
0.0
0.0
0.0
0.0
5.8
7.3
0.0
1.5
1.3
1.3
1.2
0.9
0.8
0.6
0.5
n.a = not available
19
Observations: Top 20 Agriculture Export to China (HS-4 digit, 2014)
Analysis at HS-4 digit, 2014 reveals results that are consistent with the HS-2 digit analysis, as expected.
That is, the top 20 exports to China all falls under the HS-2 digit analysis’ top ten export product
categories.
Some key observations include:
 Majority of the top 20 agriculture exports should expect further enhancement of their trade potential
as all but one product are expected to have their tariffs reduced. The exception is Seed, fruit and
spores, for sowing which already has 0 tariff.
 12 out of the 20 top 20 agriculture exports will have tariff rates zeroed by 2020
 Meat related products under the “02 HS category” combined is South Australia’s top export (Table
2.5). Further analysis (HS-4 digit) shows that it comprises of 4 key products (Table 2.6), all of which
will have their tariff rate more than halved in 5 years. Combined with the fact that only a small
percentage of total exports of these products are to China (between 0.4% - 14.1%), there are
significant opportunity to grow the trade of these products to China.
 Wine (2204 Grape Wine, alcoholic grape must) is the top export (in dollar value) to China. Export
in wine is expected to continue to grow over the next five years with tariff to be zeroed by 2020 from
19.5%. Currently Wine export to China only constitutes 10% of South Australia’s total wine exports.
 As described above, wheat and muslin exports have good trade potential; particularly the current
tariff rate of 65% can be reduced. This is because despite the high tariff rate, it is South Australia’s
4th highest export (in dollar value) to China. Currently, it is important for the South Australian
government to note that there is no tariff reduction schedule.
 There are 2 products where exports to China constitute almost all (90% or more) of total export:
o 0504 Guts, bladders and stomachs of animals except fish (92.8%)
o 1003 Barley (99.1%)
Their tariff rates are 19.5% and 1.5% respectively and both are expected to drop to 0% by 2020.
As the export of both makes up almost all of their total export, there is limited scope for further
export growth, in particular barley.
2.2.2.4
Possible Impacts of ChAFTA Commitments on Agriculture for South
Australia
The major export items are seeds and hay, wine, lamb, wheat, wool, beef and offal. Items such as fish,
dairy products and citrus are relatively small in South Australian exports. Seeds and hay, wine, lamb
and wheat are relatively important for South Australia compared to the rest of Australia.
Commitments by China under the agreement in agricultural products are summarised in Appendix 2,
where they are compared to commitments in agreements with Korea and China, as well as the
agreement of NZ with China. A key result of that comparison is that the Australian agreement would
generally offset (after full implementation) the advantage of New Zealand. The remaining areas of
disadvantage for Australia are those with long implementation periods which are noted below.
With respect to the key South Australian exports to China, the commitments made include the following.
The positives include
 Seeds and hay is the major export item, mainly oilseeds followed by hay.
o The tariff rates for erucic acid rape or colza seeds exports which range from zero to 9% will
be eliminated within a year.
o That for hay (cereal straw) falls from 12% to zero over 5 years.
 Wine exports are number 2 in value terms (this sector is discussed in more detail in a separate
section of this report.)
o Tariffs of 14-20% on wine fall to zero over 5 years.
 A country tariff quota applies to wool of 30,000 tonnes clean wool (approximately 43,000 tonnes
greasy wool).
o This volume will grow by 5 per cent each year to almost 45,000 tonnes clean (approximately
64,300 tonnes greasy) by 2024, all at duty-free rates.
Areas where SA exports might increase (based on the low shares of these products in SA exports
relative to the Australian total) include:
20



Fish, where tariffs of 12-14 would be eliminated within 4 years.
Dairy, where tariffs are cut over much longer periods, of up to 11 years.
Citrus, where tariffs of up to 30% are cut over 8 years (other horticulture is in a better position, with
tariffs cut over 4 years).
Other items of interest are the following
 Elimination of the 7.5 to 30 per cent tariff on orange juice within 7 years, and elimination of tariffs
of up to 30 per cent on other fruit juices within 4 years.
 Elimination of the 15 per cent tariff on natural honey, and the up-to-25 per cent tariff on honeyrelated products, within 4 years.
 Elimination of the 15 per cent tariff on pasta within 4 years
Other items of particular interest to South Australia include the following
 Lamb tariffs from 12-23 fall to zero over 9 years and for beef tariffs of 12-25% fall to zero over 10
years.
 Offal tariffs range from 10 to 20% and fall to zero at least in 5 years and in some cases up to 10
years
 Wheat is excluded from the agreement
The agreement will be reviewed in three years’ time and these points suggest a series of action items
in that review, including the treatment of wheat in the agreement and accelerating the treatment of items
where the implementation period is 4 years or longer.
A comparison against the agreements of other countries leads to talking points in further rounds of
negotiations. With respect to agreements with Korea and Japan, talking points in any further discussion
with China could be
 The more open treatment of wine by Korea and Japan
 The better treatment of seafood in both agreements
 The inclusion of wheat by Korea.
But otherwise these agreements provide little guidance to what might be possible with China in further
rounds of negotiation.
Two other aspects of these outcomes are significant.
 First, the treatment of traditional barriers to trade at the border, such as tariffs, is necessary to
improve the conditions of market access. But it will not be sufficient. Also important will be the
facilitation of trade, including the treatment of impediments to international business that arise as
goods cross borders. Submissions to the negotiations, and also results of other research by IIT,
indicate that especially in the case of China these matters are significant for business. There is
value in that case in tracing the supply chain from South Australia to the final points of consumption
in China, identifying the remaining restrictions and then working with partners in China to tackle
those issues for mutual benefit. Some of the issues that are identified in a project of this type might
also be the nature and application of relevant regulation at the production or export stages of this
chain.
 Second, while the removal of barriers to trade in products is significant, the capacity of South
Australia to increase output is constrained by the resources available. There are however other
ways in which to benefit from the expected growth of consumption of agricultural products in China.
These include the provision of services in food supply chains in China. The opportunity to do so
depends on the treatment of services in the agreement, which is discussed in another section of
this report.
Wheat & Canola: Our next bite of the apple?
No negotiated agreement delivers everything for everybody. While the matter is quite
straightforward, of great significance for South Australia is the omission of wheat and canola from
tariff reduction under the agreement.
The South Australian Government should advise the Commonwealth Government concerning the
comparative advantages and potential benefits South Australia has in wheat and canola, as these
areas have been excluded from tariff reduction under the current ChAFTA text (and therefore stands
at 65% for wheat). Tariff reduction or elimination for these products can bring substantial benefits to
rural South Australia.
21
2.2.2.5
Wine Sector
The signing of the ChAFTA in mid-2015, following Australia’s signing in late 2014 of FTAs with Japan
and Korea, offer the prospect of Australia reversing the impact of the earlier signing by Chile and New
Zealand of their FTAs with China (and by Chile of FTAs also with Japan and Korea). Trade diversion
resulted from those earlier FTAs signed by agricultural-exporting countries whose producers are close
competitors to Australia’s farmers and agribusinesses in East Asian markets. As a result, Australia’s
share of imports into China rose less rapidly because of preferential access provided to Chile and New
Zealand. Had Australia not negotiated the ChAFTA, its share of China’s imports would have continued
to grow less rapidly as the Chile and New Zealand FTAs with China continued to be phased in over the
next few years.
China has already become by far the most important wine-consuming country in Asia, and projections
point to the enormous speed with which China may become an even more dominant market for wine
exporters, with a projected extra 620-940 ML to be added by 2018 to its consumption of 1630 ML in
2011. Since China’s domestic production is projected to increase by ‘only’ about 210-290 ML by 2018,
its net imports are projected to rise by between 330 and 740 ML – or 50ML more once the full impact
of the three FTAs with Southern Hemisphere countries are felt. Certainly the recent austerity drive is
going to dampen the growth in super-premium and iconic wine sales in China, but because those quality
wines are still only a small share of the total sales volume the drive’s impact on China’s aggregate wine
consumption and imports is very minor.
While the recent and projected rates of increase in per capita wine consumption in China are no faster
than what occurred in several northwestern European countries in earlier decades, it is the sheer size
of China’s adult population of 1.1 billion – and the fact that grape wine still accounts for less than 4
percent of Chinese alcohol consumption – that makes this import growth opportunity unprecedented. It
would be somewhat less if China’s own winegrape production increases faster, but certainly in as short
a period as the next five years that is unlikely to be able to reduce the growth in China’s wine imports
very much, especially at the super-premium end of the spectrum and notwithstanding that country’s
recent austerity drive.
Figure 2.2: Total wine consumption (ML)
Source: Updated from Anderson and Nelgen (2011) using Euromonitor International
*All other Asian countries consume less than 0.2 litres per capita per year
Of course these projections are not predictions. Where exchange rates move, and how fast various
countries’ wine producers take advantage of the projected market growth opportunities in Asia, will be
key determinants of the actual changes in market shares over the coming years. Not all segments of
the industry are projected to benefit, with non-premium producers in Australia and elsewhere facing
falling prices if demand for their product continues to dwindle as projected above. But Australia’s
exporting firms willing to invest sufficiently in building relationships with their Chinese
importer/distributor – or in grapegrowing or winemaking as joint venturers within China – may well enjoy
long-term benefits from such investments, and more so because of ChAFTA.
22
Wine
While this paper goes to great lengths to describe opportunities in wine exports for South Australia,
citing the expected huge growth in exports over the next three years until 2018 and beyond, there are
still non-tariff measures to contend with that make navigating trade in wine with China more of a risky
undertaking than is trade in wine elsewhere.
Excluding China, every year it can be expected that a handful of wine export consignments around the
world will be either held up or blocked due to regulatory concerns. In their nascent stages, it is still
unclear what the legal or scientific grounding is for some of China’s wine regulations, but in 2014, 165
wine export consignments were blocked from entering China, exponentially more than normally
expected. While South Australia was not singled out for this treatment, Australia’s wines were rejected
at a rate proportional with Australia’s share of the wine export market in China.
The South Australian Government can engage with Wine Australia to better understand these
anomalies, determine their status and ongoing nature (is it “growing pains” for the regulatory scheme
or a systemic problem in China?), and advise the Commonwealth Government on the potential impact
for South Australian exporters, so that the situation can be addressed under ChAFTA.
Source: Wine Australia
3
Trade in Services and Investment
ChAFTA represents what may be the largest potential value bilateral trade agreement to date for
Australia. It comes at a point in time where trade is shifting, from being heavily influenced by tariff rates
and distance, to being more heavily influenced by factors such as reduction of trade costs and
administrative burden, and the availability of related and ancillary services. The study provides
qualitative as well as quantitative analysis of the level of commitments in ChAFTA. Quantitative
calculation of data is giving way to qualitative analysis of the impact of regulation. It is in this light that
we undertake to review the ChAFTA, from both a traditional standpoint and a 21 st Century practical
review and attempt to identify the advantages for the South Australian economy.
Services trade makes up 70% or more of Australia’s GDP. Furthermore, none of Australia’s industry
sectors function without services inputs. Manufacturing, agriculture, investments and even services
depend on services trade to facilitate their efficient and effective delivery.
ChAFTA provides for greater liberalisation of services trade between Australia and China than China
has extended to any other external trading partner. The opportunities in trade in services can open new
markets for South Australia, and facilitate economic growth and development for the State.
This Chapter utilises two models for evaluating the effects of liberalisation of services trade under
ChAFTA, the Hoekman Indicators (HI) and the Services Trade Restrictiveness Indices (STRI) of both
the Organisation for Economic Cooperation and Development (OECD) and The World Bank. Together
they paint a picture highlighting the comparative advantage across services sectors provided to
Australian businesses under ChAFTA.
3.1 Restrictiveness of services trade sectors in China – An overview
The following section discusses services trade restrictiveness indicators from the OECD and the World
Bank for China to provide a general overview of the Chinese services sector and the restrictiveness of
its policies. The section begins with a general discussion of the OECD Services Trade Restrictiveness
Index (STRI) and its detailed findings for the Chinese sector. The section then follows with the STRI
results for the World Bank.
23
3.1.1
Service Trade Restrictiveness Index – OECD
The OECD has developed a methodology for assessing the restrictiveness of policy as it applies to the
services sector, called the Services Trade Restrictiveness Index (STRI). 2 The methodology includes
the scoring and weighting system for 18 services sectors. The STRIs are composite indices taking
values from zero and one, zero representing an open market and one a market completely closed to
foreign services providers. The index includes not just trade measures but also regulatory measures
(see Box 1)
Box 1 The STRI
Overview
The OECD STRI provides a comprehensive picture of restrictions to services trade. It contains two
essential elements:
(1) A regulatory database of laws and regulations for 40 countries across 18 sectors
(detailed below).
(2) Composite Indices that quantify restrictions across 5 standard categories (described
below in the “Policy Measures” sections)
Scoring/Methodology
“The STRI are composite indices taking values between zero and one, zero representing an
open market and one a market completely closed to foreign services providers. The
scoring system is based on binary scoring. To reconcile the complexity of services trade
restrictions with binary scoring, non-binary measures are broken down to multiple thresholds;
complementary measures are grouped and scored as zero only if all measures in the bundle
are not restrictive. Finally in cases where one restriction renders others irrelevant, those
measures that are rendered irrelevant are automatically scored one.” (Geloso Grosso et al.,
2015: p2)
Sectors and Sub-sectors within OECD STRI
The OECD Service Trade Restrictiveness Index covers the following sectors (OECD, n.d.(b)):
1) Audio-visual
 Motion pictures
 Television and broadcasting
 Sound Recording
2) Computer services
3) Construction services
4) Courier services
5) Distribution services
 Retailers
 Wholesalers
6) Financial services
 Commercial banking
 Insurance
Broking and agency services
Life
MAT (Insurance of large risks, including marine, aviation and transport)
Non-life retail insurance and commercial insurance, including property and
casualty, liability, export, credit and travel insurance
Reinsurance and retrocession
http://www.oecd.org/tad/services-trade/services-trade-restrictiveness-index.htm. The scoring system is based on binary scoring,
non-binary measures are broken down to multiple thresholds; complementary measures are grouped and scored as zero only if all
measures in the bundle are not restrictive. Finally in cases where one restriction renders others irrelevant, those measures that are
rendered irrelevant are automatically scored one.
2
24
7) Professional services
 Legal services
 Accounting and auditing services
 Architectural services
 Engineering services
8) Telecommunications
 Fixed-line
 Internet
 Mobile
9) Transport services
 Air transport
Cargo
Domestic traffic
 Cargo
 Passenger
International traffic
 Cargo
 Passenger
Passenger
 Maritime freight transport
 Rail freight transport
 Road freight transport
Policy measures
Within these sectors the following policy measures were assessed (OECD, n.d.(b)):
1. Restriction on foreign entry
2. Restriction on the movement of people
3. Other discriminatory measures
4. Barriers to competition3
5. Regulatory transparency
The weighting scheme used for the calculation of the STRI relies on expert judgment. A large number of
experts were asked to allocate 100 points among the five policy areas present as: Restrictions on foreign
entry, restrictions to movement of people, other discriminatory measures, barriers to competition, and
regulatory transparency. The expert views are translated into weights by assigning the points experts
allocated to the policy area to each measure that falls under it and correct for differences in the number
of measures under the policy areas. Such differences are not arbitrary, but reflect the relative importance
of the policy category for each sector. The formula for measure j under category i is the following: 𝑤𝑗𝑖 =
𝑠𝑐𝑜𝑟𝑒𝑗 𝑤𝑖 / ∑𝑖 𝑛𝑖 𝑤𝑖 where 𝑛𝑖 is the number of measures under category i, and 𝑤𝑖 is the share of the total
number of points allocated to policy area i by the experts. The weights allocated to each policy area by
the experts are depicted in the table below. The STRI indices take values between zero and one, one
being the most restrictive. They are calculated on the basis of the STRI regulatory database which
contains information on regulation for the 34 OECD Members, Brazil, China, India, Indonesia, Russia and
South Africa. The STRI database records measures on a Most Favoured Nations basis. Preferential trade
agreements are not taken into account. Air transport and road freight cover only commercial
establishment (with accompanying movement of people).
3
Barrier to competition entail public ownership measures, which may have the effect of market access
restriction.
25
Table 3.1: Expert judgment weights by policy area and sector4
Source: OECD 2015
China’s score on the STRI index values across the 18 sectors is shown below in Figure 3.1, along with
the average and the lowest score among the 40 countries included in the STRI database for each sector.
Figure 3.1: China STRI by sector and policy area
Source: OECD
4
Table 8 is from OECD Policy Papers No.177, Services Trade Restrictiveness Index (STRI): Scoring and Weighting Methodology, pp34.
26
China scores well above average on the STRI in all sectors (ie more restrictive), but is close to the
average in architecture. In other areas
 parts of the construction sector, some computer services, some engineering activities,
management of railway infrastructure, road freight, parts of maritime transport, parts of the
distribution sector and accounting are encouraged;
 most of the broadcasting sectors and postal and domestic express/courier services are
highly restricted
 while the other sectors are permitted subject to different conditions.
(Refer to Table 3.1 to 3.3 for detailed data)
Table 3.2:. Barriers to trade in services - China
Service
Index
Service
Index
Accounting
3
Architecture
2
Engineering
3
Legal
3
Motion Pictures
3
Broadcasting
3
Sound recording
3
Telecom
3
Air transport
3
Maritime transport
3
Rail freight transport
3
Road freight transport
3
Courier
3
Distribution
3
Commercial banking
3
Insurance
3
Construction
3
Computer
3
1 – more trade-friendly
(Source: OECD n.d.)
2 – around all country average
3 – less trade-friendly
Table 1.3. Service Trade Restrictiveness Indexes
Service Sector
Architecture
Construction
Computer
Engineering
Sound recording
Distribution
Road freight transport
Maritime transport
Accounting
Rail freight transport
Motion pictures
Commercial banking
Insurance
Legal
Telecom
Air transport
Broadcasting
Courier
China’s Trade
Restrictiveness Index
0.26
0.29
0.29
0.29
0.31
0.36
0.38
0.39
0.41
0.42
0.45
0.49
0.50
0.52
0.53
0.59
0.78
0.87
Country Average’s Trade
Restrictiveness Index
0.23
0.17
0.18
0.20
0.16
0.13
0.16
0.25
0.30
0.22
0.18
0.19
0.20
0.32
0.22
0.44
0.28
0.26
Adapted from (OECD n.d.)
___ - Less restrictive service sectors (≤ 0.30)
___ - Service sectors with trade restrictiveness index (> 0.30 ≤ 0.50)
___ - Most restrictive service sectors (> 0.50)
3.1.2
Service Trade Restrictiveness Index – World Bank
27
Box 2 – The World Bank STRI
The World Bank STRI database provides comparable information on services trade policy measures for 103
countries – 79 developing and 24 OECD countries. It covers five major services sectors and over three modes
of delivery – described in detail below. (World Bank, n.d.)
In measuring restrictiveness, each sector (and selected subsectors within) is allocated an overall score.
Additionally, sectoral scores for the three modes of delivery are assigned. The scores given are between 0
and 100, where a 0 score means the sector is completely open, while a 100 completely close. (World
Bank, n.d.)
It is important to note that the developers/researchers of the database state that the aim of this project is “to
facilitate dialogue about, and analysis of, services trade policies”. The database is not a definitive source
of information but instead, it is hoped that it helps to facilitate the sharing of information on services trade policy.
(World Bank, n.d.)
Sectors and subsectors within World Bank STRI
The database focuses on five major services sectors. Each sector was further disaggregated into subsectors as
applicable. “The choice of sectors was based primarily on their economic importance from a development
perspective, on the existence of meaningful restriction on services trade, and on the feasibility of collecting
relevant policy data.” (Borchert et al., 2012)
These sectors are:
1) Financial services
5) Professional services

Banking

Accounting
Lending by banks

Auditing
Acceptance of deposits by banks

Legal Advice Foreign Law

Insurance

Legal Advice Domestic Law
Automobile

Court Representation
Life
Reinsurance
2)
Telecommunications

Fixed-line

Mobile
3)
Retail
4)
Transport services

Air passenger domestic

Air passenger international

Maritime shipping international

Maritime auxiliary services

Rail freight transport

Road freight transport
Policy measures
Within these sectors three modes were assessed in this study:
- “Cross-border supply of service (mode 1): This mode is defined under the GATS as the supply
of a service from the territory of one Member into the territory of any other Member. It is
analogous to trade in goods, and arises when a service crosses a national border, for example,
if a consumer in country A purchases software or insurance from a provider located in country
B. It would also include the purchase by a consumer in country A of transportation services –
such as a train ride or flight – from a provider located in country B.” (Borchert et al., 2012: p6)
- “The supply of services through commercial presence or FDI (mode 3): Under the GATS,
“commercial presence” means any type of business or professional establishment, including
through (i) the institution, acquisition or maintenance of a juridical person, or (ii) the creation of a
branch or a representative office within the territory of a Member for the purpose of supplying a
service commercial. This survey considers four types of commercial presence: a firm from a
country B might open a branch or subsidiary in the territory of county A, it might acquire part or
all of an already existing firm in the territory of country A, or it might enter through Joint Venture
28
-
with an already existing firm in the territory of country A. Thus, the service is provided within A
by a locally-established affiliate, subsidiary, o branch of the foreign-owned and controlled firm.”
(Borchert et al., 2012: p6)
“The temporary presence of natural persons (mode 4): This mode is defined under the GATS as
the supply of a service by a service supplier of one Member, through presence of natural
persons of a Member in the territory of any other Member. Thus, it covers the temporary
presence of individuals for the purpose of providing services directly to firms or consumers or for
employment in service providing firms.” (Borchert et al., 2012: p6)
The combinations of subsectors and modes for which information were used in the following:
Sectors
Banking
Subsectors
Mode 1
Mode 3
Bank lending
Deposit acceptance
X
X
X
X
Automobile insurance
Life insurance
Reinsurance
X
X
X
X
X
X
Mode 4
Insurance
Telecom
Fixed-line
Mobile
X
X
Retail distribution
X
Retailing
Transport
Air passenger domestic
Air passenger international
Maritime shipping international
Marine auxiliary services
Road trucking
Railway freight
X
X
X
X
X
X
X
X
Professional Services
Accounting
Auditing
Legal advice foreign law
Legal advice domestic law
Court representation
X
X
X
X
X
X
X
X
X
X
X
X
X
Source: Borchert et al., 2012: p7
Collected data
All the collected data regarding service trade restrictiveness in Indonesia is described in the World
Bank All Policy Measures spreadsheet. (World Bank, n.d.)
Scoring





Completely open (0);
Virtually open but with minor restrictions (25);
Major restrictions (50);
Virtually closed with limited opportunities to enter and operate (75);
Completely closed (100).
Source: Borchert et al., 2012: p46. (More details about the Scoring, its rules can be found between
p46-54)
29
Table 3.2:. World Bank Service Restrictiveness Index for China
Service Sectors
Overall
Overall
36.6
Transportation
19.3
Air Passenger Domestic
Air Passenger International
67.5
Maritime Shipping International
15
Maritime Auxiliary Services
25
Road Freight Domestic
0
Rail Freight Domestic
0
Retail
25
Financial
34.8
Banking
32.5
Insurance
38.3
Telecommunications
50
Fixed-line telecommunications
50
Mobile telecommunications
50
Professional
66
Accounting and Auditing
45
Accounting
40
Auditing
50
Legal
80
Legal Advice Foreign Law
40
Legal Advice Domestic Law
100
Legal Representation in Court
100
Adapted from (World Bank n.d)5
___ - Less restrictive service sectors (≤ 0.30)
___ - Service sectors with trade restrictiveness index (> 0.30 ≤ 0.50)
___ - Most restrictive service sectors (> 0.50)
Mode 1
39.22
37.5
75
0
71.77
75
66.67
0
0
0
0
0
0
Mode 3
37.27
22.22
50
50
50
25
0
0
25
31.46
25
41.67
50
50
50
70
50
50
50
83.33
50
100
100
Mode 4
75
75
62.5
50
75
83.33
50
100
100
The following observations can extracted from the World Bank Service Restrictiveness Index for China:
 Transportation sector is the most open sector in China, with a 19.3 overall index, despite the subsector of international aerial transportation for passenger hold a restrictive index of 67.5.
 Within the sectors included in the World Bank study, the retail sector shows to be the second most
open sector in China, with an index of 25.
 Financial services presented overall index relatively open in comparison with all service sectors in
China. The corresponding index for financial services was 34.8, slightly lower than the overall index
attributed to China (36.6).
 The telecommunication sector had an overall index of 50, with no difference on the indexes of its
sub-sectors fixed-line telecommunications and mobile communications.

5
The professional services sector, which includes accounting and auditing services and also legal
services, appears to be the most closed service sector in China, accounting for an overall index of
66. The high-restrictiveness of this sector can be attributed to the high-restrictiveness index of legal
services, which was 80, while accounting and auditing sector accounted for an overall index of 45.
World Bank n.d, Services trade restrictions database, <http://iresearch.worldbank.org/servicetrade/>
30
3.2 Services Sector Coverage in ChAFTA: China’s Commitments to Australia
in Comparison to Other Main Liberalizing Trade Agreements
3.2.1
Services Liberalization
Liberalization of services sector will be crucial to observe significant gains from ChAFTA. The growth
potential for exports of services from Australia and South Australia is expected to increase with
ChAFTA. In particular, we should expect growth in key sectors such as education services, tourism,
health and aged care, logistics, legal and mining services, and financial services. Again, South
Australian education and health and aged care sectors are well placed to take advantage of the n ew
opportunities created from ChAFTA. In addition, there are also great potential to develop the tourism
sector at South Australia under ChAFTA.
We examine the degree of openness in the services sector in ChAFTA as compared to other FTAs of
China with key trading partners. We examine the degree of commitment and openness (or
restrictiveness) of the services sector in ChAFTA as compared to China-ASEAN FTA, China-Korea
FTA, China-New Zealand FTA, and China-Hong Kong Comprehensive Economic Partnership
Agreement (CEPA). We also evaluate the degree of openness at the sectoral level in ChAFTA.
We find a significant commitment to Australia, however generally only to the extent of correcting
Australia’s previous disadvantage. We also compare the variation in commitments among agreements,
where we find the agreements of China with Korea, Australia and New Zealand are highly correlated.
Finally we examine the distribution of sectors according to their openness to Australia relative to their
openness to the world. We use this comparison to identify business opportunities in the services sector.
By these criteria apparently attractive opportunities exist in sectors such as legal services, broadcasting
and courier services. This material is complemented by case studies of a number of sectors.
3.2.2
Service Sectors Included in the Agreements
Through a simplistic comparison of the service sectors included, or not, among the five FTAs analysed
in this study, it is possible to observe that China’s commitment in ChAFTA includes more service sectors
than in ChKFTA, ChNZFTA, and ASEAN-Ch TISA, but less service sectors than in the China Mainland
and Hong Kong CEPA (Ch-HKG CEPA). Table 1 includes some of the service sector differences among
each trade agreement to illustrate this scenario. The full list of the service sectors included in five trade
agreement and the comparison of service sector differences are listed in appendix (Annex 2).
If considered the sectors which would might be on the interest of the South Australia Government,
namely (Services related to mining, wine manufacturing, education, financial, health and tourism), it is
possible to verify that China’s commitment on ChAFTA for these specific service sectors are similar to
China’s commitment on ChKFTA, despite some more-beneficial or less-restrictive measures made in
ChKFTA, e.g. services incidental to mining in the ChKFTA is not limited to oil and gas as it is in ChAFTA.
Discussion of the table:
 Services incidental to mining is included on China’s commitments on Ch-HKG CEPA and on
ChAFTA but was kept out of ChKFTA, ChNZFTA and ASEAN-Ch TISA. Note that for ChAFTA
services incidental to mining only includes oil and natural gas related, while in the Ch-HKG CEPA
beyond the provision which only includes oil and natural gas, it also include the provision for
services incidental to mining without this limitation.
 Another advantage ChAFTA presents in relation to ChKFTA, ChNZFTA and ASEAN-Ch TISA is
inclusion of Related scientific and technical consulting services, in form of prospecting services for
iron, copper and manganese, coal bed methane and shale gas (part of CPC 86751) and (part of
CPC 86752). Nevertheless, this provision excludes gravity and magnetic prospectin
 Services incidental to agriculture, forestry, hunting and fishing (CPC 881, 882) is similarly included
in four of the five compared FTAs, namely Ch-HKG CEPA, ChAFTA, ChKFTA and ChNZFTA, being
left out of ASEAN-Ch TISA. This prevision might contribute to wine manufacturing services (CPC
88182), which are included in CPC 881.
31
Table 3.5: Comparison among the trade agreements of some service sectors included
Service
Sectors
Business
services
Communication
services
Ch-HKG
CEPA
Sub-sector
Financial
services
Health
related
and
social
services
Tourism
and
travel
related
services
ChKFT
A
ChNZFTA
ASEANCh TISA
Services incidental to mining (CPC883)
x
x1
n.i
n.i
n.i
Related scientific and technical consulting
services
Prospecting services for iron, copper and
manganese, coal bed methane and shale gas
(part of CPC 86751) and (part of CPC 86752)
x
x2
n.i
n.i
n.i
Services incidental to agriculture, forestry,
hunting and fishing (CPC 881, 882)*1
x
x
x
x
n.i
Audiovisual services (CPC 961)
x3
x4
x4
x4
n.i
x
5
5
5
n.i
Primary education services (CPC 921)
Education
services
ChAFT
A
x
x
x
5
5
5
Secondary education services (CPC 922)
x
x
x
x
n.i
Higher education services (CPC 923)
x
x
x
x
n.i
Adult education services (CPC 924)
x
x
x
x
n.i
Other education services (CPC 929)
x
6
x
6
x
6
x
n.i
All
insurance
and
insurance-related services (CPC 713 - 716)
x
x
x
x
n.i
Banking
and
services (CPC 71)
x7
x
x
x
n.i
n.i
x
x
x
n.i
n.i
x
x
x
n.i
other
financial
Motor vehicle financing by non-bank financial
institutions
Other financial services listed below:
(k) Provision and transfer of financial
information, and financial data processing
and related software by suppliers of other
financial services;
(l) Advisory, intermediation and other
auxiliary financial services on all activities
listed in subparagraphs (a) through (k),
including credit reference and analysis,
investment and portfolio research and
advice, advice on acquisitions and on
corporate restructuring and strategy.
Securities (financial services) (CPC 7152)
x
x
x
x
n.i
Hospital services (CPC 9311)
Services for the aged (part of CPC 93311 and
93323)
x
x8
n.i
n.i
n.i
x9
x
n.i
n.i
n.i
Hotel (including apartment buildings) and
Restaurants (CPC 641 - 643)
x
x
x
x
n.i
Travel agency and tour operator (CPC 7471)
x
x
x
x
n.i
Tourist guides (CPC 7472)
x
n.i
n.i
n.i
n.i
n.i – not included
x1 - only including oil and natural gas
x2 - excluding gravity and magnetic prospecting and surveying services
x3 - Includes: - Videos distribution services (CPC 83202), Sound recording products distribution services, Cinema theatre services,
Chinese language motion pictures and motion pictures jointly produced, Technical service of cable television, Jointly produced
television dramas, Motion picture or video tape production services (CPC 96112), Others.
x4 - Includes: - Videos, including entertainment software and (CPC 83202), distribution services, Sound recording distribution services,
Cinema theatre services.
x5 - excluding national compulsory education
x6 - including English language training
x7 – beyond the sub-sectors included o the other FTAs it also includes money brokers.
x8 - excluding Traditional Chinese Medicine hospital
32
x9 - Social services is not only restricted to services to the aged but also includes services for persons with disabilities.
*1 - CPC 881 includes wine manufacturing services (88182)





Audiovisual services are included on Ch-HKG CEPA, ChAFTA, ChKFTA and ChNZFTA.
Specifically for ChAFTA, ChKFTA and ChNZFTA, the included sub-sectors are:
Videos, including entertainment software and (CPC 83202), distribution services,
Sound recording distribution services, and
Cinema theatre services
Ch-KHG CEPA includes the above sub-sector and additional ones.
Education services are included on Ch-HKG CEPA, ChAFTA, ChKFTA and ChNZFTA. Particularly
to primary and secondary education services, provisions on ChAFTA, ChKFTA and ChNZFTA
exclude national compulsory education. Higher and adult educations are treated similarly across
Ch-HKG CEPA, ChAFTA, ChKFTA and ChNZFTA. In regards to other education services, English
language training is included on ChAFTA, ChKFTA and ChNZFTA but not included on Ch-HKG
CEPA.
Within the financial services, the sub-sector all insurance and insurance-related services are
similarly included on Ch-HKG CEPA, ChAFTA, ChKFTA and ChNZFTA. The provision of the subsector banking and other financial services is slightly different from Ch-HKG CEPA and the other
three FTAs (ChAFTA, ChKFTA and ChNZFTA). On the Ch-HKG CEPA it includes and additional
services of money brokers which is not included on the other three. The sub-sectors of motor vehicle
financing by non-bank financial institutions and other financial services listed as (k) and (l) are only
included on ChAFTA, ChKFTA and ChNZFTA.
ChAFTA also indicates to be more privileged in comparison to ChKFTA, ChNZFTA and ASEANCh TISA in the health related and social services sector. Both, hospital services and services for
the aged are included on ChAFTA but omitted on the other three. In comparison to Ch-HKG CEPA,
there is a slight difference which indicates more openness on Ch-HKG CEPA. Traditional Chinese
medicine is not excluded in the hospital services provision and social services is not only limited to
services for the aged, as they are on the ChAFTA provisions.
Tourism and travel related services provisions are similarly included on Ch-HKG CEPA, ChAFTA,
ChKFTA and ChNZFTA, despite the fact that exclusively on Ch-HKG CEPA tourist guides services
is included.
This analysis already shows some of the commitment intensions of China with Australia by setting
ChAFTA. Nevertheless, it is important to note that the inclusion of a service sector in the trade
agreement does not guarantee that this service sector is totally liberalized. Restrictions established in
the agreement itself could already compromise the openness of that particular service sector.
33
Box 3: Why the Hoekman Index does not hold for ChAFTA.
We aimed to use the Hoekman Index to compare the openness of several Chinese trade agreements
with ChAFTA. The results of our comparison are provided in Figure 1. It is noticeable that two results
for the China Mainland-Hong Kong agreement are provided due to two different texts of the
agreement that we have identified. Even the most open result of 0.46 underestimates the actual
openness of the agreement when compared to the other agreements.
Furthermore, Figure 2 compares the Hoekman indicator for ChAFTA to the OECD STRI results for
China. In about half of the services sub-sectors, our results find a more restrictive (or less open)
Hoekman indicator compared to the results for the respective OECD STRI sectors. Since this cannot
be the case – services provisions under a trade agreement cannot be more restrictive (or be less
open) than the MFN provisions - we believe that additional work needs to be undertaken.
Nevertheless, the detailed analysis of our estimates for the Hoekman indicator is provided in the
Appendix to this services chapter. In the below a more detailed discussion of our current results is
provided.
Figure 1: Hoekman indices: average over all services sectors in various FTAs6
1
0.8
0.6
0.46
0.4
0.32
0.40
0.39
0.37
0.17
0.2
0
China Mainland- China-Australia
Hong Kong
China- South
Korea
China-New
Zealand
China-ASEAN
From the Hoekman indices of the average over all services sectors in the five FTAs signed with
China, China Mainland-Hong Kong ranks the first of all the five FTAs, with the HI 0.46. The ChAFTA
ranks the second place, with the value of 0.40. The overall HIs indicate that China shows relatively
high commitments in overall services sectors to Hong Kong and Australia. In addition, the HI for
China-New Zealand FTA (0.37) is quite close to that of ChAFTA. However, the overall HI for ChinaASEAN FTA is the lowest according to the five FTAs. To summarize, as Hong Kong is an important
part of China, and at the meantime China shows commitments in services and investments to a wide
degree. On the other hand, China offers quite high commitments to Australia, which is up to our
expectations. But as for ASEAN countries, most of the services sectors are not listed in the Schedules
of services provisions, which are considered to be no openness (full restrictiveness) for ASEAN
In the HI of the China Mainland-Hong Kong, we have different values of 0.32 and 0.46 separately; The Blue Bar with the value of 0.32,
which is calculated from the China Mainland FTA website (Trade and Industry Department), however the value of the Yellow Bar with
the value of 0.46, which is calculated from the Government of the Hong Kong Special Administrative Region website. Due to the data
come from different sources, we conclude the two different results (0.32, 0.46).
6
34
countries to gain benefits from Chinese services sectors, such as Communication, Distribution,
Education, Financial services, Recreational areas, Transport services. Furthermore, the ASEAN
countries would negotiate more in the specific areas, and perhaps update the schedules of service
commitments for China-ASEAN FTA.
Figure 2: STRI and ‘1-HI’ Values
As we mentioned in the previous two sections, STRI represents a measure of restrictiveness but the
Hoekman index represents a measure of openness. The value of 1 minus the value of the Hoekman
index (1-HI) measures instead of openness the restrictiveness of commitments in services sectors.
We can then compare the degrees of restrictiveness implied by commitments in ChAFTA with those
in actual policy.
Figure 14 shows four quadrants to illustrate the range of outcomes. The values in the black represent
the ‘STRI’ results, and the red character values represent the ‘1-HI’ results. The various quadrants
show the combinations of high and low values of the measures. Our interpretation is the following.
 In Quadrant One, both STRI and (1-HI) are high: these are sectors with a degree of
restrictiveness but also no significant commitments to openness in ChAFTA. Air transport is an
example. While profits may be available, they cannot be easily sought by Australian firms.
 Quadrant Two demonstrates that Low ‘1-HI’ but High STRI results, that means under the ‘1-HI’
calculation results, China shows less restrictiveness in specific services sectors to Australia, but
high restrictiveness in these services sectors to other countries in the world. These are more
likely to be attractive sectors for Australia (and other trading partners with similar access).
 Quadrant Three shows Low levels under both the STRI and ‘1-HI’ results. There are many
sectors in this category and they are likely to be highly competitive, and so less attractive to entry.
 In the last case, Quadrant Four shows High ‘1-HI’ but Low STRI results, which means that China
demonstrates higher restrictiveness to Australia than that of other countries in the world in
particular areas. Likewise these are relatively less attractive opportunities for Australian firms
(or areas in which in future to seek more open access).

35
3.3 Detailed Analysis of Service Provisions under ChAFTA with focus on SA
sectors of interest
3.3.1
Mining Services Sector
As shown in table 4, services incidental to mining, specifically in regards to oil and natural gas, are
included in China’s commitments on the service sector of ChAFTA. The specific provisions on this subsector determine that commercial presence can only be taken in form of oil and gas exploitation with
Chinese partners, and includes no limitations on consumption abroad. The cross-border supply remains
unbound and the presence of natural persons is unbound except as indicated in horizontal
commitments.
The ChAFTA provisions on related scientific and technical consulting services for iron, copper,
manganese, coal bed methane and shale gas limits the commercial presence of Australian service
providers to only in the form of prospecting and surveying services for these fields of services and in
cooperation with Chinese partners. There is no limitation on cross-border supply and on abroad
consumption. The presence of natural persons is unbound except as indicated in horizontal
commitments.
Additional information on these sector’s provisions is available in the below tables.
Table 3.6
1.
Business Services
a. Other Business services
i. Services incidental to mining (CPC 883, only including oil and natural gas)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound
Unbound
Consumption abroad
None
None
Commercial presence
Only in the form of oil and gas
exploitation in cooperation with
Chinese partners.
None
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Table 3.7
1.
Business Services
a. Other Business services
i. Related scientific and technical consulting services (CPC 8675)
1. Field services for iron, copper, manganese, coal bed methane and shale gas
(part of CPC 86751) and (part of CPC 86752)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Only in the form of prospecting and
surveying services for iron, copper,
manganese, coal bed methane and
shale gas in cooperation with
Chinese partners.
None
36
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Additional commitments on related scientific and technical consulting services for iron, copper,
manganese, coal bed methane and shale gas: “In accordance with the requirements of Catalogue for
the Guidance of Foreign Investment Priority Industries in the Central and Western Regions, and subject
to approval, the Australian services suppliers are allowed to provide comprehensive utilization of
mineral resources exploitation services in the central and western regions of China.
The Australian mining industry has benefitted greatly during times when the Australian dollar was low,
and suffered with the dollar’s meteoric rise. Industry has identified the potential for opening up the
mining services market as a way to provide a new, more predictable market, less influenced by
fluctuating world market prices for primary mining goods, and more dependent upon South Australia’s
expertise and consequent comparative advantages in areas including exploration, mining construction
services site preparation and consultant engineering services. As highlighted above, these services are
unrestricted in the Central and Western regions of China, with a commercial presence permitted for
prospecting and surveying services anywhere in China.
3.3.2
Agriculture (Wine)
The provisions on services incidental to agriculture limit the commercial presence of Australian service
suppliers to only in the form of joint ventures, with foreign majority ownership. There are no limitations
on cross-border supply and on consumption abroad. The presence of natural persons is unbound
except as indicated in horizontal commitments.
There is no specific provision on services incidental to the wine sector, nevertheless, according to the
Central Product Classification (CPC), the wine manufacturing services (CPC 88182) is included in the
CPC 881 referred in the provisions on services incidental to agriculture included on ChAFTA.
Additional information on these sector’s provisions is available in the below tables.
Table 3.8
1.
Business Services
a. Other Business services
i.
Services incidental to agriculture, forestry, hunting and fishing (CPC 8817, 882)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Only in the form of joint ventures,
with foreign majority ownership
permitted.
None
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Three main factors are important to note when considering the Chinese market for wine-related
agricultural services: China’s quickly growing middle class, new and extensive plantings of grapes for
wine production and rapidly rising per capita consumption of wine. While South Australia stands to be
Australia’s largest beneficiary in wine exports to China under ChAFTA, South Australia has the human
capital and expertise to be Australia’s biggest beneficiary in wine-related agricultural services exports
as well. Furthermore, given the early stage of development of the Chinese domestic wine production
industry, the size and value of the rapidly growing Chinese domestic market for wine, and the Chinese
preference for premium and super premium wines, South Australia can enjoy both a robust wine export
7
CPC 881 includes wine manufacturing services (88182)
37
market and a wine-related agricultural services market in China, without fear of cannibalisation of one
market by the other.
3.3.3
Audiovisual Services Sector
Audiovisual services provisions on ChAFTA limit Australian services suppliers on the services of videos,
including entertainment software and distribution services and sound record distribution to establish
contractual joint ventures with Chinese partners to engage in the distribution of audiovisual products.
Cinema theatre services are limited to the construction and/or renovation of cinema theatres, with
foreign investment no more than 49 percent. There is no limitation on cross-border supply and on
abroad consumption and the presence of natural persons is unbound except as indicated in horizontal
commitments.
Table 3.9
2.
Communication Services
d. Audiovisual Services
- Videos, including entertainment software and (CPC 83202), distributions services
- Sound recording distribution
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Presence of natural persons
Services suppliers of Australia
are permitted to establish
contractual joint ventures with
Chinese partners to engage in
the distribution of audiovisual
products, excluding motion
pictures, without prejudice to
China’s right to examine the
content of audio and video
products (see footnote8).
Unbound except as indicated in
horizontal commitments.
None
Unbound except as indicated in
horizontal commitments.
The terms of the contract, concluded in accordance with China’s laws, regulations and other measures, establishing a “contractual
joint venture” govern matters such as the manner of operation and management of the joint venture as well as the investment or other
contributions of the joint venture parties. Equity participation by all parties to the contractual joint venture is not required, but is
determined pursuant to the joint venture contract. “Foreign invested enterprise” in this Schedule means a foreign invested enterprise
duly constituted or otherwise organised under “Law on Chinese-Foreign Equity Joint Ventures”, “Law on Chinese-Foreign Contractual
Joint Ventures” and “Law on Foreign-Capital Enterprises
8
38
Table 3.10
3.
Communication Services
e. Audiovisual Services
- Cinema Theatre Services
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Presence of natural persons
Services
suppliers
of
Australia are permitted to
construct and/or renovate
cinema theatres, with foreign
investment no more than 49
percent.
Unbound except as indicated in
horizontal commitments.
None
Unbound except as indicated in
horizontal commitments.
Additional commitments on audiovisual services: “Without prejudice to compliance with China’s
regulations on the administration of films, China allows the importation of motion pictures for theatrical
release from foreign countries on a revenue-sharing basis and the number of such imports shall be 20
on an annual basis.”
Opportunities for SA:
Creative Industries – film, television and audio-visual production
Unlike the Australia-US FTA (AUSFTA), Australia has less defensive interest with China in the creative
industries sector, and significant potential offensive interests. China’s creative industries have grown
due to extensive government intervention in the field, but remains under-developed to serve the
Chinese domestic market. South Australia, including through the support of and for the South Australian
Film Corporation (SAFC), is host to a number of internationally acclaimed production companies, and
has strong capabilities in all stages of production and in services in support therefore. South Australia
also has capability in offering diverse and unique locations for production. Chinese outbound
investment in the creative industries can be utilised in South Australia to produce top quality products
for both the Chinese and international markets.
The SAFC's core activities include:
 Screen practitioner development and support.
 Script and project development.
 Production investment funding, cash flow loans and incentives.
 Operation of production and post-production facilities.
 Marketing South Australia's unique locations, professional crew and state of the art facilities
(Adelaide Studios) to both domestic and international markets, including offering a confidential
locations and production liaison service for projects looking to shoot in South Australia.
Currently, Chinese creative industry productions are failing to generate a return in the Chinese market
comparable to international productions. The table below marks not only a dominance by international
films over Chinese domestic films, but importantly shows that over the period of 2009-13, the disparity
between the earnings realised by domestic and foreign films has risen steadily.
39
Figure3.2
Source: Xioalin Zhou, South China Normal University
Adelaide Studios, a $48 million facility run under the auspices of the SAFC, currently hosts 33 South
Australian creative industries businesses as tenants, and lists thirty in its South Australian business
directory. These businesses range from location scouting services, casting services, pre and post
production, film studios, lighting and even catering. One particular South Australian film production
company, Rising Sun Pictures, has been involved in the production of over 70 major motion pictures,
including those based upon the Marvel ® comic characters the X-Men, Batman, Superman and the
Green Lantern, the Harry Potter series and the Lord of the Rings series. Further, grants and tax
incentives provided by the Australian Commonwealth Government, and augmented by incentives from
the South Australian Government via the SAFC, combine with South Australia’s creative industries
services expertise to make South Australia an attractive destination for inbound Chinese investment in
production. This is an attractive option for South Australia, where in 2013-14, for every dollar invested
by the Government of South Australia into film production brought a return of $8.60 ($2.75 million
invested by SAFC brought a return of $24 million in investment).
Concerning exploitation of audio-visual works, including motion pictures, in China, Australian
companies can now create joint ventures in China for their distribution. These products remain subject
to review by Chinese censors prior to distribution. Further, Australian companies are now permitted to
participate in the construction and renovation of movie theatres in China, if foreign investment therein
is less than 49%.
3.3.4
Education Services Sector
The provisions on the education services include:
a) Primary education services,
b) Secondary education services,
c) Higher education services,
d) Adult education services, and
e) Other education services.
Special education services, e.g., military, police, political and party school education are excluded from
the education services sector. National compulsory education is excluded from primary and secondary
education services and English language training is included in the sub-sector other education services.
The commercial presence of Australian service providers on these sectors are permitted in form of joint
school, with foreign majority ownership. Cross-border mode of supply is unbound and there is no
limitation on consumption abroad for education services. The particularities on the presence of natural
persons are described in the table below.
40
Table 3.11
5.
Education services (excluding special education services e.g. military, police, political and party school
education)
a. Primary education services (CPC 921, excluding national compulsory education in CPC 92190)
b. Secondary education services (CPC 922 excluding national compulsory education in CPC92210)
c. Higher education services (CPC 923)
d. Adult education services (CPC 924)
e. Other education services (CPC 929, including English languages training)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound
Unbound
Consumption abroad
None
None
Commercial presence
Joint schools may be established,
with foreign majority ownership
permitted.
Unbound
Presence of natural persons
Unbound except as indicated in
horizontal commitments and the
following:
Qualifications are as follows:
Individual
education
service
suppliers of Australia may enter
into China to provide education
services when invited or employed
by Chinese schools and other
education institutions.
possession of Bachelor’s degree or
above;
and an appropriate professional
title or certificate, with two years’
professional experience.
Additional commitments in the educational services: “China agrees to list within one year, through its
examination and evaluation procedures, on the website www.jsj.edu.cn the 77 Australian CRICOS (the
Commonwealth register of Institutions and Courses for Overseas Students)-registered higher education
institutions that are set up in accordance with Australian laws and eligible to confer diplomas or degrees
recognised by Australian education authorities.”
Opportunities for SA:
Education is by far South Australia’s largest services export, with income nearly quadrupling from $250
million in 2003-04 to nearly $1 billion in 2013-14. Consistent across that period, China remained the
most important export market for education services, with the number of Chinese students studying in
South Australia rising from 3500 in 2004 to over 11,000 in 2013. Chinese students outnumber Indian
students (the second largest education export market for South Australia) by nearly four to one, and
constituted 40% of the total foreign student enrolments in 2013. Chinese student enrolment in South
Australia rose at an average of approximately 75% per annum over the period.
41
Table 3.12
South Australia’s Top 20
Source Countries Country
Rank
Enrolments 2013
Commencements Year
to Date June 2014
China
India
Malaysia
Vietnam
Saudi Arabia
South Korea
Hong Kong
Brazil
The Phillipines
Singapore
Japan
Indonesia
UK
Kenya
Taiwan
Nepal
Thailand
Germany
US
Pakistan
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
11,232
3,300
2,024
1,272
1,165
1,109
829
606
595
518
481
422
323
287
278
271
252
242
224
218
3,498
991
531
423
469
369
276
338
224
139
220
73
65
148
92
103
100
98
78
65
Under ChAFTA, China has committed within one year of enactment to add an additional 77 CRICOS
registered higher education institutions to its “white list” maintained on its Ministry of Education web
site, bringing the total number to 182. This is significant, as 90% of Chinese students currently studying
in Australia attend institutions listed on the Ministry of Education’s white list. How many of those
institutions are South Australian, and how the addition of 77 more institutions will affect enrolments
across institutions, remains to be seen.
While China is poised to remain the cornerstone of the South Australian education export market in
terms of foreign students attending institutions in South Australia, the ChAFTA raises the possibilities
for South Australian educational institutions to enter into joint venture schools in China, and for
individual South Australian education service providers to work in Chinese education institutions. This
ability to establish a commercial presence and enable the movement of education professionals is a
significant step, and can expand South Australia’s capacity to service the Chinese education market
beyond what it currently has capacity to provide from a ground base in South Australia.
Significantly, China has limited its commitments concerning joint venture educational institutions in
China. While such institutions can be majority foreign-owned, both China and Australia have reserved
to not commit to providing national treatment for such institutions. Accordingly, the reality and
practicality of entering such a venture remains to be defined, as regulatory restriction can and will be
different than for the establishment of Chinese owned educational institutions.
42
3.3.5
Financial Services Sector
The provisions on ChAFTA in regards to financial services include:
All insurance and insurance-related services, and
Banking and other financial services
On it turns, the sub-sector of all insurance and insurance-related services includes:
a) Life, health and pension/annuities
b) insurance
c) Non-life insurance
d) Reinsurance
e) Services auxiliary to insurance
This sub-sector limitation on cross-border supply is unbounded except for reinsurance; international
marina, aviation and transport insurance; and brokerage for large scale commercial risks, international
marina, aviation and transport insurance, and reinsurance. The limitation on market access for
consumption abroad is unbound for brokerage and none for others. Limitations on market access for
commercial presence are classified in: a) Form on establishment; b) Business Scope; and c) Licences.
Details of this limitations, including on national treatment are included in the below table. The presence
of natural persons is unbound except as indicated in horizontal commitments.
The sub-sector of banking and other financial services includes the following services:
a) Acceptance of deposits and other repayable funds from the public;
b) Lending of all types, including consumer credit, mortgage credit, factoring and financing of
commercial transaction;
c) Financial leasing;
d) All payment and money transmission services, including credit, charge and debit cards,
travellers cheques and bankers drafts (including import and export settlement);
e) Guarantees and commitments;
f) Trading for own account or for account of customers: foreign exchange.
The limitation on cross-border supply for this sub-sector is unbounded except for: provision and transfer
of financial information, and financial data processing and related software by suppliers of other financial
services; Advisory, intermediation and other auxiliary financial services on all activities listed in
subparagraph (a) through (k), including credit reference and analysis, investment and portfolio research
and advice, advice on acquisitions and on corporate restructuring and strategy. There is no limitation
on consumption abroad. Limitations on market access for commercial presence are classified in: a)
Geographic coverage; b) Clients; and c) Licensing. Details of this limitations, including on national
treatment are included in the below table. The presence of natural persons is unbound except as
indicated in horizontal commitments.
The sub-sector of motor vehicle financing by non-bank financial institutions provisions establish no limits
on consumption abroad and commercial presence. The presence of natural persons is unbound except
as indicated in horizontal commitments.
In the provisions of the sub-sector of other financial services listed: (k) and (l), there are no limitation
for cross-border supply and consumption abroad. The presence of natural persons is unbound except
as indicated in horizontal commitments. In regards to the commercial presence, the criteria for
authorisation to deal in China’s financial services sector are solely prudential. Branches of institutions
of Australia are permitted.
43
Table 3.13
5.
Financial Services
a. All insurance and insurance-related services
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound except for:
None
(a) reinsurance;
(b) international
marine,
aviation, and transport
insurance; and
(c) brokerage for large scale
commercial
risks,
international
marine,
aviation and transport
insurance,
and
reinsurance.
Consumption abroad
Unbound for brokerage. Other,
none.
None
Commercial presence
A. Form of establishment
None, except for:
Non-life insurers of Australia are
permitted to establish as a branch
or as a wholly-owned subsidiary;
i.e., with no form of establishment
restrictions.
- Insurance institutions of Australia
shall not engage in the statutory
insurance business, except that
insurance institutions of Australia
are permitted to undertake third
party auto liability insurance.
Life insurers of Australia are
permitted 50 percent foreign
ownership in a joint venture with the
partner of their choice.
The joint venture partners can
freely agree the terms of their
engagement, provided they
remain within the limits of the
commitments contained in this
Schedule.
For brokerage for insurance of
large scale commercial risks and
brokerage for reinsurance and
brokerage
for
international
marine,
aviation, and transport insurance
and reinsurance: wholly foreignowned
subsidiaries
are
permitted.
For other brokerage services:
Unbound.
Internal branching is permitted
for insurance firms of Australia
which have established joint
venture insurance companies or
wholly owned subsidiaries in
China.
Internal branching is permitted
for brokerage for insurance of
large scale commercial risks and
brokerage for reinsurance and
brokerage
for
international
44
marine, aviation, and transport
insurance and reinsurance which
have established wholly foreignowned subsidiaries in China.
B. Business Scope
Non-life insurers of Australia are
permitted to provide “Master policy”
(see
Attachment
3)
insurance/insurance of large scale
commercial risks, which has no
geographic
restrictions.
In
accordance with national treatment,
insurance brokers of Australia are
permitted to provide “Master policy”
no later than Chinese brokers,
under
conditions
no
less
favourable.
Non-life insurers of Australia are
permitted to provide the full range of
non-life insurance services to both
foreign and domestic clients.
Insurers of Australia are permitted
to provide health insurance,
individual/group insurance and
pension/annuities insurance to
foreigners and Chinese.
Insurers of Australia are permitted
to provide reinsurance services for
life and non-life insurance as a
branch, joint venture, or wholly
foreign-owned subsidiary, without
geographic
or
quantitative
restrictions on the number of
licences issued.
C. Licences
Licences will be issued with no
economic needs test or quantitative
limits on licences. Qualifications for
establishing an insurance institution
of Australia are as follows:
- the investor shall be an insurance
company of Australia with more
than 30 years of establishment
experience in a WTO Member;
- it shall have a representative office
for two consecutive years in China;
- it shall have total assets of more
than US$ 5 billion at the end of the
45
year prior to application, except for
insurance brokers.
Insurance brokers shall have total
assets of more than US$ 200
million.
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
46
Table 3.14
7.
Financial Services
b. Banking and other financial services
Modes of supply
Cross-border supply
Limitations on market access
Unbound
following:
except
for
Limitation on national treatment
the
None
- Provision and transfer of
financial
information,
and
financial data processing and
related software by suppliers of
other financial services;
- Advisory, intermediation and
other auxiliary financial services
on all activities listed in
subparagraphs (a) through (k),
including credit reference and
analysis,
investment
and
portfolio research and advice,
advice on acquisitions and on
corporate restructuring and
strategy.
Consumption abroad
None
None
Commercial presence
A. Geographic coverage
Except for prudential measures,
foreign financial institutions may do
business, without restrictions or
meed for case-by-case approval,
with foreign-invested enterprises,
non-Chinese natural persons,
Chinese natural persons and
Chinese enterprises. Otherwise,
none.
For foreign currency and local
currency business, there is no
geographic restriction.
B. Clients
For foreign currency business,
financial institutions of Australia are
permitted to provide services in
China without restriction as to
clients.
For local currency business,
financial institutions of Australia are
permitted to provide services to
Chinese enterprises. Financial
institutions
of
Australia
are
permitted to provide services to all
Chinese
clients.
Financial
institutions of Australia licensed for
local currency business in one
region of China may service clients
in any other region.
C. Licensing
Criteria for authorisation to deal in
China’s financial services sector
are solely prudential (i.e., contain
no economic needs test or
quantitative limits on licences).
Financial institutions of Australia
who meet the following condition
are permitted to establish a
subsidiary of a bank of Australia in
China:
47
- total assets of more than US$ 10
billion at the end of the year prior to
filing the application.
Financial institutions of Australia
who meet the following condition
are permitted to establish a branch
of a bank of Australia in China:
- total assets of more than US$ 20
billion at the end of the year prior to
filing the application.
Financial institutions of Australia
who meet the following condition
are permitted to establish a
Chinese-foreign joint bank in China:
- total assets of more than US$ 10
billion at the end of the year prior to
filing the application.
Qualifications
for
financial
institutions of Australia to engage in
local currency business are as
follows:
- one year business operation in
China prior to the application,
otherwise, none.
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Additional commitment for Banking and other financial services: “For financial leasing services, financial
leasing corporations of Australia will be permitted to provide financial leasing service at the same time
as domestic corporations.”
Table 3.15
7.
Financial Services
a. Motor vehicle financing by non-bank financial institutions
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound except for the following:
Unbound
- Provision and transfer of financial
information, and financial data
processing and related software by
suppliers of other financial services;
- Advisory, intermediation and other
auxiliary financial services on all
activities listed in subparagraphs (a)
through (k), including credit reference
and analysis, investment and portfolio
research and advice, advice on
acquisitions and on corporate
restructuring and strategy.
Consumption abroad
None
None
Commercial presence
None
None
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
48
49
Table 3.16
7.
Financial Services
a. Other financial services as listed below:
i. Provision and transfer of financial information, and financial data processing and related
software by suppliers of other financial services;
ii. Advisory, intermediation and other auxiliary financial services on all activities listed in
subparagraphs (a) through (k), including credit reference and analysis, investment and
portfolio research and advice, advice on acquisitions and on corporate restructuring and
strategy.
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
None. Criteria for authorization to
deal in China's financial services
sector are solely prudential (i.e.,
contain no economic needs test or
quantitative limits on licenses).
Branches of Korean institutions are
permitted.
None
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Opportunities for SA:
Financial Planning
The population of China is ageing, and it is well known that the distribution of the population compared
to other developing countries is much older for its stage of development, in part due to China’s one child
policy.
The provision of retirement income for this population is imperative. We expect a shift to self-reliance
in this respect, and expect Chinese households will be making this provision. This means growing
demand for wealth management services and financial advice, especially for saving for retirement.
Related to this will be growth in demand for health services for an ageing population, including the
contingent planning for funding therefor funding.
Financial planning of this nature is referred to as non-life, pension insurance, and is associated also
with health insurance, in China’s commitments under the financial services chapter of ChAFTA.
Australian entities can establish a Chinese entity as a wholly owned subsidiary or a branch office,
without restriction.
The provision of wealth management services is supported by a community of advisers. Adelaide has
considerable expertise in this area, indeed SA could be described as the capital of this industry, as
home of the hosting the Self-Managed Super Fund Association (SMSFA).
SMSFA has argued that success in the delivery of these services requires a professional community of
advisers. There is an alliance therefore with the education sector to deliver the education required to
build and maintain this professional community, with potential growth sparked by Chinese demand
creating flow-on opportunities in South Australia.
50
SMSF
China has two demographic characteristics that,
leveraged with the benefits under ChAFTA, make
the superannuation advisory industry a key area
for potential growth: An exponentially growing
middle-class, and a large, aging population. China’s
growing and aging middle-class will hold a
significant and growing percentage of the world’s
financial assets in the coming years. Australia has
the recognised expertise to advise on investment,
distinguishing itself in the region and ranked as a
world leader in pension systems in the Mercer
Global Pension Index.
According to SMSFA CEO Angela Slattery, “There
will be opportunities across a range of services,
including financial advice; fund administration;
system design; retirement income policy expertise;
and complex data storage, security and
management.”
“It will be imperative for these industries to offer
world best practices to convert this opportunity.
This can only be achieved by all industry
participants maintaining a focus on increased
professionalism and higher educational standards
across both the superannuation and financial
services sectors.”
South Australia is home of the SMSFA and the
International Centre for Financial Services (ICFS) at
the University of Adelaide. The South Australian
Government should encourage and enable this
body of expertise and educational platform to
grow and remain based in Adelaide, promoting
South Australia a recognized centre of excellence
in the field across Australasia.
Sources: SMSFA; Shed Media (on behalf of
SMSFA); ICFS, University of Adelaide
51
3.3.6
Health Related and Social Services (services for the aged)
The provisions on ChAFTA in regards to the health related and social services sector includes the
following services:
a) Hospital services; and
b) Services for the aged
The limitations on market access and on national treatment for cross-border supply and consumption
abroad are unbound for both hospital services and services for the aged.
In the hospital services provisions, traditional Chinese medicine hospital are excluded and the
commercial presence of qualified service suppliers of Australia are permitted, in form of wholly foreignowned hospital by constitution or acquisition, in specific provinces, namely Beijing, Tianjin, Shanghai,
Jiangsu, Fujian, Guangdong and Hainan.
In the services for the aged sector, commercial presence of service suppliers of Australia is permitted
in form of wholly foreign-owned profit-making institutions.
The presence of natural persons is unbound except as indicated in horizontal commitments in both subsectors.
Table 3.17
8.
Health Related and Social Services
a. Hospital services (excluding Traditional Chinese Medicine hospitals)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound
Unbound
Consumption abroad
Unbound
Unbound
Commercial presence
Presence of natural persons
Qualified service suppliers of
Australia are permitted to
establish wholly foreign-owned
hospitals by constitution or
acquisition in Beijing, Tianjin,
Shanghai,
Jiangsu,
Fujian,
Guangdong
and
Hainan
province. The establishment
procedures, practice registration,
diagnosis
and
treatment
activities of such hospitals are
subject to
Chinese laws,
regulations and rules, and the
relevant
rules
of
the
abovementioned
areas
on
foreign investment in hospitals
shall be applied as well.
Unbound except as indicated in
horizontal commitments.
Unbound
Unbound except as indicated in
horizontal commitments.
52
Table 3.18
8.
Health Related and Social Services
b. Social services (services for the aged)
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
Unbound
Unbound
Consumption abroad
Unbound
Unbound
Commercial presence
Service suppliers of Australia are
permitted to establish wholly
foreign
-owned
profit-making
institutions for the aged in China.
Unbound
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Opportunities for SA:
The health care and aged care opportunities for South Australia under ChAFTA are unprecedented in
China’s trade relations. Australians can open hospitals across some of the most populous regions of
China, and can open and operate for profit aged care facilities across all of China. With an ageing
population, and a smaller young generation due to China’s one-child policy, the Chinese are starting to
privately plan for their future health and aged care needs, catering to the health, welfare and comfort
needs of a wealthier and burgeoning Chinese middle class.
Furthermore, Australian medical and dental professionals can enter into joint ventures and partnerships
with Chinese practices and partners in China, providing mobility and new export opportunities for
Australian practitioners.
3.3.7
Tourism and Travel Related Services Sector
The provisions on this sector include:
a) Hotels (including apartment buildings) and Restaurants; and
b) Travel Agency and Tour Operator
There are no limitations on cross-border supply and consumption abroad for both sub-sectors.
In regards to commercial presence, in both sub-sectors wholly foreign-owned subsidiaries are
permitted.
Specifically to hotels and restaurants sub-sector, service suppliers of Australia are permitted to
construct, renovate and operate hotel and restaurant establishments in China. For travel agency and
tour operator services, suppliers of Australia in form of joint venture or wholly foreign-owned travel
agencies and tour operators are not permitted to engage in the activities of Chinese travelling abroad
and to Hong Kong China,
Macao China and Chinese Taipei.
For both sub-sectors, the presence of natural persons is unbound except as indicate in horizontal
commitments.
Additional information on these sector’s provisions is available in the below tables.
53
Table 3.19
9.
Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Services suppliers of Australia may
construct, renovate and operate
hotel
and
restaurant
establishments in China.
Wholly foreign-owned subsidiaries
are permitted.
None
Presence of natural persons
Service suppliers of Australia are
permitted to establish wholly
foreign
-owned
profit-making
institutions for the aged in China.
Service suppliers of Australia are
permitted to establish wholly
foreign
-owned
profit-making
institutions for the aged in China.
Table 3.20
9.
Tourism and Travel Related Services
b.
Travel Agency and Tour Operator
Modes of supply
Limitations on market access
Limitation on national treatment
Cross-border supply
None
None
Consumption abroad
None
None
Commercial presence
Wholly foreign-owned subsidiaries
are permitted
None, except that joint ventures or
wholly
foreign-owned
travel
agencies and tour operators are not
permitted to engage in the activities
of Chinese travelling abroad and to
Hong Kong China, Macao China
and Chinese Taipei.
Presence of natural persons
Unbound except as indicated in
horizontal commitments.
Unbound except as indicated in
horizontal commitments.
Opportunities for SA:
The Chinese tourism services market is also one of the most important services markets for South
Australia, with the number of visitors to South Australia rising from 4,300 in 2003-04 (comprising 2% of
all Chinese visitors to Australia during the period), to 27,000 Chinese visitors in the year ending in March
2014 and 33,000 visitors during the year ending in March 2015 (comprising 4% of the total Chinese
visitors to Australia during those respective periods). On average between 2012 and 2014, this
attracted $126 million per year in income from Chinese inbound tourism, with an average of 1.625
million nights stayed in South Australia. Income from Chinese inbound tourism was $157 million in the
year ending March 2015. Approximately 99% of Chinese visitors to South Australia spend nights in
Adelaide over the period of 2012-14, while 83% of the total nights stayed by all foreign visitors were
spent in Adelaide during the year ending in March 2015. During the same period, the Limestone Coast
received 12% of the total foreign visits, Kangaroo Island 10%, while those destinations attracted 4%
and 3% of Chinese visitors, respectively.
The travel logistics for Chinese travellers depend largely on Chinese tour and travel operators in
Adelaide, in liaison with key distribution partners in China. While the ChAFTA does allow Australian
wholly owned and joint venture travel and tour service operations to be established in China, it has
54
restricted national treatment for those operations in that they cannot engage in the activities of Chinese
national travelling abroad or to Hong Kong, Macau or Chinese Taipei. Accordingly, for the attraction of
inbound Chinese tourists, South Australia will need to continue to depend upon key distribution partners
in China who are Chinese owned travel and tour services operators. However, a new market of Chinese
domestic travellers and Australian and other inbound foreign travellers to China, will be open to
Australian participation in the domestic Chinese travel industry.
Keeping the Profits in China
Unfortunately, ChAFTA does not provide Australian travel services industries access to Chinese consumers for purposes of
travel out of China. Couple this with the majority of tourist travel purchased as a part of a package, and the result is a significant
portion of the profits made remain with the travel services operators in China, who collect the up-front fee, and negotiate deals
with Australian services providers that will allow the Chinese travel agent to retain the maximum profit.
The Government of South Australia should brief the Commonwealth Government of this imbalance in the agreement, and
suggest more work be done to allow Australian service providers to capture more tourist revenue, as well as being able to offer
Chinese tourists a broader range of quality services on competitive terms.
Australians will have access to the Chinese market for the construction, maintenance and operation of
hotels and restaurants in China under ChAFTA, with national treatment afforded in this area, subject to
horizontal commitments on the movement of persons. With South Australia’s emphasis to the Chinese
tourism market being on wine, food and the aesthetic natural beauty of the state, there may be an
opportunity for South Australian themed services, restaurants in particular, to showcase the strong
attributes of the state, and attract not only local customers in China, but encourage interest in South
Australian tourism by showcasing wine and food, as well as offering a representation of the South
Australian lifestyle ideal.
Themed Wine and Food Offerings in China
The wine industry has been a leader in market promotion and premiumisation, including in China. One mechanism
that has arisen is the opening of cellar door facilities and/or wine bar operations in China. In particular, two South
Australian wineries, Bird in Hand and Tomich, have opened cellar door operations in China, with the intent of brand
building and market promotion, and taking advantage of the trend of double-digit growth in the Chinese premium
wine market. Bird in Hand alone is now exporting over 20,000 cases per year to China, over 10% of their total
production, and hopes to see continued rapid growth due to its strategy of coupling premium product with a physical
presence and continuing education of the local consumer base. Tomich has gone further, leveraging its relationships
built exporting wine, to recently entering into a deal worth an estimated $500million, to export wine and food to be
distributed by a Chinese supermarket chain, in store aisles dedicated to selling “famous Australian brands.”
As demonstrated, the concept of premiumisation and market promotion in food and beverage sectors goes beyond
wine. Further, the ventures thus far pioneered and described above are for-profit, commercial ventures, both of which
have met with success.
The South Australian Government, in promoting South Australian food and beverages, can support such outreach into
China. As this type of operation is a commercial venture, the support given by the South Australian Government can
be limited as appropriate, and the venture can even become self-sustaining, depending upon its commercial success.
Market access, start-up and promotion expenses might be some areas where a contribution can be made, and given
the right industry partner, cellar door operations and restaurants featuring premium South Australian products could
achieve both commercial success and the governmental goal of opening markets and creating awareness of and
demand for premium South Australian products, including the pairing and close promotion of quality food and wine.
Sources: Bird in Hand; Tomich Wines
55
Table 3.21
South Australia
Holiday
VFR
Business
Other
Total
Visits
9,000
7,000
3,000
7,000
25,000
Nights
85,000
283,000
112,000
1,144,000
1,625,000
9
40
37
163
65
Average Length of
Stay (nights)
Expenditure
$126,000,000
Data is based on a 3 year average for the years ending June 2012 to June 2014 for all purpose visitors.
Source: Tourism SA, 2015.
3.4 Foreign Direct Investment
ChAFTA creates incentive for FDI in two ways. ChAFTA creates comparative advantages for both
China and Australia, both of which may attract FDI. ChAFTA also facilitates FDI by liberalising the
regulatory framework governing FDI between Australia and China. South Australia can benefit from
both inbound and outbound FDI opportunities under ChAFTA, based again on the combination of
sectoral comparative advantage and liberalised rules on FDI.
3.4.1
FDI in China: Foreign Direct Investments: China’s Foreign Investment Industries
Guidance Catalogue
Overview
The foreign direct investment in China is regulated by the Foreign Investment Industries Guidance
Catalogue (the “FDI Catalogue”). It classifies foreign investment projects in three sectors: encouraged,
restricted and prohibited industrial sectors. The FDI Catalogue also regulates restrictions on forms of
investment and/or shareholding proportion. Foreign investment industries not included in the FDI
Catalogue will be considered permitted. (Minter Ellison 2015, p.2)
The latest version of the FDI Catalogue, amended in 2015, narrowed down the number of foreign
investment projects under the restricted category from 79 to 38. It decreased from 43 to 15 the number
of projects requiring the invested enterprises to adopt the form of Sino-foreign equity/cooperation joint
ventures (“EJV/CJV”) and from 44 to 35 the number of projects requiring majority shareholding by
Chinese parties. Nevertheless, manufacturing industries and service industries, including logistics,
retail/wholesale, e-commerce and finance had their restrictions increased in the 2015 version. (Minter
Ellison 2015, p.2)
According to the National Development and Reform Commission (NDRC), one of the aims of the 2015
version is to prepare the FDI Catalogue for a smooth transition to the future ‘negative list’ approach,
which is expected to be adopted when a new Foreign Investment Law is promulgated in the near future.
The 2015 version has some provisions that are inconsistent or contradict with other regulations and
rules, which will require some explanations and clarifications from the government while implementing
it. (Minter Ellison 2015, p.2)
The Catalogue for the Guidance of Foreign Industries (Amended in 2015) is available on the FDI Invest
in China website <http://www.fdi.gov.cn/1800000121_39_4830_0_7.html>.
Industry sectors included
The FDI Catalogue (2015) includes twelve industry sectors in the Encouraged Foreign Investment
Industries list; fourteen in the Restricted Foreign Investment Industries list; and thirteen in the Prohibited
Foreign Investment Industries list. Nevertheless, the Manufacturing Industries sector in the Encouraged
Foreign Investment Industries list comprehend 24 subsectors, while Manufacturing Industries sector in
the Prohibited Foreign Investment Industries list includes only four subsectors. The sectors included in
the Chinese Foreign Investment Industries Guidance Catalogue are described below. The full
description of the sectors and its specific activities included on the FDI Catalogue in attached on Annex
I.
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Foreign Investment in Restricted Industries
“There is no standard process for approval of foreign investment in industries that fall under the
restricted category of the Catalogue Guiding Foreign Investment”. The actual practice depends on the
industry and investment scale. Usually, requests are submitted to a prerequisite approval process with
the industry’s administration authority, accordingly to the specific related industry. For example, a biotech company would likely to go through a prerequisite approval process with the Ministry of Health
before requesting approval from other agencies. Further on, the company would request approval from
the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC)
or other local counterparts, depending on the size of the investment. (Jiang 2013)
The number of government agencies involved in the foreign investment in restricted industries varies
according to the industry and the amount of investment. Nevertheless, usually the investor should work
first with the industry administration authority. (Jiang 2013)
Basic Approval Process
By the time an industry administration authority approves and investment, usually the company then
obtains approval from NDRC and MOFCOM. In this case, approval should be first requested from
NDRC than from MOFCOM because MOFCOM only approves requests that have been approved by
other agencies first. Again, the investment value and its industry will determine whether the approval is
needed from the national agency or its local counterparts. (Jiang 2013)
National Development and Reform Commission (NDRC) approval
The NDRC is responsible to assess whether an investment correlates with the industry policies and
economic development goals. The NDRC rules determines that approvals for investment projects in the
restricted category under $50 million should be analysed by provincial NDRC offices, approvals for
investment projects in the restricted category between $50 million and $100 million should be assessed
by the national-level NDRC and investment projects in the restricted category for more than $100 million
should be analysed by the State Council. (Jiang 2013)
As an example, a company in Shanghai which wants to invest less than $50 million in a restricted
industry would need and approval from the Development and Reform Commission in Shanghai. If the
investment project was more than $50 million, the project application should be submitted to the national
level of NDRC. After obtaining the approval from NDRC, the company would be able to submit the
contract and articles of association to be approved by MOFCOM. (Jiang 2013)
Ministry of Commerce (MOFCOM) approval
The MOFCOM approval process focuses on document requirements and general considerations, e.g.,
environmental impact and land use. For investment higher than %50 million in restricted industries the
investor needs to submit an application to provincial MOFCOM branches, which, after any clarification
needed, will send the documents to MOFCOM review and approval. This approval process in MOFCOM
usually takes up to three months. After approved, the Commerce Commission (Provincial MOFCOM
branches) will notify the investor. However, it is important to note that approval from other agencies
must be obtained before MOFCOM’s approval. (Jiang 2013)
57
Projects worth less than $50 million in restricted industries can be approved by the provincial commerce
departments without sending applications to MOFCOM, which makes the approval process less
expensive, less time consuming and more flexible. Access to local officials involved in the approval
process would be easier than in the case in a national-level approval process. Nevertheless, companies
must apply to agencies that work with them directly, independently of the level of approval is required.
(Jiang 2013)
Approval times
The specificity of the approval, such as approval authorities involved, documentation requirements and
other operation conditions in restricted industries will determine the time frame of the whole approval
procedure. It was reported that if there is no complication within the approval process, it takes around
one year to be concluded. However, if the number of agencies involved in the process and/or any
agency requires further documentation, the approval process often takes longer. Approvals procedures
for foreign investment projects within the western China appear to be a little quicker due to the interest
of Chinese Government in attracting more foreign investment to interior provinces. (Jiang 2013)
3.4.2
FDI in ChAFTA: Chapter 9 Investment
The foreign direct investment on ChAFTA is set in two-stage approaches:
1. Commitments on entry-into-force; and
2. Forward work program
The first-stage approach, commitments on entry-into-force, includes provisions on basic market access
and on the establishment of a committee on investment and a forward work program. Part of Australia’s
commitments includes the more liberal Foreign Investment Review Board (FIRB) screening the
threshold.
The second stage, forward work program, includes the commitment to commerce negotiations for
comprehensive investment chapter in the future, which includes comprehensive investment protections
and China’s investment market access commitments within three years of the FTA entered into force.
(Department of Foreign Affairs and Trade – Australian Government n.d.)
Both Parties committed in the investment chapter to non- discriminatory treatment of the other Party’s
investors and investments (national treatment). Subject to Australia’s schedules of non-conforming
measures, the national treatment obligations by Australia apply the market access and postestablishment investment stages. For China, in the absence of investment schedules, national
treatment obligation applies exclusively to established investments. Both parties are also committed to
MFN treatment at the market access and post-establishment stages, which entitles Australian investors
to treatment no less favourable than that which China accords to other foreign investors under any
future investment arrangements. (Department of Foreign Affairs and Trade – Australian Government
n.d.)
In the need to enforce the national treatment commitments, Australian and Chinese investors are able
to use an investor-state dispute settlement (ISD) mechanism, which excludes claims in regards to
screening of foreign investment and includes modern safeguards and exceptions to retain policy space
for legitimate public welfare regulation. The code of conduct applicable to arbitrators in ISDS
proceedings in established on Annex 9-A, and the specification on the Parties’ addresses for the service
of documents is set on Annex 9-B of the Agreement. (Department of Foreign Affairs and Trade –
Australian Government n.d.)
The following are provisions from the ChAFTA Agreement:
Australia’s Commitment
Australia’s commitments on foreign investment under the ChAFTA are established on Annex III, part 1:
Schedule of non-conforming measures on trade in services and investments:
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“A. The following investments9 may be subject to objections by the Australian Government and may
also require notification to the Government:
(a) Investment by foreign persons10 of five per cent or more in the media sector, regardless of the
value of the investment;
(b) Investments by foreign persons in existing11 Australian businesses, or prescribed corporations 12,
the value of whose assets exceeds 252 million13 Australian Dollars in the following sectors:
(i).
The telecommunication sector;
(ii).
The transport sector, including airports, port facilities, rail infrastructure, international and
domestic aviation and shipping services provided either within, or to and from, Australia;
(iii).
The supply of training or human resources, or the manufacture or supply of military goods,
equipment, or technology, to the Australian or other defence forces;
(iv).
The manufacture or supply of goods, equipment or technologies able to be used for military
purpose;
(v).
The development, manufacture or supply of, or provision of services relating to, encryption
and security technologies and communication systems; and
(vi).
The extraction of (or rights to extract) uranium or plutonium, or the operation of nuclear
facilities;
(c) Investments by foreign persons in existing Australian businesses, or prescribed corporations, in
all other sectors, excluding financial sector companies 14, the value of whose total assets exceeds
1094 million15 Australian Dollars;
“Investments” means activities covered by Part II of Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) or, where applicable,
ministerial statements on foreign investment policy. Funding arrangements that include debt instruments having quasi-equity
characteristics will be treated as direct foreign investments.
10 A “foreign person” means, as defined in section 5 of the FATA:
(a) A natural person not ordinarily resident in Australia;
(b) A corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling
interest;
(c) A corporation in which two or more persons, each of whom is either a natural person no ordinarily resident in Australia or
a foreign corporation, hold the aggregate controlling interest;
(d) The trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a
substantial interest; or
(e) The trustee of a trust estate in which two or more persons, each of whom is either a natural person not ordinarily resident
in Australia or a foreign corporation, hold an aggregate substantial interest.
11 For the purpose of this entry, “existing’ means in existence at the time the investment is proposed or made.
12 For the purpose of this entry, “prescribed corporation” means:
(a) A trading corporation;
(b) A financial corporation;
(c) A corporation incorporated in a Territory under the law in force in that Territory relating to companies;
(d) A foreign corporation that, on its last accounting date, held assets the sum of the values of which exceeded 252 million
Australian Dollars (for item (b) of the entry) or 1094 million Australian Dollars (for item (c) of the entry), being assets
consisting of all or any of the following:
(i).
Land situated in Australia (including legal and equitable interests in such land);
(ii).
Mineral rights;
(iii).
Shares in a corporation incorporated in Australia;
(e) A foreign corporation that was, on its last accounting date, a holding corporation of an Australian corporation or Australian
corporations, where the sum of the values on that date of the assets of the Australian corporation or Australian corporations
exceeded 252 million Australian Dollars (for item (b) of the entry) or 1094 million Australian Dollars (for item (c) of the
entry);
(f) A corporation that was, on its last accounting date, a holding corporation of a foreign corporation referred to in paragraph
(d) or (e) of this footnote;
(g) A foreign corporation that, on its last accounting date, held assets of a kind or kinds referred to in paragraph (d) of this
footnote, where the sum of the values on that date of those assets was not less than one-half of the sum of the values on
that date of the assets of the foreign corporation and of all the subsidiaries of that corporation; or
(h) A foreign corporation that was, on its last accounting date, a holding corporation of an Australian corporation or Australian
corporations, where the sum of the values on that date of the assets of that Australian corporation or those Australian
corporations was not less than one-half of the sum of the values on that date of the assets of the foreign corporation and of
all the subsidiaries of that corporation.
13 This figure as at 1 January 2015. To be indexed on 1 January each year to the GDP implicit price deflator in the Australian National
Accounts for the previous financial year. If the Agreement has not entered into force by 1 January 2016, this figure will be indexed on
the date of entry into force.
14 A “financial sector company” means, as defined in section 3 of the Financial Sector (Shareholdings) Act 1998 (Cth):
(a) An authorised deposit-taking institution; or
(b) An authorised insurance company; or
(c) A holding company of a company covered by paragraph (a) or (b) of this footnote.
15 This figure as at 1 January 2015. To be indexed on 1 January each year to the GDP implicit price deflator in the Australian National
Accounts for the previous financial year. If the Agreement has not entered into force by 1 January 2016, this figure will be indexed on
the date of entry into force.
9
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(d) Acquisitions by foreign persons of developed non-residential commercial real estate valued at
more than 1094 million Australian Dollars;
(e) Direct investments by foreign government investors, irrespective of size
Notified investments may be refused, subject to interim orders, and/or approved subject to
compliance with certain conditions. Investment referred to in (a) through (e) for which no notifications
is required or received may be subject to orders under Sections 18 through 21 and 21A of the FATA.”
“B. The acquisition of a stake in an existing financial sector company by a foreign investor, or entry into
and arrangement by a foreign investor, that would lead to an unacceptable shareholding situation or to
practical control16 of an existing financial sector company, may be refused, or be subject to certain
conditions17.”
“C. In addition to the measures identified in the entry, other entries in Section A or Section B set out
additional non-conforming measures imposing specific limits on, or requirements relating to, foreign
investment in the following areas:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Telstra;
Commonwealth Serum Laboratories;
Qantas Airways Ltd;
Australian international airlines, other than Qantas;
Urban land;
Agricultural land;
Agribusiness
Federal leased airports; and
Shipping.”
Queensland
“Certain leases (obtained at ballot), and other leases at the discretion of the Minister, may be subject
to a condition that the lessee personally lives on the lease for the first seven years of its term.”
“While all changes to ownership of land must be registered, there is an additional duty on foreign land
holders to disclose, through a prescribed notification, present interests in and acquisitions of land,
disposal of interests in land and notification on ceasing to be or becoming a foreign person.”
“Failure to provide the information causes a breach of the Act that may result in prosecution, the
imposition of financial penalties and/or forfeiture of the interest in the land to the Crown.”
China’s Commitment on Foreign Investment
China’s commitments on foreign investment under the ChAFTA are established on Annex III, part 2:
schedule of the People’s Republic of China on specific commitments on services:
“In China, foreign invested enterprises include foreign capital enterprises (also referred to as wholly
foreign-owned enterprises) and joint venture enterprises and there are two types of joint venture
enterprises: equity joint ventures and contractual joint ventures. 18”
“The proportion of foreign investment in an equity joint venture shall be no less than 25 per cent of the
registered capital of the joint venture.”
“The establishment of branches by enterprises of Australia is unbound, unless otherwise indicated in
specific sub-sectors, as the laws and regulations on branches of foreign enterprises are under
formulation.”
“The land in the People’s Republic of China is State-owned. Use of land by enterprises and individuals
are subject to the following maximum term limitations:
(a) 70 years for residential purposes;
(b) 50 years for industrial purposes;
(c) 50 year for the purpose of education, science, culture, public health and physical education;
“Unacceptable shareholding situation” and “practical control” as defined in the Financial Sector (Shareholdings) Act 1998 (Cth).
Ministerial statements on foreign investment policy including the Treasurer’s Press Release No. 28 of 9 April 1997.
18 The terms of the contract, concluded in accordance with China’s laws, regulations and other measures, establishing a “contractual
joint venture” govern matters such as the manner of operation and management of the joint venture as well as the investment or other
contributions of the joint venture parties. Equity participation by all parties to the contractual joint venture is not required, but is
determined pursuant to the joint venture contract. “Foreign invested enterprise” in this Schedule means a foreign invested enterprise
duly constituted or otherwise organised under “Law on Chinese-Foreign Equity Joint Venture”, “Law on Chinese-Foreign Contractual
Joint Ventures” and “Law on Foreign-Capital Enterprises”.
16
17
60
(d) 40 years for commercial, tourist and recreational purpose;
(e) 50 years for comprehensive utilisation or other purpose.”
The commitments on foreign investment set on the other compared trade agreements involving China
are include in appendix (Annex 2).
3.5 Chinese Free Trade Zones
3.5.1
Shanghai Free Trade Zone (SFTZ)
The Shanghai Free Trade Zone (FTZ) is integrated into the body of the ChAFTA by reference in many
provisions, including those related to services commitments. Accordingly, in order to take full advantage
of the ChAFTA, Australian businesses will need to understand how the FTZ relates to their activities,
how they operate administratively, and what advantages are offered compared to what restrictions still
exist.
“Since it was established on September 29, 2013, the China (Shanghai) Pilot Free Trade Zone (FTZ)
has carried out institutional reform and innovation in areas of investment, foreign trade, finance and
post-filing supervision to form a legal framework for investment and trade within the zone. It has adopted
the negative list for investment management, simplified foreign trade supervision procedures, promoted
financial system reform to realize RMB capital account convertibility, and advocated post-filing
supervision as a way to transform government functions.” (Government of China n.d.)
On December 28, 2014 the Shanghai FTZ was expanded nationwide, which included Guangdong,
Tianjin and Fujian as free trade zones. “It approved the expansion of Shanghai FTZ by incorporating
Lujiazui Financial Area, Jinqiao Export Processing Zone, and Zhangjiang high Tech Park, enlarging the
FTZ from 28.78 square kilometres to 120.72 square kilometres to provide more space for reform trials.”
(Government of China n.d.)
Importantly, the Shanghai FTZ has not only recently expanded in its own right, but three new pilot Free
Trade Zones have been announced, in Guangdong, Tianjin and Fujian. Each of these can be exploited
by Australian enterprises, and offer different options which may create further opportunities.
ChAFTA and SFTZ relationship
ChAFTA will guarantee access to Australian firms to establish commercial association within the
Shanghai Free Trade Zone (SFTZ). Examples of this access guarantee are:
Legal services
“In addition to guaranteeing existing access for Australian law firms in China, ChAFTA also guarantees
to allow Australian law firms the ability to establish commercial association with Chinese law firms in
the Shanghai Free Trade Zone (SFTZ). These commercial associations will be able to offer Australian,
Chinese and international legal services, without restrictions on where clients are located.” (Department
of Foreign Affairs and Trade – Australian Government 2015)
Telecommunication services
“China has provided its most extensive telecommunications commitments in any Agreement to date,
including guaranteeing market access for Australian companies investing in specified value-added
telecommunication services in the SFTZ. These commitments provide greater certainty for Australian
telecommunications investments in the SFTZ.” (Department of Foreign Affairs and Trade – Australian
Government 2015)
“Australian-owned enterprises will also enjoy guaranteed access to participate in joint ventures in the
SFTZ to supply online data and transaction processing services, with increased equity participation of
up to 55 per cent permitted.” (Department of Foreign Affairs and Trade – Australian Government 2015)
Health and aged care services
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“In best-ever commitments, China has committed the Australian medical services suppliers are able to
establish wholly Australian-owned hospitals in China”, including in Shanghai. (Department of Foreign
Affairs and Trade – Australian Government 2015)
Construction and engineering services
“Under ChAFTA, China has guaranteed market access to Australian companies established in the
SFTZ and undertaking joint construction projects with Chinese counterparts in Shanghai. Australian
companies will be exempted from business scope restrictions, allowing them to undertake a wide range
of commercially meaningful projects.” (Department of Foreign Affairs and Trade – Australian
Government 2015)
Transport services
“Providing the best treatment under any of its FTAs, China will permit Australian maritime transport
service suppliers to establish wholly Australian-owned ship management enterprises in the SFTZ”
(Department of Foreign Affairs and Trade – Australia Government 2015), “without the need for approval
from China’s Ministry of Commerce” (Hinze 2015).
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63
64
65
The Negative List
The Chinese State Council has released, in conjunction with the framework documents setting out the
new and expanded FTZs, the Negative List for Foreign Investment. The Negative List went into effect
for all FTZs on May 8, 2015. The Negative List sets out restrictions on foreign investment and trade
applicable within the FTZs. For all trade not outlined in the document, foreign enterprises will receive
National Treatment (the same treatment as Chinese companies).
A positive trend has been that the number of special administrative measures on the negative list has
fallen, from a 190 in 2013 at the launch of the Shanghai FTZ, to 139 in 2014, to 122 in 2015, an overall
36% reduction. Importantly, the reduction is in some degree both quantitative and qualitative, with cuts
intended to pilot trade liberalisation measures. The latest reduction in administrative measures sees
further increased access for foreign investment in manufacturing, infrastructure, real estate, wholesale
and retail services, IT services, business services and financial services.
Foreign Investment National Security Review
New in the FTZs is the introduction of a national security review for foreign investment that may impact
military-related matters (ie., in close proximity to a military installation), key agricultural products,
infrastructure, transport, energy, information technology, culture and equipment manufacture. The
review is run by a joint committee of the National Development and Reform Commission and the
Ministry of Commerce (MOFCOM). The review will assess the impacts on national security (including
impact on the ability to provide essential goods and services), economic stability, social order, culture
and morality, internet security and sensitive technology for national defence. Investigations will normally
be instigated upon recommendation by the authority administering the FTZ. These reviews will apply
to foreign investment where the foreign investor exerts “actual control” over the enterprise, including
where over 50% of the shares are held, sufficient voting rights exist to control the board or shareholders,
or other circumstances exist that create control over operational decisions, staffing, finance or
technology.
While imposing, this review exists to enable liberalisation in areas where little or no access was
previously permitted, and a stated end result is that even where there is a finding of negative impact,
additional undertaking may be taken to remedy the perceived problem, in order to continue with the
formation of the enterprise in China.
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Advantage in multiple FTZ options
With the Chinese State Council expanding its FTZ pilot program, Australian investors now have further
choices when considering direct entry into the Chinese market. Different FTZs will have different areas
of focus, different strengths and different competitive advantages. For example, while Shanghai is a
financial hub, it is also one of the most expensive places in China to set up and conduct business.
Accordingly, more open access to the Chinese market in a different location may be more attractive to
some investors. Below are some of the particular features of each FTZ.
Source: Nikkei Asian Review, 08/01/2015
Shanghai FTZ
The Shanghai FTZ has now been expanded to include the Lujaizui Financial Area, the Jinqiao Export
Processing Zone and the Zhangjiang High Tech Park.
The Lujaizui Financial District is the financial services hub of Shanghai, and also includes the
Shanghai International Trade Centre and the Shanghai International Shipping Centre.
The Zhangjiang High Tech Park is a hub for advanced manufacturing and industrial innovation.
The Jinqiao Export Processing Zone is a hub for emerging industries, advanced manufacturing,
and in particular includes a focus on “green tech”. This may be an opportunity for partnership
and growth for South Australia’s green tech SMEs, including concerning water, irrigation and
agricultural technologies, as well as energy.
Tianjin FTZ
The Tianjin FTZ, including the Nort Port Area of Tianjin Port, Tianjin Airport Area and the Binhai New
Area CBD, is at the crossroads of Beijing, Tianjin and Heibe (an area together referred to as Jing-JinJi). The region is set to become a hub in China’s “Belt and Road” initiative, building Beijing’s 7 th ring
road to encompass Jing-Jin-Ji, and planning new transportation networks connecting the area to
Mongolia and Russia to the north. In 2014 the GDP of Tianjin was approximately US$250billion, with
imports and exports from the region reaching over US$90billion. 139 Fortune 500 companies were
invested in Binhai in 2014. The proximity of the Tianjin FTZ to China’s neighbours South Korea and
Japan also hold potential for Australian businesses. With preferential agreements with China, Japan
and South Korea, Australian businesses who establish a presence in the Tianjin FTZ may be able to
take advantage of the sought after increase of trade flow between the neighbouring economies,
particularly in the provision of services.
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-
The North Port Area will concentrate on services, including transport, logistics, finance and
leasing.
The Tianjin Airport Area will focus on high end manufacturing, technology and research and
development, in areas including information technology, high end design and manufacturing
and aerospace.
Binhai will focus largely on financial services.
Guangdong FTZ
The Guangdong FTZ is made up of three regions, the Guangzhou Nansha New Area, Shenzhen
Qianhai Development Zone and Zhuhai Hengqin New Area. The Quangdong FTZ is positioned to
facilitate economic development and trade between Hong Kong, Macau and mainland China. As the
area has been a commercial hub and pathway already, it is a prime location to reach the growing
Chinese domestic consumer market. The focus of the area is shifting away from low-end manufacturing
to high-end manufacturing and innovative provision of services in order to meet that market demand.
Guangzhou Nansha New Area will focus on becoming a services centre and advanced
industrial hub. High-end manufacturing, shipping, logistics and financial services will feature.
Shenzhen will also focus on services, with technology and information services, and innovation
in opening the financial services sector, as well as liberalising the port services.
Zhuhai Hengqin New Area will include tourism, high technology, education, culture and health
services.
Fujian FTZ
The Fujian FTZ includes areas in Fuzhou, Xiamen and Pingtan Island. The Fujian FTZ is situated to
advance greater economic integration between mainland China and Chinese Taipei (Taiwan).
Accordingly, the main focus of the FTZ, beyond industry sectors, is to grow cross-Strait movement of
people, capital and trade. Businesses setting up in the Fujian FTZ will benefit from the increase in
economic, social and cultural exchange between mainland China and Chinese Taipei. While much of
the benefit is aimed at inbound investment from Chinese Taipei, the FTZ is open to Australian
businesses and all other trading partners.
Significantly, the Fujian FTZ will be the first to implement the online application system
for a business license. Under this procedure, the applicant fills in one form, online, in order
to apply for a business license, and then (if successful) would only need to collect the license
from the administration of the FTZ. If all goes to plan, this will represent a significant
simplification of the company set-up process in China.
Fuzhou is intended to be a central point along the proposed “Maritime Silk Road.” It will
concentrate on trade, finance and high-end manufacturing.
Xiamen will focus on shipping, financial services and emerging industries (including service
industries).
Pingtan Island is designated to become a “common homeland” for people from both mainland
China and Chinese Taipei. Accordingly, its focus will be on domestic and international tourism,
as well as investment and financial services. The FTZ will also facilitate the movement of
personnel between mainland China and Chinese Taipei.
3.6 Labour Mobility
ChAFTA, as well as the accompanying MoU on An Investment Facilitation Arrangement and Side Letter
on Skills Assessment and Licensing break significant new ground in terms of potential labour mobility
between China and Australia. However, there are caveats and procedures that lead to the probability
that what has been agreed will result in what might be described as a streamlined procedure for Chinese
enterprises to take advantage of existing mechanisms in Australia. Simply put, Chinese enterprises
may apply to import skilled and semi-skilled labour in instances where they will be investing in significant
infrastructure projects (investment greater than or equal to $150million), and certain service providers
may be able to have their credentials and qualifications reviewed pursuant to obtaining a temporary
entrant visa (a “457 visa”) under existing regulations.
These measures are intended to facilitate significant inbound investment, and to allow the import of
services necessary to take full advantage of available technologies and skills (for example, skilled
68
electricians for the specific installation of specialised products imported from China). There is no
provision for the specific import of unskilled labour.
Chapter 10 of the ChAFTA deals with Movement of Natural Persons, and is mainly concerned with
business visitors, corporate officials and installers and service providers. The chapter also allows for
entrants under the ChAFTA who will stay for more than 12 months to bring their spouses and
dependants.
The MoU on an Investment Facilitation Arrangement sets out very specific rules concerning
infrastructure projects involving an expected foreign inbound investment of at least $150million over the
life of the project. Here, while the MoU does state that there will be no requirement to conduct a labour
market analysis to establish an Investment Facilitation Agreement (IFA), labour agreements under the
IFA will be implemented under the Department of Immigration’s current project agreement program,
which does require labour market analysis. Further, skilled workers are brought in under Australia’s
457 visa, which requires that positions filled under such visas must first be advertised locally.
In simple terms, the jobs envisioned as subject to these agreements are solely for infrastructure projects
dependent upon significant foreign direct investment from China, and will be regulated under a
framework consistent with that which exists currently, with the investor having an expedited path to
utilise and achieve those regulatory outcomes. Even more simply, the roles would not exist but for the
benefit gained by the significant foreign direct investment from China, and the rules governing the grant
of visas for skilled workers have not changed as a result of the ChAFTA.
Further, while the language of the various instruments allows for some minor degree in flexibility in
implementation, the reality is that any approval by the Department of Immigration and Naturalisation
will necessarily not only be subject to regulatory scrutiny, but also to political and public scrutiny as well.
Accordingly, any exceptions to current practice will require an exercise of discretion that will require the
development of new procedures and protocols that must meet Australian law, and would serve
Australian interests in such a demonstrable way as to satisfy political opinion.
Recommendation: Codify the pathway described for Chinese migrant labour; give certainty
concerning the Australian labour market and remove the boogeyman
The issue of labour mobility has been a highly contentious issue under ChAFTA, causing some to balance the optics of the
impact on the Australian job market with the overall economic benefits of the ChAFTA. This is largely unnecessary, as
ChAFTA is not intended to cause a rift in the Australian labour market.
The South Australian Government should recommend to the Commonwealth Government that they codify the pathway for
migrant Chinese workers that has been set out when explaining ChAFTA. By codifying processes and procedures to the
extent practicable, the mystery and fear surrounding labour mobility will be addressed, while not changing any intended
benefits afforded to China under ChAFTA.
Source: The Howe Report, University of Adelaide Law School
3.7 Conclusion
There are real and substantial opportunities to grow and develop South Australia’s economy under
ChAFTA. Concerning goods exports, there are real opportunities for growth in South Australia’s three
biggest categories for export to China, meat, beverages (including wine) and mining. However,
potential growth can come also from sectors that have heretofore been either inconsequential,
underserved or never existed, including metals (particularly lead), and several agricultural products.
Services opportunities are in many cases greenfield opportunities for Australian businesses. Financial
planning, health and aged care services, education, tourism and creative industries represent just a few
sectors where South Australia may enjoy significant benefit.
Liberalisation of regulation governing bilateral FDI, coupled with perceived comparative advantage
either created under or augmented by ChAFTA, can identify potential opportunities for both inbound
and outbound FDI. South Australia has the potential to attract investment where this advantage is
present, such as in lead, infrastructure, creative industries, tourism and agriculture. South Australian
69
outbound investment can find potential benefit in sectors including education, tourism (including hotels
and restaurants) and health and aged care.
A complicated agreement, covering a broad spectrum of specific trade related subject matter, ChAFTA
creates a comprehensive framework for bilateral trade that, properly utilised by Government and private
stakeholders, has the potential to substantially benefit the South Australian economy.
70
APPENDIX 1: GOODS
A. THE GRAVITY MODEL
B. REVEALED COMPARATIVE ADVANTAGE
C. SOUTH AUSTRALIA’S AGRICULTURE EXPORTS TO CHINA
D. AGRICULTURE PROVISION UNDER ChAFTA IN COMPARISON TO OTHER FTAS
71
The Gravity Model
In this study we used a standard specification of the gravity model and ABS trade data from 2000, 2004
and 2009-14. The data are classified by the harmonized system, with goods divided into just under 100
groups (“industries”) at the HS 2-digit level, and for finer disaggregation at the HS 6-digit level there are
about 5,000 goods (“commodities”). To exclude small flows and zero observations, the dataset covers
27 countries: Australia, China and their 25 top trading partners (Table A1).
Table A1 – Countries included in the Gravity Modelling
-
Australia
-
Germany
-
New Zealand
-
South Africa
-
Brazil
-
India
-
Papua New
-
Thailand
-
Canada
-
Indonesia
Guinea
-
United Arab Emirates
-
Chile
-
Italy
-
Philippines
-
United Kingdom
-
China
-
Japan
-
Rep. of Korea
-
USA
-
Russian
-
Viet Nam
Federation
-
Hong-Kong
-
Malaysia
-
Saudi Arabia
-
France
-
Mexico
-
Singapore
Note: “country” refers to trading/customs units that are members of the WTO, and makes no judgment on
sovereignty status.
The general gravity model (GM) explains bilateral trade between pairs of countries as a function of their
real GDP, the distance between the two countries, and other variables. The specification of a general
applied GM in log linear form (natural logs) is:
𝑀
𝑋
𝑀
𝑋
𝑙𝑛(𝑋𝑖𝑗𝑡 ) = 𝛼0 + 𝛼1 𝑙𝑛𝑌𝑖𝑗𝑡
+ 𝛼2 𝑙𝑛𝑌𝑖𝑗𝑡
+ 𝛼3 𝑙𝑛𝑃𝑜𝑝𝑖𝑗𝑡
+ 𝛼4 𝑙𝑛𝑃𝑜𝑝𝑖𝑗𝑡
+ 𝛼5 𝑙𝑛𝐷𝑖𝑠𝑡𝑖𝑗 + ∑ 𝛼𝑛 𝐴𝑑𝑑𝑛 + 𝜀𝑖𝑗𝑡
𝑛
where 𝑖 and 𝑗 are the trading partners and 𝑡 indicates time, and
 𝑋𝑖𝑗𝑡 is bilateral trade in period 𝑡,
𝑀
 𝑌𝑖𝑗𝑡
is the import country’s real GDP in period 𝑡,
𝑋
 𝑌𝑖𝑗𝑡
is the export country’s real GDP in period 𝑡,
𝑀
 𝑃𝑜𝑝𝑖𝑗𝑡
is the import country’s population in period 𝑡,
𝑋
 𝑃𝑜𝑝𝑖𝑗𝑡
is the export country’s population in period 𝑡,
 𝐷𝑖𝑠𝑡𝑖𝑗 is the distance between the specific trading partners, and
 ∑𝑛 𝛼𝑛 𝐴𝑑𝑑𝑛 are additional factors that could influence trade between the two trading
partners.
and 𝜀𝑖𝑗𝑡 is the error term.
We use an augmented GM, including the countries’ respective land sizes and tariff rates (following
Estevadeordal, 2009), as well as dummy variables to capture cultural, geographical, historical and
political circumstances that might influence bilateral trade patterns. The dummy variables are used to
answer the following questions: are the two trading partners direct neighbours, are the two countries in
the same region (North America, Asia-Pacific, Europe), do the countries belong to the same regional or
free trade agreement, do they use the same national language or have a common currency, do the
countries have a shared colonial history, and are the countries island states?
The augmented GM applied in this study to investigate the bilateral trade relationships among Australia,
China and their top trading partners takes the form:
72
𝑀
𝑋
𝑀
𝑋
𝑀
𝑋
𝑙𝑛(𝑋𝑖𝑗𝑡 ) = 𝛼0 + 𝛼1 𝑙𝑛𝑌𝑖𝑗𝑡
+ 𝛼2 𝑙𝑛𝑌𝑖𝑗𝑡
+ 𝛼3 𝑙𝑛𝑃𝑜𝑝𝑖𝑗𝑡
+ 𝛼4 𝑙𝑛𝑃𝑜𝑝𝑖𝑗𝑡
+ 𝛼5 𝑙𝑛𝐷𝑖𝑠𝑡𝑖𝑗 + 𝛼6 𝑙𝑛𝐴𝑟𝑒𝑎𝑖𝑗𝑡
+ 𝛼7 𝑙𝑛𝐴𝑟𝑒𝑎𝑖𝑗𝑡
𝑀
𝑋
+ 𝛼8 𝑙𝑛𝜏𝑖𝑗𝑡 + 𝛽1 𝑅𝑖𝑗 + 𝛽2 𝑁𝑖𝑗 + 𝛽3 𝑅𝑇𝐴𝑖𝑗𝑡 + 𝛽4 𝐶𝐶𝑖𝑗 + 𝛽5 𝐶𝐻𝑖𝑗 + 𝛽6 𝐶𝐿𝑖𝑗 + 𝛽7 𝐼𝑠𝑖𝑗 + 𝛽8 𝐼𝑠𝑖𝑗
+ 𝜀𝑖𝑗𝑡
with the additional variables:
𝑀
𝐴𝑟𝑒𝑎𝑖𝑗𝑡
is the land size of the importing country,
𝑋
𝐴𝑟𝑒𝑎𝑖𝑗𝑡
is the land size of the exporting country,
𝜏𝑖𝑗𝑡 is the tariff rate of the importing country,
𝑅𝑖𝑗 is 1 if the two countries belong to the same region and zero otherwise,
𝑁𝑖𝑗 is 1 if the two countries are neighbours and zero otherwise,
𝑅𝑇𝐴𝑖𝑗𝑡 is 1 if the two countries participate in the same regional or free trade agreement in period
𝑡 and zero otherwise,
 𝐶𝐶𝑖𝑗 is 1 if the two countries use the same currency, zero otherwise,
 𝐶𝐻𝑖𝑗 is 1 if the two countries have a common colonial history, zero otherwise,
 𝐶𝐿𝑖𝑗 is 1 if the two countries share a common language, zero otherwise,
 𝐼𝑠𝑖𝑗𝑀 is 1 if the importing country is an island state, zero otherwise,
 𝐼𝑠𝑖𝑗𝑋 is 1 if the exporting country is an island state, zero otherwise.
The analysis of the augmented gravity model is undertaken using different econometric specifications.






Bilateral trade data at the HS2-digit level have been taken from the United Nations Comtrade database
and from the Australian Bureau of Statistics (ABS, 2015). Real GDP, country size and country
population data were obtained from the World Bank’s World Development Indicators (2015). Data on
the distance between trading partners are from Rose (2003). The average tariff rates at the HS2-digit
level of disaggregation were obtained from the World Trade Organization’s Tariff Analysis Online
(2015).
The benchmark results are obtained by pooling the data across the eight years (2000, 2004 and 200914). We first run simple ordinary least squares (Table A2), and then introduce year (Table A3) and
product (Table A4) fixed effects. To test for the robustness of the benchmark results, we conduct panel
data analysis with random effects (RE) and fixed effects (FE) specifications. The fixed effects model is
known to provide more robust results in estimating a gravity model, but its disadvantage is that it is not
able to estimate time-invariant effects such as distance and most of the dummy variables. Finally, we
run a standard cross-section analysis on an annual basis for the years 2000, 2004, and 2009 to 2014.
The core GM variables (the two countries’ GDP and the distance between them) are, as expected,
strongly significant in every specification. Other consistent results are that being neighbouring countries
or in the same region and belonging to the same regional or free trade agreement are associated with
greater bilateral trade. Table A2 shows the “plain vanilla” ordinary least squares results. Table A3
reports results from pooled-data ordinary least squares analysis with year fixed effects and robust
standard errors and Table A4 reports the results with fixed effects for the HS2-digit products. A common
language and colonial history are also significant explanatory variables in all of these specifications,
reflecting the Commonwealth links in Australian trade and the “Greater China” aspect of China’s trade.
The results from the benchmark GM in Tables A2-A4 indicate that importer’s and exporter’s GDP are
positively related to size of bilateral trade; a one per cent increase in importer or exporter GDP increases
the bilateral trade between two trading partners by slightly more than one per cent. Furthermore, the
importing country’s population is slightly positively related with trade (ca. 0.17% trade response to a 1%
increase in population) and the exporter’s population more positively (ca. 0.7%). 19 For every percentage
increase in the distance between the two countries, bilateral trade is reduced by between 0.61% and
0.95%; the further away a trading partner, the lower the trade intensity. With respect to the dummy
variables, a shared colonial history and common language have a larger impact than being in the same
RTA, but all are consistently significant.20
Adding country area improves the explanatory power but the coefficients and increase in R2 are small, i.e. having a lower population
density slightly mitigates the impact of population size but the impact is minor.
19
A shared colonial history raises trade by circa 327% and a common language by circa 153%. If two trading partners are located
within the same region, bilateral trade is on average larger by about 19% (exp(1.048) -1 ≈ 19 per cent), although if they belong to the
20
73
Results using panel data with random effects (RE) and fixed effects (FE) are presented in Table A5 and
A6. Compared to the benchmark results in Tables A2-A4, the RE model and FE model estimates for
the importing and exporting countries’ size are less strong. A one per cent increase in the export
country’s GDP is associated with an increase in bilateral trade of 0.35% (RE) or 0.44% (FE) and a one
per cent increase in the import country’s GDP with increases of about 0.69% (RE) or 0.84% (FE),
compared to the >1% estimated in the benchmark models. The Hausman test to evaluate the
robustness of the results of the RE and FE models finds the FE model to provide the better estimates,
although as mentioned above this is at the cost of losing information about time-invariant variables.
For those variables, the RE model has qualitatively similar (i.e. with fairly small changes in coefficient
size and no change in statistical significance) compared to the benchmark results. A general conclusion
is that, although Table A6 is preferable to Table A5 or A2-A4 on econometric criteria, the benchmark
results are robust.
In Tables A7 and A8 annual cross-sectional analysis is undertaken for the years 2000, 2004 and 2009
to 2014 in order to investigate possible trends of the main explanatory variables of interest, namely
GDP, distance, and RTA/FTA membership. The impact of importer and exporter GDP on bilateral trade
has declined over the fourteen-year period. Whereas in 2000 a one per cent increase in exporter GDP
increased bilateral trade by 1.6% and a one per cent increase in importer GDP increased bilateral trade
by 1.3%, in 2014 the impact was only 1.1% and 0.6% respectively. The coefficient on distance has
remained stable over the study’s timeframe: it was 0.7 in 2000 and also in 2014. The coefficient on the
regional dummy variable increased from 0.38 in 2000 to 0.92 in 2014, implying that the impact on
bilateral trade of being in the same region increased from 46% to circa 150%. The coefficient on the
dummy for common membership of a regional or free trade agreement increased from 0.38 in 2000 to
1.02 in 2014, implying that belonging to a free or regional trade agreement has had an increasingly
strong impact over the time period and in 2014 was associated, other things equal, with trade flows that
were higher by 178%.
As with any empirical work, there are caveats. No trade data are perfect, although the ABS data are
among the world’s best (made easier by the absence of porous land borders for Australia). Some of
the variables, especially the dummies for region, RTA and common language or colonial heritage, may
introduce multicollinearity that vitiates interpretation of coefficients on those dummies; the augmented
GM specification used here is, however, in common usage. The relatively low R2 values in Tables A2A8 indicate that part of bilateral trade is not explained by the model, most likely because we use
disaggregated data for 2-digit groups that are heterogeneous, i.e. for some industries distance or RTA
membership are important and for some industries other determinants matter more. That presumption
leads us on to the more disaggregated analysis of SA-China trade.
In sum, the gravity model is an internationally accepted and useful tool to investigate bilateral trade
flows. Tables A2-A8 show that the results are robust to variations in specification. In the Australian
context, some of these results are obvious, e.g. China is an important trading partner due to its
economic size and relative proximity even though there are not the added positive effects of shared
history and language (as in, say, Singapore or New Zealand). What is less obvious is that the GM
provides quantitative evidence of the importance of a trade agreement for bilateral trade, and of the
increase in this importance since 2000.
Finally, we ran the GM separately for agricultural (HS0-21) and non-agricultural goods (Table A9).
There are substantial differences in the results, e.g. the impact of the population of the exporting country
is less strong for agricultural goods but the country’s area is more important. The RTA coefficient is
also larger for agricultural goods. These results provide justification for separate treatment of
agricultural and non-agricultural goods in this report.
closer region the results show a decline in trade by about 3% (exp(-0.033) -1 ≈ 3 per cent). Belonging to the same regional or free
trade agreement is associated with bilateral trade flows that are higher by about 118% ((exp(0.78) -1 ≈ 118 per cent).
74
Table A2 – Benchmark Gravity Results – standard ordinary least squares
Exporter GDP
Importer GDP
Exporter Population
Importer Population
Distance
Exporter Size
Importer Size
Colonial History
Region
Closer Region
RTA
Common Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
(1)
1.191
(0.006)***
1.009
(0.006)***
0.687
(0.006)***
0.171
(0.006)***
-0.945
(0.005)***
-----
(2)
1.273
(0.006)***
1.009
(0.006)***
0.728
(0.006)***
0.176
(0.006)***
-0.902
(0.005)***
-0.055
(0.001)***
-0.003
(0.001)**
---
---
---
---
---
---
---
---
---
---
---
---
---
---
-19.761 (0.087)***
-19.957 (0.087)***
0.2530
539136
0.2560
539136
(3)
1.268
(0.006)***
1.008
(0.006)***
0.733
(0.006)***
0.157
(0.007)***
-0.616
(0.08)***
-0.030
(0.001)***
0.016
(0.001)***
1.445
(0.019)***
0.163
(0.013)***
-0.031
(0.013)**
0.783
(0.008)***
0.937
(0.010)***
0.013
(0.010)
-0.107
(0.010)***
-23.748
(0.111)***
0.2902
539136
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. *** statistically
significant at the one percent confidence level; ** statistically significant at the five percent confidence
level; * statistically significant at the ten percent confidence level.
75
Table A3 – Benchmark Gravity Results – pooled ordinary least squares with year fixed effects
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Colonial History
Region
Closer Region
RTA
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
(1)
1.213
(0.080)***
1.031
(0.097)***
0.683
(0.082)***
0.167
(0.093)*
-0.947
(0.065)***
-----
(2)
1.299
(0.084)***
1.035
(0.096)***
0.726
(0.095)***
0.173
(0.095)*
-0.901
(0.065)***
-0.057
(0.016)***
-0.005
(0.016)
---
---
---
---
---
---
---
---
---
---
---
---
---
---
-20.193 (1.290)***
-20.430 (1.281)***
0.2559
539136
0.2591
539136
(3)
1.295
(0.078)***
1.035
(0.087)***
0.730
(0.070)***
0.154
(0.091)*
-0.609
(0.096)***
-0.032
(0.016)**
0.014
(0.015)
1.452
(0.235)***
0.176
(0.147)
-0.033
(0.157)
0.781
(0.095)***
0.932
(0.131)***
0.015
(0.127)
-0.105
(0.129)
-24.290
(1.378)***
0.2933
539136
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. *** statistically
significant at the one percent confidence level; ** statistically significant at the five percent confidence level;
* statistically significant at the ten percent confidence level.
76
Table A4 – Benchmark Gravity Results – pooled ordinary least squares analysis with HS2-digit
product fixed effects
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Colonial History
Region
Closer Region
RTA
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
(1)
1.191
(0.081)***
1.009
(0.097)***
0.687
(0.082)***
0.171
(0.093)*
-0.945
(0.065)***
---
---
---
---
---
---
---
---
---
---
---
---
---
---
-19.761
(1.279)***
-19.957
(1.269)***
(3)
1.268
(0.078)***
1.008
(0.087)***
0.733
(0.071)***
0.157
(0.091)*
-0.615
(0.096)***
-0.030
(0.016)*
0.016
(0.015)
1.445
(0.234)***
0.163
(0.147)
-0.032
(0.156)
0.783
(0.095)***
0.937
(0.131)***
0.130
(0.127)
-0.107
(0.130)
-23.753
(1.361)***
0.3912
539136
0.3942
539136
0.4284
539136
-----
(2)
1.273
(0.084)***
1.009
(0.096)***
0.728
(0.079)***
0.176
(0.095)*
-0.902
(0.065)***
-0.055
(0.016)***
-0.003
(0.016)
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. *** statistically
significant at the one percent confidence level; ** statistically significant at the five percent confidence level;
* statistically significant at the ten percent confidence level.
77
Table A5 – Random Effects Model
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Colonial History
Region
Closer Region
RTA
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
(1)
0.354
(0.044)***
0.690
(0.044)***
0.869
(0.058)***
0.276
(0.058)***
-0.900
(0.070)***
-----
(2)
0.358
(0.045)***
0.688
(0.045)***
0. 618
(0.058)***
0.264
(0.059)***
-0.925
(0.070)***
0.013
(0.015)
0.018
(0.015)
---
---
---
---
---
---
---
---
---
---
---
---
---
---
-8.776 (0.775)***
-9.219 (0.829)***
0.2273
539136
0.2266
539136
(3)
0.393
(0.044)***
0.673
(0.044)***
0.868
(0.057)***
0.258
(0.058)***
-0.770
(0.102)***
0.0337
(0.015)**
0.038
(0.015)**
1.320
(0.273)***
0.128
(0.165)
-0.032
(0.180)
0.827
(0.105)***
1.051
(0.134)***
-0.038
(0.115)
-0.109
(0.115)
-12.186
(1.044)***
0.2628
539136
Notes:
Standard errors are reported in parentheses. *** statistically significant at the one percent confidence
level; ** statistically significant at the five percent confidence level; * statistically significant at the ten percent
confidence level.
78
Table A6: Fixed Effects Model
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Colonial History
Region
Closer Region
RTA
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
(1)
0.437
(0.058)
0.838
(0.058)***
0.785
(0.088)***
0.401
(0.089)***
(omitted)
-------------
(2)
0.44
(0.058)
0.838
(0.058)***
0.785
(0.088)***
0.401
(0.089)***
(omitted)
(omitted)
(omitted)
---------
---
---
-----
-----
-14.742 (0.651)***
-19.957 (1.269)***
0.1465
539136
0.1465
539136
(3)
0.44
(0.058)
0.838
(0.058)***
0.785
(0.088)***
0.401
(0.089)***
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
(omitted)
-14.742
(0.651)***
0.1465
539136
Notes:
Standard errors are reported in parentheses. *** statistically significant at the one percent confidence
level; ** statistically significant at the five percent confidence level; * statistically significant at the ten percent
confidence level.
79
Table A7: Annual (2000, 2004, 2009, 2010) Cross-Sectional Analysis (OLS)
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Region
Closer Region
RTA
Colonial History
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
2000
1.584
(0.059)***
1.251
(0.070)***
0.614
(0.057)***
-0.014
(0.084)
-0.692
(0.095)***
-0.061
(0.012)***
-0.236
(0.012)**
0.354
(0.133)***
0.185
(0.161)
0.382
(0.092)***
0.988
(0.219)***
1.097
(0.119)***
0.414
(0.102)***
0.218
(0.103)**
-25.527
(1.341)***
2004
1.492
(0.061)***
1.120
(0.072)***
0.627
(0.060)***
-0.027
(0.082)
-0.724
(0.097)***
-0.046
(0.012)***
-0.009
(0.011)
0.256
(0.134)*
0.026
(0.147)
0.474
(0.090)***
0.837
(0.199)***
0.960
(0.121)***
0.320
(0.103)***
0.188
(0.106)*
-24.214
(1.349)***
2009
1.246
(0.102)***
1.156
(0.113)***
0.458
(0.088)***
-0.208
(0.103)**
-0.552
(0.115)***
-0.005
(0.020)
0.039
(0.019)**
0.616
(0.190)***
0.046
(0.188)
0.830
(0.117)***
1.762
(0.259)***
0.894
(0.194)***
-0.539
(0.186)***
-0.73506
(0.184)***
-21.973
(1.696)***
2010
1.264
(0.103)***
1.163
(0.115)***
0.427
(0.090)***
-0.194
(0.105)*
-0.558
(0.115)***
-0.003
(0.021)
0.044
(0.020)**
0.600
(0.192)***
0.685
(0.190)
0.832
(0119)***
1.788
(0.263)***
0.870
(0195)***
-0.561
(0.189)***
-0.754
(0.185)***
-22.215
(1.696)***
0.5125
67392
0.5211
67392
0.4408
67392
0.4393
67392
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. *** statistically
significant at the one percent confidence level; ** statistically significant at the five percent confidence level;
* statistically significant at the ten percent confidence level.
80
Table A8: Annual Cross-Sectional Analysis (OLS), 2011 – 2014
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Region
Closer Region
RTA
Colonial History
Common
Language
Exporter Island
Importer Island
Constant
Adjusted R2
Observations
2011
1.271
(0.106)***
1.161
(0.117)***
0.423
(0.091)***
-0.179
(0.104)*
-0.529
(0.117)***
-0.072
(0.021)
0.049
(0.020)**
0.618
(0194)***
0.102
(0.191)
0.854
(0.120)***
1.849
(0.253)***
0.869
(0.197)***
-0.616
(0.190)***
-0.758
(0.188)***
-22.595
(1.744)***
2012
1.284
(0.108)***
1.186
(0.119)***
0.440
(0.091)***
-0.175
(0.104)*
-0.446
(0.134)***
-0.014
(0.021)
0.044
(0.020)**
0.642
(0.196)***
0.007
(0.198)
0.933
(0.136)***
1.917
(0.265)***
0.661
(0.232)***
-0.575
(0.196)***
-0.737
(0.193)***
-23.609
(2.006)***
2013
1.020
(0.104)***
0.460
(0.114)***
1.473
(0.112)***
1.048
(0.147)***
-0.724
(0.125)***
-0.074
(0.018)***
-0.287
(0.016)*
0.757
(0.222)***
0.250
(0.219)
0.918
(0.113)***
0.879
(0.302)***
1.066
(0.124)***
0.644
(0.141)***
0.664
(0.144)***
-23.914
(1.771)***
2014
1.097
(0.123)***
0.581
(0.132)***
1.428
(0.119)***
1.061
(0.144)***
-0.670
(0.161)***
-0.034
(0.022)
0.006
(0.021)
0.920
(0.253)***
0.524
(0.292)*
1.022
(0.136)***
1.575
(0.307)***
1.047
(0.144)***
1.040
(0.166)***
1.090
(0.0.167)***
-28.796
(2.190)***
0.4389
67392
0.4329
67392
0.5058
67392
0.4423
67392
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. *** statistically
significant at the one percent confidence level; ** statistically significant at the five percent confidence level;
* statistically significant at the ten percent confidence level.
81
Table A9 –Gravity Results (standard ordinary least squares):
Agricultural and Non-agricultural Goods
Exporter GDP
Importer GDP
Exporter Population
Importer Population
Distance
Exporter Size
Importer Size
Colonial History
Border
Common Language
RTA
Adjusted R2
Observations
All Trade
0.788***
(0.030)
0.654***
(0.032)
0.397***
(0.032)
0.145***
(0.029)
-0.956***
(0.064)
-0.200***
(0.018)
-0.140***
(0.018)
0.618***
(0.226)
0.678***
(0.180)
0.524***
(0.084)
0.480***
(0.078)
0.449
524,358
Agricultural
0.520***
(0.038)
0.701***
(0.043)
0.086**
(0.039)
0.018
(0.042)
-0.865***
(0.089)
0.112***
(0.028)
-0.128***
(0.023)
0.549*
(0.300)
0.655***
(0.210)
0.543***
(0.112)
0.622***
(0.104)
0.300
118,174
Non-agricultural
0.876***
(0.030)
0.644***
(0.032)
0.472***
(0.033)
0.180***
(0.029)
-0.999***
(0.064)
-0.283***
(0.018)
-0.141***
(0.019)
0.654***
(0.223)
0.692***
(0.180)
0.531***
(0.085)
0.433***
(0.080)
0.500
406,184
Notes:
Robust standard errors clustered by country-pairs are reported in parentheses. Closer region and
island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
82
Table A10 –Gravity Results (standard ordinary least squares):
All trade years 2000, 2004, 2009, and 2014
Exporter GDP
Importer GDP
Exporter Population
Importer Population
Distance
Exporter Size
Importer Size
Colonial History
Border
Common Language
RTA
Adjusted R2
Observations
2000
0.780***
(0.028)
0.757***
(0.030)
0.287***
(0.030)
0.087**
(0.029)
-0.978***
(0.064)
-0.156***
(0.017)
-0.143***
(0.018)
0.656***
(0.233)
0.709***
(0.179)
0.688***
(0.081)
0.313***
(0.077)
2004
0.793***
(0.027)
0.742***
(0.030)
0.344***
(0.029)
0.126***
(0.028)
-0.983***
(0.063)
-0.180***
(0.018)
-0.156***
(0.017)
0.732***
(0.231)
0.776***
(0.177)
0.627***
(0.080)
0.375***
(0.077)
2009
0.863***
(0.034)
0.719***
(0.037)
0.351***
(0.034)
0.079**
(0.032)
-0.971***
(0.066)
-0.197***
(0.020)
-0.144***
(0.018)
0.672***
(0.232)
0.728***
(0.185)
0.447***
(0.087)
0.530***
(0.080)
2014
0.946***
(0.039)
0.725***
(0.043)
0.371***
(0.037)
0.078**
(0.035)
-0.933***
(0.076)
-0.219***
(0.021)
-0.127***
(0.020)
0.668***
(0.230)
0.706***
(0.197)
0.407***
(0.090)
0.575***
(0.086)
0.441
65,101
0.452
67,650
0.455
64,517
0.465
64,284
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. Closer region and
island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
83
Table A11 – Gravity Results (standard ordinary least squares):
Agriculture trade years 2000, 2004, 2009, and 2014
Exporter GDP
Importer GDP
Exporter Population
Importer Population
Distance
Exporter Size
Importer Size
Colonial History
Border
Common Language
RTA
Adjusted R2
Observations
2000
0.489***
(0.037)
0.741***
(0.038)
0.013
(0.035)
0.011
(0.040)
-0.866***
(0.085)
0.111***
(0.024)
-0.137***
(0.022)
0.549*
(0.319)
0.778***
(0.204)
0.607***
(0.105)
0.329***
(0.095)
2004
0.469***
(0.036)
0.711***
(0.039)
0.076**
(0.034)
0.058
(0.039)
-0.873***
(0.085)
0.114***
(0.027)
-0.151***
(0.021)
0.619**
(0.307)
0.759***
(0.203)
0.582***
(0.107)
0.469***
(0.098)
2009
0.535***
(0.046)
0.730***
(0.052)
0.086*
(0.046)
-0.031
(0.049)
-0.839***
(0.097)
0.122***
(0.032)
-0.124***
(0.025)
0.638**
(0.316)
0.779***
(0.226)
0.493***
(0.124)
0.669***
(0.113)
2014
0.587***
(0.048)
0.690***
(0.060)
0.109**
(0.047)
0.035
(0.052)
-0.804***
(0.108)
0.098***
(0.033)
-0.126***
(0.026)
0.573*
(0.327)
0.668***
(0.241)
0.485***
(0.121)
0.755***
(0.122)
0.291
15,194
0.292
15,982
0.291
14,626
0.302
14,778
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. Closer region and
island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
84
Table A12 – Gravity Results (standard ordinary least squares):
Non-agriculture trade years 2000, 2004, 2009, and 2014
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Exporter Size
Importer Size
Colonial History
Border
Common
Language
RTA
Adjusted R2
Observations
2000
0.876***
(0.029)
0.767***
(0.031)
0.373***
(0.031)
0.109***
(0.029)
-1.022***
(0.066)
-0.235***
(0.017)
-0.143***
(0.019)
0.713***
(0.236)
0.697***
(0.183)
0.727***
(0.084)
0.297***
(0.083)
2004
0.900***
(0.028)
0.756***
(0.031)
0.433***
(0.031)
0.145***
(0.028)
-1.032***
(0.066)
-0.269***
(0.018)
-0.155***
(0.018)
0.773***
(0.236)
0.786***
(0.183)
0.658***
(0.084)
0.335***
(0.082)
2009
0.971***
(0.034)
0.718***
(0.037)
0.405***
(0.034)
0.112***
(0.031)
-1.029***
(0.066)
-0.280***
(0.019)
-0.148***
(0.019)
0.690***
(0.229)
0.709***
(0.184)
0.447***
(0.087)
0.482***
(0.081)
2014
1.066***
(0.040)
0.736***
(0.043)
0.421***
(0.038)
0.092***
(0.034)
-0.992***
(0.075)
-0.302***
(0.021)
-0.125***
(0.019)
0.700***
(0.228)
0.711***
(0.196)
0.394***
(0.091)
0.515***
(0.087)
0.493
49,907
0.508
51,668
0.510
49,891
0.520
49,506
Notes: Robust standard errors clustered by country-pairs are reported in parentheses. Closer region and
island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
85
Table A13 – Gravity Results (standard ordinary least squares):
Comparison of Australian States and Territories, all trade
Exporter GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Importer Size
Common
Language
RTA
Adjusted R2
Observations
SA
0.682**
(0.252)
0.670***
(0.123)
-5.536***
(1.527)
-0.323*
(0.169)
-1.170***
(0.381)
0.084
(0.070)
0.459*
(0.247)
0.327
(0.226)
NSW
0.799***
(0.183)
0.740***
(0.165)
-5.042***
(0.819)
-0.307
(0.209)
-2.180***
(0.508)
0.046
(0.101)
0.743**
(0.305)
0.170
(0.302)
VIC
0.250*
(0.142)
0.793***
(0.160)
-2.586**
(0.945)
-0.327
(0.209)
-2.163***
(0.513)
0.036
(0.094)
0.647**
(0.298)
0.248
(0.300)
TAS
-0.092
(0.385)
0.499***
(0.093)
4.493
(3.781)
-0.101
(0.127)
-1.092***
(0.227)
0.020
(0.047)
0.166
(0.190)
0.205
(0.152)
QLD
1.078***
(0.173)
0.651***
(0.143)
-3.399***
(0.775)
-0.398**
(0.143)
-1.941***
(0.420)
0.121
(0.083)
0.238
(0.305)
0.377
(0.294)
NT
-0.313
(0.683)
0.385***
(0.092)
3.398
(2.601)
-0.051
(0.099)
-0.886***
(0.217)
-0.128***
(0.040)
-0.573***
(0.193)
0.530***
(0.204)
ACT
-7.675
(5.731)
0.339
(0.431)
41.800
(33.28)
0.594
(0.472)
-0.472
(0.924)
-0.191
(0.173)
0.112
(0.916)
-0.065
(0.732)
WA
0.800***
(0.210)
0.615***
(0.107)
-1.688***
(0.596)
-0.143
(0.121)
-1.445***
(0.250)
-0.020
(0.043)
0.272
(0.263)
0.296
(0.220)
0.464
8,701
0.484
13,745
0.479
13,760
0.435
4,112
0.435
11,774
0.451
2,195
0.160
86
0.505
10,128
Notes:
Robust standard errors clustered by country-pairs are reported in parentheses. Closer region, exporter
size, border and island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
Table A14 – Gravity Results (standard ordinary least squares):
Comparison of Australian States and Territories, Agriculture trade
Exporter
GDP
Importer GDP
Exporter
Population
Importer
Population
Distance
Importer Size
Common
Language
RTA
Adjusted R2
Observations
SA
NSW
VIC
Tas
Queensl
NT
ACT
WA
0.447
(0.358)
0.808***
(0.112)
0.352
(2.297)
-0.419***
(0.111)
-1.584***
(0.319)
0.098**
(0.041)
0.366*
(0.210)
0.070
(0.237)
1.004***
(0.283)
0.954***
(0.175)
-4.265**
(1.914)
-0.596***
(0.161)
-2.654***
(0.566)
0.154**
(0.083)
0.671**
(0.302)
0.227
(0.308)
0.174
(0.303)
0.962***
(0.185)
-0.354
(1.542)
-0.475**
(0.170)
-2.899***
(0.637)
0.036
(0.083)
0.546*
(0.317)
-0.025
(0.345)
-1.055
(0.662)
0.731***
(0.075)
11.055
(7.441)
-0.383**
(0.139)
-1.127***
(0.347)
0.049
(0.060)
0.160
(0.246)
0.321
(0.252)
0.668
(0.445)
0.862***
(0.191)
-1.489
(1.781)
-0.499***
(0.128)
-2.741***
(0.633)
0.101
(0.086)
0.282
(0.354)
0.186
(0.350)
-3.290**
(1.421)
0.214
(0.175)
16.865***
(5.024)
0.026
(0.200)
-0.266
(0.374)
-0.132
(0.082)
-0.119
(0.432)
0.493
(0.405)
-
0.066
(0.400)
0.814***
(0.161)
1.700
(1.750)
-0.183
(0.149)
-1.868***
(0.419)
-0.080
(0.074)
-0.123
(0.363)
-0.127
(0.382)
0.459
1,829
0.435
2,582
0.406
2,574
0.268
958
0.358
2,224
-
0.410
1,665
Notes:
Robust standard errors clustered by country-pairs are reported in parentheses. Closer region, exporter
size, border and island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
86
Table A15 – Gravity Results (standard ordinary least squares):
Comparison of Australian States and Territories, non-Agriculture trade
Exporter
GDP
Importer
GDP
Exporter
Population
Importer
Population
Distance
Importer
Size
Common
Language
RTA
Adjusted R2
Observation
s
SA
NSW
VIC
TAS
QLD
NT
ACT
WA
0.749**
(0.269)
0.629***
(0.145)
-6.848***
(1.622)
-0.294
(0.203)
-1.059***
(0.429)
0.080
(0.085)
0.488*
(0.289)
0.399
(0.258)
0.751***
(0.197)
0.688***
(0.177)
-5.110***
(0.771)
-0.237
(0.227)
-2.070***
(0.517)
0.020
(0.106)
0.766**
(0.316)
0.156
(0.308)
0.253
(0.168)
0.753***
(0.177)
-2.984***
(1.007)
-0.291
(0.231)
-1.998***
(0.516)
0.036
(0.100)
0.674**
(0.319)
0.310
(0.308)
0.161
(0.472)
0.420***
(0.107)
2.755
(4.508)
-0.009
(0.129)
-1.073***
(0.245)
0.013
(0.051)
0.176
(0.224)
0.199
(0.174)
1.157***
(0.209)
0.603***
(0.150)
-3.765***
(0.835)
-0.375**
(0.160)
-1.772***
(0.405)
0.127
(0.086)
0.235
(0.318)
0.416
(0.294)
0.089
(0.628)
0.404***
(0.101)
1.540
(2.493)
-0.060
(0.104)
-0.944***
(0.232)
-0.127***
(0.042)
-0.630***
(0.203)
0.523**
(0.207)
-8.140
(5.773)
0.506
(0.418)
43.487
(33.69)
0.515
(0.434)
-0.598
(0.944)
-0.223
(0.160)
-0.262
(1.041)
0.330
(0.836)
0.962***
(0.223)
0.566***
(0.137)
-2.335***
(0.633)
-0.125
(0.157)
-1.348***
(0.287)
-0.009
(0.050)
0.359
(0.291)
0.381*
(0.234)
0.454
0.494
0.490
0.468
0.448
0.462
0.163
0.523
6,872
11,163
11,186
3,154
9,950
1,980
80
8,463
Notes:
Robust standard errors clustered by country-pairs are reported in parentheses. Closer region, exporter
size, border and island variables dropped.
*** statistically significant at the one percent confidence level; ** statistically significant at the five percent
confidence level; * statistically significant at the ten percent confidence level.
87
Revealed comparative advantage index for Australian States and Territories in
2014
H
S
Live animals
5.2
0.0
2.1
0.2
2.8
0.1
56.9
0.0
11.7
VIC
to
Ch
159.
1
0.0
0.0
5.0
0.5
Meat and edible meat offal
Fish and crustaceans,
molluscs and other aquatic
invertebrates
Dairy produce; birds' eggs;
natural
honey;
edible
products of animal origin,
not elsewhere specified or
included
Products of animal origin,
not elsewhere specified or
included
Live trees and other plants;
bulbs, roots and the like;
cut flowers and ornamental
foliage
Edible vegetables and
certain roots and tubers
Edible fruit and nuts; peel
of citrus fruit or melons
Coffee, tea, maté and
spices
16.8
16.7
9.7
14.8
0.7
0.3
0.0
0.0
18.4
30.4
1.0
1.8
20.7
13.5
3.7
0.4
0.1
0.0
0.6
0.0
0.0
0.0
1.2
0.3
0.8
10.9
0.7
0.2
0.7
0.4
0.7
0.4
0.1
0.0
0.0
0.0
18.8
23.1
1.6
14.8
0.1
0.0
2.9
21.6
1.7
10.2
0.3
0.7
0.2
0.9
7.1
59.1
0.1
2.3
0.7
0.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.3
6.3
0.0
1.0
0.0
0.2
0.0
0.0
0.0
3.5
0.0
0.3
0.0
1.9
0.0
2.5
0.4
0.7
1.1
0.0
0.0
0.1
0.0
5.1
1.9
0.2
2.5
0.4
0.4
0.0
0.0
0.3
0.9
0.0
0.0
0.0
0.0
0.2
1.3
0.0
0.0
0.1
0.0
Cereals
Products of the milling
industry; malt; starches;
inulin; wheat gluten
Oil seeds and oleaginous
fruits;
miscellaneous
grains,seeds and fruit;
industrial or medicinal
plants; straw and fodder
Lac; gums, resins and
other vegetable saps and
extracts
Vegetable
plaiting
materials;
vegetable
products not elsewhere
specified or included
Animal or vegetable fats
and oils and their cleavage
products; prepared edible
fats; animal or vegetable
waxes
Preparations of meat, of
fish or of crustaceans,
molluscs or other aquatic
invertebrates
Sugars
and
sugar
confectionery
Cocoa
and
cocoa
preparations
Preparations of cereals,
flour, starch or milk;
pastrycooks' products
Preparations
of
vegetables, fruit, nuts or
other parts of plants
Miscellaneous
edible
preparations
Beverages, spirits and
vinegar
Residues and waste from
the
food
industries;
prepared animal fodder
Tobacco
and
manufactured
tobacco
substitutes
Salt; sulphur; earths and
stone; plastering materials,
lime and cement
20.9
4.7
3.8
7.3
4.8
0.6
0.0
0.0
7.1
8.5
0.0
0.0
1.1
3.9
7.1
0.3
11.3
1.1
1.7
0.0
0.0
0.0
5.7
0.4
0.0
0.0
1.1
0.0
6.3
1.2
0.7
0.4
1.4
0.1
0.2
0.0
3.3
1.0
0.2
0.1
0.5
0.0
0.0
0.0
0.3
1.5
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.5
0.3
0.7
0.9
0.1
0.0
0.0
0.0
2.3
2.2
0.1
1.5
1.3
0.4
0.4
0.0
0.4
0.0
0.0
0.0
0.0
0.0
0.8
0.0
0.1
0.0
0.2
0.0
0.0
0.0
0.4
0.0
0.0
0.0
0.0
0.0
1.1
2.8
0.0
0.0
1.3
0.1
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.0
1.9
2.0
0.8
0.0
0.0
0.0
0.3
0.1
1.4
0.5
0.0
0.0
0.0
0.0
5.0
9.7
0.0
0.0
0.5
0.0
0.5
1.6
0.3
0.0
0.0
0.0
0.0
0.0
0.8
1.1
0.0
0.0
0.3
0.1
0.1
0.3
2.1
14.4
0.0
0.1
0.0
0.0
3.0
11.0
0.0
0.0
1.1
2.1
17.2
28.4
2.4
2.9
0.1
0.1
0.0
0.0
1.5
10.1
0.0
1.1
0.1
0.1
0.6
0.0
1.4
0.3
0.1
0.0
0.1
0.0
1.6
0.5
0.2
0.0
1.0
0.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.1
0.1
1.1
0.8
0.1
0.0
0.1
0.3
0.0
0.5
0.2
0.3
Ores, slag and ash
13.5
7.2
5.4
2.4
40.3
12.0
19.8
13.9
0.2
0.2
1.8
7.3
5.4
2.0
Mineral fuels, mineral oils
and products of their
0.1
0.0
2.6
2.4
1.2
0.0
3.6
0.0
0.5
0.0
0.0
0.0
2.9
3.1
SA
to W
SA
to
Ch
NSW
W
NSW
Ch
WA
to W
WA
to
Ch
NT
to W
NT
to
Ch
VIC
to W
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
TAS
to W
TAS
to
Ch
QLD
to W
QLD
to
Ch
27
88
distillation;
bituminous
substances; mineral waxes
28
29
30
31
32
33
34
35
36
37
38
39
40
Inorganic
chemicals;
organic
or
inorganic
compounds of precious
metals,
of
rare-earth
metals,
of
radioactive
elements or of isotopes
1.0
0.1
0.1
0.1
0.7
0.1
1.5
0.0
0.2
0.2
0.0
0.0
0.1
0.0
Organic chemicals
0.0
0.0
0.1
0.0
0.0
0.0
0.2
0.0
0.2
0.0
0.0
0.0
0.0
0.0
Pharmaceutical products
0.1
0.0
0.5
2.2
0.0
0.0
0.0
0.0
1.0
0.5
0.0
0.0
0.1
0.0
Fertilisers
Tanning or dyeing extracts;
tannins
and
their
derivatives;
dyes,
pigments
and
other
colouring matter; paints
and varnishes; putty and
other mastics; inks
Essential
oils
and
resinoids;
perfumery,
cosmetic
or
toilet
preparations
Soap, organic surfaceactive agents, washing
preparations,
lubricating
preparations,
artificial
waxes, prepared waxes,
polishing
or
scouring
preparations, candles and
similar articles, modelling
pastes,
“dental
waxes― and dental
preparations with a basis of
plaster
Albuminoidal substances;
modified starches; glues;
enzymes
Explosives;
pyrotechnic
products;
matches;
pyrophoric alloys; certain
combustible preparations
Photographic
or
cinematographic goods
Miscellaneous
chemical
products
Plastics
and
articles
thereof
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
1.4
0.0
0.2
0.0
0.6
0.2
1.1
0.8
0.0
0.0
0.9
1.8
0.0
0.0
0.1
0.0
1.1
3.2
1.0
0.7
0.0
0.0
0.0
0.0
1.0
0.6
0.0
0.0
0.2
0.1
0.0
0.0
0.6
0.2
0.0
0.0
0.0
0.0
0.9
0.7
0.0
0.0
0.2
0.0
0.1
0.0
0.9
0.1
0.0
0.0
0.0
0.0
5.6
2.6
0.1
2.6
0.2
0.0
0.0
0.0
1.6
0.0
0.1
0.0
0.1
0.0
0.2
0.0
0.0
0.0
1.4
4.4
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.5
0.2
0.0
0.0
0.1
0.0
0.1
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.6
0.5
0.0
0.0
0.1
0.0
Rubber and articles thereof
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.1
0.0
1.9
2.9
4.5
6.4
0.3
0.2
1.1
0.0
11.8
26.1
0.2
4.2
4.1
6.7
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.3
0.1
0.0
0.0
0.0
0.0
41
42
43
44
45
46
47
48
49
50
Raw hides and skins (other
than furskins) and leather
Articles of leather; saddlery
and harness; travel goods,
handbags and similar
containers;
articles
of
animal gut (other than silkworm gut)
Furskins and artificial fur;
manufactures thereof
Wood and articles of wood;
wood charcoal
0.3
0.6
0.4
0.8
0.0
0.0
0.0
0.0
1.2
3.8
0.3
3.6
0.2
0.2
Cork and articles of cork
Manufactures of straw, of
esparto or of other plaiting
materials; basketware and
wickerwork
Pulp of wood or of other
fibrous cellulosic material;
recovered (waste and
scrap)
paper
or
paperboard
Paper and paperboard;
articles of paper pulp, of
paper or of paperboard
Printed
books,
newspapers, pictures and
other products of the
printing
industry;
manuscripts, typescripts
and plans
0.4
0.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.5
0.1
0.5
0.5
0.1
0.0
0.0
0.0
1.4
1.8
0.0
0.0
0.3
0.3
0.2
0.0
1.5
5.8
0.0
0.0
0.0
0.0
1.8
0.7
0.2
0.7
0.1
0.0
0.1
0.0
1.4
0.2
0.0
0.0
0.0
0.0
0.7
0.3
0.0
0.0
0.2
0.0
Silk
0.0
0.0
0.4
1.9
0.0
0.0
0.0
0.0
0.2
0.1
0.0
0.0
0.1
0.1
89
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
78
Wool, fine or coarse animal
hair; horsehair yarn and
woven fabric
13.4
9.9
19.5
33.9
4.6
3.3
0.1
0.0
76.2
139.
5
1.2
19.8
0.6
0.9
Cotton
Other vegetable textile
fibres; paper yarn and
woven fabrics of paper
yarn
Man-made filaments; strip
and the like of man-made
textile materials
0.1
0.1
9.8
12.0
0.0
0.0
0.0
0.0
3.4
4.0
0.0
0.0
10.1
8.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
Man-made staple fibres
Wadding,
felt
and
nonwovens; special yarns;
twine, cordage, ropes and
cables and articles thereof
Carpets and other textile
floor coverings
Special woven fabrics;
tufted textile fabrics; lace;
tapestries;
trimmings;
embroidery
Impregnated,
coated,
covered
or
laminated
textile
fabrics;
textile
articles of a kind suitable
for industrial use
Knitted
or
crocheted
fabrics
Articles of apparel and
clothing
accessories,
knitted or crocheted
Articles of apparel and
clothing
accessories,not
knitted or crocheted
Other made up textile
articles; sets; worn clothing
and worn textile articles;
rags
Footwear, gaiters and the
like; parts of such articles
Headgear
and
parts
thereof
Umbrellas, sun umbrellas,
walking-sticks, seat-sticks,
whips, riding-crops and
parts thereof
Prepared feathers and
down and articles made of
feathers or of down;
artificial flowers; articles of
human hair
Articles of stone, plaster,
cement, asbestos, mica or
similar materials
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.2
0.1
0.0
0.0
0.0
0.0
0.1
0.0
0.1
0.1
0.0
0.0
0.0
0.0
1.5
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.1
0.0
0.0
0.0
0.0
2.0
0.1
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.3
0.1
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.4
0.4
0.0
0.0
0.0
0.0
0.6
0.4
0.0
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.2
4.2
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.3
0.3
0.0
0.0
0.1
0.0
Ceramic products
0.0
0.0
0.4
0.1
0.0
0.0
0.0
0.0
0.2
0.2
0.0
0.0
0.2
0.9
Glass and glassware
Natural or cultured pearls,
precious or semi-precious
stones, precious metals,
metals clad with precious
metal, and articles thereof;
imitation jewellery; coin
1.5
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.4
0.3
0.0
0.0
0.0
0.0
0.3
0.0
0.4
0.1
3.6
5.3
0.1
0.0
0.3
0.0
0.0
0.0
0.1
0.0
Iron and steel
0.6
0.2
0.6
0.4
0.1
0.0
0.1
0.0
0.6
0.3
0.0
0.3
0.4
0.1
Articles of iron or steel
0.3
0.2
0.4
0.2
0.0
0.0
0.3
0.0
0.3
0.3
0.0
0.0
0.2
0.1
Copper and articles thereof
15.0
9.9
0.7
0.6
0.0
0.0
0.0
0.0
0.7
0.6
0.0
0.0
7.3
5.4
Nickel and articles thereof
Aluminium and articles
thereof
0.0
0.0
0.1
0.2
3.8
0.3
0.0
0.0
0.0
0.0
0.0
0.0
1.9
0.0
0.3
1.7
5.5
5.6
0.0
0.1
0.0
0.0
5.3
4.6
2.1
13.5
3.3
1.3
Lead and articles thereof
96.6
64.8
9.9
0.8
0.0
0.0
0.0
0.0
0.3
0.0
2.0
21.1
0.6
Zinc and articles thereof
2.9
0.0
0.1
0.0
0.0
0.0
0.3
0.0
0.2
0.0
29.7
9.0
218.
8
13.4
13.9
Tin and articles thereof
Other
base
metals;
cermets; articles thereof
Tools, implements, cutlery,
spoons and forks, of base
metal; parts thereof of base
metal
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.0
0.5
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.1
0.8
0.0
0.1
0.0
0.1
0.0
0.0
0.0
2.1
2.6
0.3
0.0
0.2
0.0
0.1
0.0
0.1
0.0
0.4
0.0
0.0
0.0
0.2
0.0
79
80
81
82
90
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
Miscellaneous articles of
base metal
Nuclear reactors, boilers,
machinery and mechanical
appliances; parts thereof
Electrical machinery and
equipment
and
parts
thereof; sound recorders
and reproducers, television
image
and
sound
recorders
and
reproducers, and parts and
accessories
of
such
articles
Railway
or
tramway
locomotives, rolling-stock
and parts thereof; railway
or tramway track fixtures
and fittings and parts
thereof;
mechanical
(including
electromechanical)
traffic
signalling equipment of all
kinds
Vehicles other than railway
or tramway rolling-stock,
and parts and accessories
thereof
Aircraft, spacecraft, and
parts thereof
Ships, boats and floating
structures
Optical,
photographic,
cinematographic,
measuring,
checking,
precision,
medical
or
surgical instruments and
apparatus;
parts
and
accessories thereof
Clocks and watches and
parts thereof
Musical instruments; parts
and accessories of such
articles
Arms and ammunition;
parts and accessories
thereof
Furniture;
bedding,
mattresses,
mattress
supports, cushions and
similar stuffed furnishings;
lamps and lighting fittings,
not elsewhere specified or
included; illuminated signs,
illuminated
name-plates
and the like; prefabricated
buildings
Toys, games and sports
requisites;
parts
and
accessories thereof
Miscellaneous
manufactured articles
Works of art, collectors'
pieces and antiques
0.2
0.1
0.2
0.1
0.0
0.0
0.0
0.0
0.6
0.7
0.0
0.0
0.1
0.0
0.1
0.0
0.3
0.2
0.0
0.0
0.0
0.0
0.4
0.4
0.0
0.0
0.2
0.1
0.1
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.2
0.1
0.0
0.0
0.0
0.0
0.6
0.2
0.7
1.4
0.0
0.1
0.3
0.0
0.3
0.4
0.0
0.0
0.5
1.6
0.4
0.1
0.1
0.0
0.0
0.0
0.0
0.0
1.0
0.1
0.0
0.0
0.1
0.0
0.1
0.0
0.2
0.0
0.0
0.0
0.0
0.0
1.8
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.2
0.0
0.4
0.0
0.1
0.0
0.1
0.0
0.0
0.1
0.8
0.0
0.3
0.1
1.6
0.2
0.0
0.0
0.0
0.0
0.4
0.1
0.0
0.0
0.2
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.5
0.4
0.0
0.0
0.0
0.0
1.1
0.0
1.0
0.0
0.0
0.0
0.0
0.0
3.5
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.5
0.0
0.0
0.0
0.0
0.2
1.0
0.0
0.0
0.1
0.1
0.0
0.0
0.6
0.2
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.1
0.0
0.0
0.0
0.0
0.0
0.4
0.1
0.0
0.0
0.0
0.0
0.1
0.1
1.0
1.8
0.0
0.0
0.2
0.0
0.4
0.4
0.0
0.0
0.1
0.0
91
SA exports of agricultural products to China in 2014 (AUD)
AHECC
AHECC Description
20120
Fresh or chilled meat cuts of bovine animals, with bone in (excl. carcasses and
half-carcasses)
Fresh or chilled boneless meat cuts of bovine animals
117,227
Frozen meat cuts of bovine animals, with bone in (excl. carcasses and halfcarcasses)
Frozen boneless meat cuts of bovine animals
2,004,123
20130
20220
20230
20422
Value (FOB) $A
444,326
30,038,211
20442
Fresh or chilled meat cuts of sheep, with bone in (excl. carcasses and halfcarcasses)
Frozen meat cuts of sheep, with bone in (excl. carcasses and half-carcasses)
20443
Frozen boneless meat cuts of sheep
20450
Fresh, chilled or frozen meat of goats
20629
Frozen edible offal of bovine animals (excl. tongues and livers)
20630
Fresh or chilled edible offal of swine
20649
Frozen edible offal of swine (excl. livers)
20690
Frozen edible offal of sheep, goats, horses, asses, mules or hinnies
30236
30711
Fresh or chilled southern bluefin tunas (Thunnus maccoyii) (excl. fillets and
other meat of HS 0304 and livers and roes)
Fresh or chilled fish of the types listed in HS 03025 (excl. cod, haddock, coalfish,
hake, Alaska Pollack and blue whitings; fillets and other meat of HS 0304 and
livers and roes)
Fresh or chilled fish (excl. fish of HS 03021, 03022, 03023, 03024, 03025 and
03027; dogfish and other sharks; rays and skates; toothfish, seabass;
seabream; fillets and other meat of HS 0304 and live
Frozen salmonidae (excl. sockeye salmon (red salmon); Pacific salmon; Atlantic
salmon; Danube salmon; trout; fillets and other meat of HS 0304 and livers and
roes)
Frozen southern bluefin tunas (Thunnus maccoyii) (excl. fillets and other meat
of HS 0304 and livers and roes)
Frozen lobsters (Homarus spp.), whether in shell or not, raw, dried, salted, in
brine or smoked, or cooked in shell by steaming or boiling in water (excl. rock
lobsters and Norway lobsters (Nephrops n
Frozen shrimps and prawns (excl. cold-water shrimps and prawns), whether in
shell or not, raw, dried, salted, in brine or smoked, or cooked in shell by steaming
or boiling in water
Unfrozen rock lobster and sea crawfish (Palinurus spp., Panulirus spp., Jasus
spp.), whether in shell or not, live, fresh, chilled, dried, salted, in brine or
smoked, or cooked in shell by steaming or
Unfrozen lobsters (Homarus spp.), whether in shell or not, live, fresh, chilled,
dried, salted, in brine or smoked, or cooked in shell by steaming or by boiling in
water (excl. rock lobsters and Norwa
Unfrozen crabs, whether in shell or not, live, fresh, chilled, dried, salted, in brine
or smoked, whether or not cooked before or during the smoking process; or
cooked in shell by steaming or by boili
Live, fresh or chilled oysters, whether in shell or not
30731
Live, fresh or chilled mussels (Mytilus spp., Perna spp.), whether in shell or not
48,539
30781
Live, fresh or chilled abalone (Haliotis spp.), whether in shell or not
39,840
30789
Albalone (Haliotis spp.), whether in shell or not, frozen, dried, salted, in brine or
smoked, whether or not cooked before or during the smoking process
Molluscs (excl. oysters, scallops, mussels, cuttlefish, squid, octopus, snails
(excl. sea snail), clams, cockles, ark shell & abalone) frozen, dried, salted, in
brine or smoked & flour, meals & pellet
Concentrated milk and cream, powder, granules or other solid forms, of a fat
content, by weight, exceeding 1.5%, not containing added sugar or other
sweetening matter
Milk and cream (excl. in powder, granules or other solid forms), containing
added sugar or other sweetening matter, whether or not concentrated
30259
30289
30319
30346
30612
30617
30621
30622
30624
30799
40221
40299
115,635
82,287,462
6,110,104
3,567
869,156
4,015
739,097
11,106,780
37,954
4,809
11,942
3,684
1,802,845
6,912
4,250
20,808
133,000
64,166
724,138
426,835
55,661
601,942
205,996
92
40610
Fresh (unripened or uncured) cheese (incl. whey cheese & curd)
40900
Natural honey
50400
AHECC
Guts, bladders and stomachs of animals (excl. those of fish), whole and pieces
thereof, fresh, chilled, frozen, salted, in brine, dried or smoked
AHECC Description
80212
Shelled, fresh or dried almonds, whether or not peeled
80510
Fresh or dried oranges
91091
100199
Mixtures of two or more products from different headings of HS 0904 to HS
0910, referred to in Note 1 (b) of this Chapter
Wheat and meslin (excl. seed and durum wheat)
100210
Rye seed
100310
Barley seed
110100
Wheat or meslin flour
110290
Cereal flours (excl. flours of wheat, meslin and maize (corn))
110412
Rolled or flaked grains of oats
120510
120921
Low erucic acid rape or colza seeds (see Subheading note 1 of this Chapter for
further explanation), whether or not broken
Lucerne (alfalfa) seeds, of a kind used for sowing
120922
Clover (Trifolium spp.) seeds, of a kind used for sowing
120925
150210
Rye grass (Lolium multiflorum Lam., Lolium perenne L.) seeds, of a kind used
for sowing
Seeds, fruit and spores, of a kind used for sowing (excl. seeds of sugar beet;
seeds of lucerne, clover, fescue, grass and other forage plants; seeds of
herbaceous plants cultivated mainly for their f
Cereal straw and husks (incl. feed for animals during a voyage) unprepared,
whether or not chopped, ground, pressed or in the form of pellets
Swedes, mangolds, fodder roots, hay, clover, sainfoin, forage kale, lupins,
vetches and similar forage products (incl. feed for animals during a voyage),
whether or not in the form of pellets (excl. l
Tallow of bovine animals, sheep or goats (excl. that of HS 1503)
150290
Fats of bovine animals, sheep or goats (excl. fats of HS 1503 and tallow)
150910
Virgin olive oil, not chemically modified
150990
Refined olive oil and its fractions, not chemically modified
73,419
151000
Oils and their fractions, obtained solely from olives (excl. oils of HS 1509),
whether or not refined, but not chemically modified (incl. olive-residue oils; and
blends of these oils or fractions with
Prepared or preserved abalone (excl. abalone of Chapter 03)
86,458
Sugar confectionery (incl. white chocolate) not containing cocoa (excl. chewing
gum)
Food preparations of flour, groats, meal, starch, malt extract or of dairy products
of HS 0401 to HS 0404 (cocoa content as specified in HS 1901), for infant use,
put up for retail sale
Mixes and doughs (cocoa content as specified in HS 1901) for preparation of
bread, pastry, cakes, biscuits & other bakers wares, communion wafers, empty
cachets suitable for pharmaceutical use, sealin
Malt extract; food preparations of flour, groats, meal, starch, malt extract or
goods of 0401 to 0404 (cocoa content stated in HS 1901) (excl. for infant use,
put up for retail sale; mixes & dough fo
Sweet biscuits, whether or not containing cocoa
13,420
120999
121300
121490
160557
170490
190110
190120
190190
190531
190590
200190
200599
Bakers wares, with or without cocoa (excl. crispbread, gingerbread & the like,
sweet biscuits, waffles, wafers, rusks, toasted bread & similar); communion &
sealing wafers, empty cachets for pharmaceu
Vegetables, fruits, nuts and other edible parts of plants, prepared or preserved
by vinegar or acetic acid (excl. cucumbers and gherkins)
Unfrozen vegetables & mixtures of vegetables, prepared or preserved other
than by vinegar or acetic acid (excl. homogenised veges; potatoes; peas; beans;
asparagus; olives; sweet corn; bamboo shoots;
2,865,444
332,809
14,246,445
Value (FOB) $A
17,765
2,495,910
17,472
38,613,055
97,527
913,922
67,858
8,440
254,962
54,326,244
53,674
1,050,824
86,903
64,307
180,000
18,202,697
2,315,480
239,532
1,158,302
3,204
111,159
7,616
74,080
21,600
20,561
270
5,440
93
200791
200799
Jams, jellies, marmalades, purees and pastes, of citrus fruits, obtained by
cooking, whether or not containing added sugar or other sweetening matter
(excl. homogenised preparations)
Jams, fruit jellies, marmalades, fruit or nut purees and fruit or nut pastes,
obtained by cooking, whether or not containing added sugar or other sweetening
matter (excl. homogenised preparations and
54,572
87,770
94
AHECC
AHECC Description
200912
210230
Unfrozen orange juice, of a Brix value not exceeding 20, unfermented and not
containing added spirit, whether or not containing added sugar or other
sweetening matter
Grapefruit (incl. pomelo) juice, of a Brix value not exceeding 20, unfermented
and not containing added spirit, whether or not containing added sugar or other
sweetening matter
Grape juice (incl. grape must), of a Brix value not exceeding 30, unfermented
and not containing added spirit, whether or not containing added sugar or other
sweetening matter
Grape juice (incl. grape must), of a Brix value exceeding 30, unfermented and
not containing added spirit, whether or not containing added sugar or other
sweetening matter
Apple juice, of a Brix value not exceeding 20, unfermented and not containing
added spirit, whether or not containing added sugar or other sweetening matter
Juice of any single fruit or vegetable (excl. orange, grapefruit & other citrus fruits;
pineapple; tomato; apple; cranberry; grape and grape must), unfermented and
with no added spirit, with or withou
Mixtures of fruit (incl. grape must) and vegetable juices, unfermented and not
containing added spirit, whether or not containing added sugar or other
sweetening matter
Inactive yeasts; other dead single-cell micro-organisms (excl. vaccines of HS
3002 and medicaments or other products of HS 3003 and HS 3004)
Prepared baking powders
210320
Tomato ketchup and other tomato sauces
7,963
210390
Sauces and similar preparations used as sauces or food accompaniments (incl.
salsas), mixed condiments and mixed seasonings (excl. soya sauce, tomato
ketchup and other tomato sauces; mustard flour and
Food preparations (excl. those previously identified in Chapter 21), not
elsewhere specified or included
Waters, ice and snow (excl. mineral waters and aerated waters), not containing
added sugar or other sweetening matter nor flavoured
Waters (incl. mineral waters and aerated waters), containing added sugar or
other sweetening matter or flavoured
Non-alcoholic beverages (excl. fruit or vegetable juices of HS 2009, waters, ice
and snow)
Sparkling wine from fresh grapes
7,774
200921
200961
200969
200971
200989
200990
210220
210690
220190
220210
220290
220410
220421
220820
Wine of fresh grapes (excl. sparkling wines) and grape must (excl. grape must
of HS 2009) with fermentation prevented or arrested by the addition of alcohol,
in containers not exceeding 2 L
Wine of fresh grapes (excl. sparkling wines) and grape must (excl. grape must
of HS 2009) with fermentation prevented or arrested by the addition of alcohol,
in containers exceeding 2 L
Grape must (excl. grape must of HS 2009, grape must with fermentation
prevented or arrested by the addition of alcohol and sparkling wine)
Fermented beverages (incl. cider, perry and mead) (excl. beer made from malt
and wine of fresh grapes), mixtures of fermented beverages and non-alcoholic
beverages not elsewhere specified or included
Spirits obtained by distilling grape wine or grape marc
220870
Liqueurs and cordials
230240
Brans, sharps and other residues, whether or not in the form of pellets, derived
from the sifting, milling or other working of cereals (excl. those of maize (corn)
or of wheat)
220429
220430
220600
Value (FOB) $A
22,266
37,696
430,801
566,291
24,869
71,568
364,566
2,451
1,053
517,866
55,980
368,934
1,262,022
1,442,158
104,611,362
7,302,155
804,554
114,088
120,608
18
21,318
95
Agriculture provisions under ChAFTA in comparison to other FTAs
Agriculture provisions in the Korea Australia Free Trade Agreement, the Japan Australia
Economic Partnership Agreement, the China-Australia Free Trade Agreement and the New
Zealand China Free Trade Agreement.21
Item
Korea
Japan
China
NZ
FTA
with
China
(from
October 2008)22
Beef
Eliminate the 40 %
tariff on beef and
18 % tariff on
bovine offal over
15 years.
Japan
currently
imposes a 38.5%
tariff
on
beef
imports. The tariff
on frozen beef will
be cut to 19.5%,
with
an
eight
percentage
point
cut in the first year,
two in the second
year and one in the
third
year
(18
years).
China
currently
imposes tariffs of
12-25% on beef
imports. These will
be removed in 9
years.
Zero
tariffs
on
imports by 2016.
Korea has the right
to
apply
a
safeguard
measure (initially a
40% tariff falling to
30% then 24% in 5
year intervals) for
the next 15 years
for volumes over a
base
level
of
imports which is
increasing by 2% a
year.
Australian exports
to Korea in 2012
and 2013 were
about
125,000t
and
the
base
volume for the
safeguard
measure is higher
than
that
at
154,584t.
Australia in recent
years
has
accounted for over
half of Korean beef
imports.23
The tariff on fresh
beef will be cut to
23.5 %. The tariff
will be cut by six
percentage points
in the first year,
followed by annual
one
percentage
point
cuts
(15
years).
Japan has the right
to
apply
a
safeguard
measure. On frozen
beef exports, the
trigger volume is
195,000t,
with
growth of 1500t a
year over 10years.
For any Australian
exports above the
trigger volume in
the first 12 months
the
tariff
automatically
‘snaps back’ to
38.5pc.
A 12% tariff on offal
will be removed in 47 years.
China has retained
the right to apply a
safeguard
restriction on beef
imports (but not
offal). The trigger
starts at 170,000
tonnes and grows
over time.
The
trigger is reported to
be ‘10% above the
peak of Australia’s
historic
calendar
year peak levels to
China’. Exports in
2013-2014
were
161,000 tonnes and
93,000 tonnes the
year before.
On chilled beef
exports, the trigger
volume will start at
130,000t,
with
Primary source of this material is this website http://www.dfat.gov.au/fta/m supplemented by other reporting referred to in the
following footnotes. See also http://ftatool.com.au/ An earlier version of this table is included in Christopher Findlay, ‘Australia’s
Free Trade Agreements with Japan and South Korea: Lessons for the Future’, ch. 12 in Tang, Guoqiang, and Peter A. Petri. "New
directions in Asia-Pacific economic integration." East West Centre, Hawaii (2014).
22 Primary source of this material is http://www.chinafta.govt.nz/1-The-agreement/3-Publications/Key-outcomes.pdf
23
http://www.mla.com.au/Prices-and-markets/Trends-and-analysis/Beef/Forecasts/MLA-cattle-industry-projections-2013/82beef-exports-Korea
21
96
1500t a year growth
for ten years.
24
Sugar
Abolish the 3 %
tariff on raw sugar.
Wheat
Eliminate the 1.8
% tariff on wheat
The
year-one
trigger levels are
higher than recent
years, eg in 2013
volumes
of
115,000t
chilled
and
173,000t
frozen. 24
The official website
say that ‘Australian
sugar exporters will
benefit from tariff
elimination
and
reduced levies for
international
standard raw sugar’
but the industry
says ‘Australia has
been supplying a
specialised Japangrade sugar for
many years to the
Japanese market,
which is inherently
different to the
international grade
sugar supplied to its
other
customers.
While
the
announced change
of a tariff reduction
on
international
standard
sugar
from 184% to a
110% effective tariff
is welcome, clearly
this will not improve
Australia’s access
to Japan. The tariff
remains
significantly higher
than that of the
effective tariff on
the special grade
sugar that Australia
supplies
which
remains unchanged
at 70%.’25
Not included.
Not included.26
n/a
Not included. 27
n/a
http://www.beefcentral.com/news/article/4499
25
http://www.canegrowers.com.au/page/Industry_Centre/Media_Centre/Media_Releases/Japan_as_disappointing_as_04_US_free_tra
de_agreement_for_sugar_ASA/
26 DFAT notes that ‘China applies quotas on imports of rice, wheat, maize, sugar and vegetable oils. These are open to all WTO
members, including Australia. In-quota tariffs are set at only 1 per cent for wool, rice, wheat, cotton and maize; 8 to 10 per cent for
vegetable oils and related products and 15 per cent for sugar. Imports of vegetable oils are no longer administered through a quota.
Australia’s exports of these products enter China under existing WTO arrangements. Arguing that these products are key staples and
already enjoy virtually duty-free access, China has not further liberalised these products in any of its FTAs to date. Accordingly, China
has not provided preferential access to Australia under ChAFTA.’
http://dfat.gov.au/trade/agreements/chafta/factsheets/Pages/fact-sheet-agriculture-and-processed-food.aspx
27 See note 6.
97
and 8 % tariff on
wheat gluten.
Dairy
Tariffs of 36 % on
cheese and 89 %
on butter will be
eliminated
between 13 and
20 years.
Australian
dairy
exporters will also
benefit
from
growing duty free
quotas for cheese,
butter and infant
formula.
Under
current
arrangements,
Australia
exports
27,000t of cheese
duty-free under a
global
quota.
Australia
has
gained
a
preferential, dutyfree Australia-only
quota growing to
20,000t
(above
which a tariff of 29%
applies).
Halving of the 40pc
tariff on processed
cheese over 10
years
and
immediate
tariff
cuts on grated and
powdered cheese
as well as a 20pc
tariff cut on cheese
such
as
blueveined, with no
volume restrictions.
Japan has granted
immediate
dutyfree access for milk
products such as
protein
concentrates and
casein, with tariffs
of up to 5.4 %.
Elimination of the 15
per cent tariff on
infant formula within
4 years.
Elimination of the 10
- 19 per cent tariff on
ice cream, lactose,
casein and milk
albumins within 4
years.
Elimination of the 15
per cent tariff on
liquid milk within 9
years.
Elimination of the 10
to 15 per cent tariff
on cheese, butter
and yogurt within 9
years.
Elimination of the 10
per cent tariff on
milk powders within
11 years.
A
safeguard in
whole milk powder
applies.
China’s tariff on
butter, liquid milk
and cheese will be
removed over 10
years (2017).
Tariffs on skim and
whole milk powders
will be removed
over
12
years
(2019).
Milk powders are
subject to a midterm
review
mechanism that, if
triggered,
could
extend the phase
out by a maximum
of 1 year.
Dairy products with
a 10 or 12-year
phase out will be
subject
to
a
quantity-based
safeguard, which
extends 5 years
after the tariffs have
been
eliminated
(i.e. for up to 15 or
17 years in total).
Ice cream and
yoghurt, a 50 per
cent reduction of a
14.9 per cent tariff
and
increased
quotas,
plus
a
review trigger if
another
country
gets a better deal
on dairy.28
Skim milk, fresh
cheese and butter
are not covered.
Lamb/goat/pork
28
Eliminate the 22.5
% tariff on all
sheep and goat
meat over 10
years.
Tariffs were zero for
lamb and will be
bound at zero.
Tariffs on pork cut
to 2.2% from 4.3%,
within a quota that
limits volume to
Elimination of the
tariffs
on
sheepmeat
(currently ranging
from 12 to 23 per
cent) within 8 years.
Tariffs on sheep
meat removed over
9 years (2016).
http://www.abc.net.au/news/2014-04-23/andrew-robb-hits-back-at-japan-deal-criticism/5406428
98
Tariffs on key pork
exports of 22.5 to
25 % will be
eliminated in five
to 15 years.
6,700 metric tons in
the first year and
rises to 16,700 tons
within five years.29
Elimination of the 18
per cent tariff on
frozen sheepmeat
offal within 7 years
Elimination of the 20
per cent tariff on
goat meat within 8
years.
Live animals
n/a
Horticulture
Cherries, almonds
and dried grapes,
will enter Korea
duty free on entry
into force. These
currently
face
tariffs of 8 to 24 %.
Tariffs
on
macadamia nuts,
fruit
juices,
mangoes,
asparagus
and
lentils,
ranging
from 27 to 54 %,
will be phased out
over 3 to 10 years.
5%
tariff
on
macadamia
nuts
eliminated
immediately, 7.8%
in season tariff and
17% off season
tariff
on
table
grapes eliminated
over 10 years, 16%
and 17% in season
tariff on oranges
and
mandarins
eliminated over 10
and
15
years
respectively, 10%
tariff on grapefruit
eliminated over 5
years.30
Tariffs on potatoes
for
chipping
(current tariff 304
%), oranges (50
%), fresh table
grapes (24 %),
and
mandarins
(144 %) will be
eliminated during
Australian
exporting
seasons.
Barley (and other
grains)
A growing dutyfree quota for malt
and malting barley
and eliminate high
out-of-quota tariffs
Elimination of tariffs
of up to 20% on pork
meat
eliminated
within 4 years.
Elimination of all
tariffs on live animal
exports within four
years, including the
10 per cent tariff on
live cattle (purebred breeding cattle
now enter China
duty free).
Elimination of the 10
to 25 per cent tariff
on macadamia nuts,
almonds, walnuts,
pistachios and all
other nuts within 4
years.
n/a
Fruit and vegetable
tariffs were phased
out over 5 years
(2012).
Kiwifruit tariffs were
phased out over 9
years (2016).
Elimination of the 11
to 30 per cent tariff
on
oranges,
mandarins, lemons
and all other citrus
fruits within 8 years.
Elimination of the 10
to 30 per cent tariff
on all other fruit
within 4 years.
Elimination of the 10
to 13 per cent tariff
on
all
fresh
vegetables within 4
years.
Barley
exporters
will have ‘increased
duty-free access’.
Immediate
elimination of the 3
per cent tariff on
barley and 2 per
n/a
http://www.agweb.com/article/japan_adds_pork_tariff_cut_to_beef_in_trade_pact_with_australia_BLMG/ According to this source,
pork imports from Australia were about 700 tons in the 12 months to March 31, 2013. Japan imported 738,455 tons of pork worth
$3.8 billion in 2013, of which 38% came from the U.S., the world’s largest exporter.
30
http://www.weeklytimesnow.com.au/commodities/horticulture/japan-free-trade-agreement-is-big-a-boost-tohorticulture/story-fnker6g8-1226884737630
29
99
of 269 and 513 %
over 15 years.
cent
tariff
sorghum.
on
Elimination over 4
years of the 15 per
cent tariff on cotton
seeds.
Elimination of the 10
per cent tariff on
malt and wheat
gluten
within
4
years.
Immediate
elimination of the 2
per cent tariff on
oats,
buckwheat,
millet and quinoa.
Elimination of tariffs
of up to 7 per cent
on pulses within 4
years.
Rice
Excluded.31
Excluded.
Excluded.
n/a
Seafood
Southern bluefin
tuna (current tariff
10 %) and rock
lobsters (20 %) will
enter duty free
after three years.
Tariffs on shrimps
and prawns, rock
lobsters, abalone
(fresh
or
preserved),
oysters,
crabs,
yellowfin
tuna,
toothfish,
sea
urchins and fish oils
and
southern
bluefin tuna will be
eliminated.
Elimination of the 14
per cent tariff on
abalone within 4
years.
Products for which
tariffs were 5% or
less
became
immediately duty
free.
Elimination of the 15
per cent tariff on
rock lobster within 4
years.
Others
were
phased out over 5
years (by 2012).
Elimination of the 12
per cent tariff on
southern
bluefin
tuna, salmon, trout
and swordfish within
4 years.
Elimination of the 14
per cent tariff on
crabs,
oysters,
scallops
and
mussels within 4
years.
Elimination of the
up-to-8 per cent
tariffs on prawns
within 4 years.
The full list of exclusions is the following: rice, unhulled barley, milk powders, condensed milk, some abalone, ginger, apples, pears,
watermelon, walnuts, onions, capsicums, garlic, honey, oak mushrooms, chestnuts, shallots, some berries, green tea, ginseng, sesame
oil and frozen pork belly.
31
100
Wine
Eliminate the 15 %
tariff on Australian
wine immediately.
Wool
Already zero.
Tariffs on bulk wine
will be eliminated
immediately
and
those on bottled
and sparkling wine
will be subject to
‘quick
tariff
elimination’.
Already zero.
Tariffs of 14 to 20
per
cent
on
Australian
wine
imports
will
be
eliminated within 4
years.
Tariffs of up to 65
per cent on other
alcoholic beverages
and spirits will be
eliminated within 4
years.
China
provides
‘virtually’ duty-free
access on wool,
under a large WTO
tariff rate quota of
287,000
tonnes.
Tariffs within this
quota are set at 1
per cent.
China has the right
to impose a 38 per
cent tariff outside
the
quota,
but
traditionally it has
not done this.
Hides, skins
leather
and
n/s
n/s
In addition to the
existing
WTO
quota, Australia will
receive an exclusive
duty-free Country
Specific Quota of
30,000 tonnes clean
wool (approximately
43,000
tonnes
greasy wool). This
volume will grow by
5 per cent each year
to almost 45,000
tonnes
clean
(approximately
64,300
tonnes
greasy) by 2024, all
at duty-free rates.
Elimination of the 7
per cent tariff on
sheep skins over 4
years – exports
worth $378 million
in 2013-14.
Tariffs on wine
reduced over 5
years (by 2012).
The FTA creates a
country-specific
tariff
quota
to
provide duty free
treatment for an
initial quantity (in
2009) of 25,000
tonnes of wool and
450 tonnes of wool
tops,
with
an
annual growth rate
of 5 percent over 8
years through to
2017.
The initial level of
the quota provides
NZ exporters with
duty-free access for
approximately 75
percent of exports
at the time of
signing.
For exports outside
the country quote,
NZ exporters will
still be able to
access
China’s
global wool quota.32
n/s
Elimination of the 5
to 8.4 per cent tariffs
on cow hides and
skins between 2
and 7 years –
imports
worth
around $576 million.
Elimination of the 9
per cent tariff on
32
See note 6.
101
kangaroo hides and
skins and the 14 per
cent
tariff
on
kangaroo
leather
over 4 years.
Processed Foods
n/s
Tariffs up to seven
per
cent
on
vegetable
juices
(carrot and mixed
vegetables)
eliminated
within
seven years; grape
and
mixed
vegetable
juices
over five years and
on
apple
and
grapefruit
juices
over 10 years.
The nine per cent
tariff on canned
tomatoes will be
eliminated over five
years and tariffs up
to 10.8 per cent on
canned
and
preserved
fruits
such as peaches
and pears will be
eliminated
over
seven years.
Tariffs on prepared
foods
such
as
soups and broths,
jams and peanut
butter
will
be
eliminated within 10
years.
Elimination of tariffs
on
various
pet
foods from entry
into force up to 10
years.
Elimination of tariffs
between 5 and 14
per cent on a range
of other leather
products either on
day one of the
Agreement or over
4 years
Elimination of the
7.5 to 30 per cent
tariff on orange juice
within 7 years, and
elimination of tariffs
of up to 30 per cent
on other fruit juices
within 4 years.
n/s
Elimination of the 15
per cent tariff on
natural honey, and
the up-to-25 per
cent tariff on honeyrelated
products,
within 4 years.
Elimination of the 15
per cent tariff on
pasta
within
4
years.
Elimination of the 8
to 10 per cent tariff
on chocolate within
4 years.
Elimination of the 15
to 25 per cent tariff
on
canned
tomatoes, peaches,
pears and apricots
within 4 years.
Elimination of the 15
to 20 per cent tariff
on biscuits and
cakes
within
4
years.
Around 95 per cent
of
Australia’s
chocolate exports
will enter Japan
duty-free or at a
reduced tariff rate.
The nine per cent
tariff
on
crisp
breads
will
be
eliminated over 15
years and tariffs on
102
biscuits,
pastry,
cakes
and
breakfast cereals
will be reduced.
Tariffs of 17 per
cent on tea will be
eliminated over ten
years.
The 25.5 per cent
tariff on honey will
be eliminated over
ten years under a
growing quota.
103
ChAFTA’s Impact on Agribusiness:
A case study of wine
Kym Anderson
(drawing on recent modelling work with Glyn Wittwer)
Wine Economics Research Centre
School of Economics
University of Adelaide
Adelaide, SA 5005
[email protected]
July 2015
Background paper for the multi-sectoral analysis of the impact on South Australia of
the Australia-China Free Trade Agreement (ChAFTA). Views expressed are the
author’s alone.
104
ChAFTA’s Impact on Agribusiness:
A case study of wine
The signing of the Australia-China Free Trade Agreement (ChAFTA) in mid-2015,
following Australia’s signing in late 2014 of FTAs with Japan and Korea, offer the
prospect of Australia reversing the impact of the earlier signing by Chile and New
Zealand of their FTAs with China (and by Chile of FTAs also with Japan and Korea).
Trade diversion resulted from those earlier FTAs signed by agricultural-exporting
countries whose producers are close competitors to Australia’s farmers and
agribusinesses in East Asian markets. As a result, Australia’s share of imports into
China rose less rapidly because of preferential access provided to Chile and New
Zealand. Had Australia not negotiated the ChAFTA, its share of China’s imports
would have continued to grow less rapidly as the Chile and New Zealand FTAs with
China continued to be phased in over the next few years.
For South Australia, one of the most important agricultural products that was
being subjected to trade diversion is wine, since the vast majority of Australia’s wine
exports are from South Australian-based wineries. This paper therefore provides, as
a case study, an analysis of that product’s trade between Australia and China as it
would have been to 2018 (a) without any of the above-mentioned FTAs, (b) with just
Chile and New Zealand FTAs, and (c) with Australia’s three recent FTAs as well. It
makes sense to consider Australia’s bilateral FTAs with Japan and Korea alongside
its FTA with Japan because they will be implemented simultaneously – although, as
we will see in the case of wine, China is by far the most-important East Asian market
for Australia.
Rice wine is common in Asia, but wine made from grapes has had a very
minor role traditionally. Prior to this century grape wine was consumed only by Asia’s
elite, and produced only in tiny quantities and mostly in just Japan and – from the late
1980s – China.33 However, income growth and a preference swing towards this
traditional European product have changed the consumption situation dramatically.
33
Winegrape production in China may have begun more than two millennia ago, but it would have been only for
the ruling elite’s pleasure (Huang 2000 (pp. 240-246); McGovern 2003, 2009). For developments in East Asian
wine markets to the turn of this century, see Findlay et al. (2004).
105
China is also expanding its area of vineyards and is now the world’s 6 th largest
producer of grape-based wine (hereafter called just wine), up from 14th as recently as
2001.34 To date that supply expansion has not been able to keep up with China’s
growth in demand though, so wine imports have surged. Nor are those imports only
of low quality. The average current US$ price of Asia’s wine imports grew at 7% per
year between 2000 and 2009, compared with only 5.5% in the rest of the world. By
2009 Asia’s average import price was nearly 80% higher than the world average (and
more than four times higher in the case of Hong Kong and Singapore). Even the unit
values of China’s imports of both still bottled and sparkling wines were above the
global average by 2009 (Anderson and Nelgen 2011). Meanwhile, shortly after
removing its tariff on wine imports in February 2008, Hong Kong became the world’s
most important market for ultra-premium and iconic wines.
What is the future of Asia and especially China in the world’s wine markets?
What roles will preferential trade agreements play? And how much will China’s
austerity/anti-corruption drive, introduced rapidly through 2013, dampen conspicuous
consumption of luxuries such as expensive wines? This paper addresses each of
these questions, drawing on a recent paper by Anderson and Wittwer (2015). It first
draws on comparative advantage theory, then looks at the recent history in more
detail before presenting some projections for 2018 under various assumptions about
economic growth, real exchange rates, bilateral trade agreements, and China’s
austerity measures. It concludes that is set to continue to change global markets for
wines dramatically, and that Australia – especially South Australia – is going to be
better placed to capture a greater share of China’s wine import market as a
consequence of ChAFTA.
Determinants of Comparative Advantage in Wine
According to the workhorse theory of comparative advantage developed in the 20th
century, we should expect agricultural trade to occur between relatively lightly
populated economies that are well-endowed with agricultural land and those that are
densely populated with little agricultural land per worker (Krueger 1977). Leamer
34
China is also the world’s largest producer of table grapes. Its total vineyard area surpassed that of France in
2014, at 799,000 hectares compared with France’s 792,000, and so is now 2nd only to Spain’s 1.02 million hectares
(OIV 2015).
106
(1987) developed this model further and related it to paths of economic development.
If the stock of natural resources is unchanged, rapid growth by one or more countries
relative to others in their availability of produced capital (physical plus human skills
and technological knowledge) per unit of available labour time would tend to cause
those economies to strengthen their comparative advantage in non-primary products.
By contrast, a discovery of minerals or energy raw materials would strengthen that
country’s comparative advantage in mining and weaken its comparative advantage in
agricultural and other tradable products, other things equal. It would also boost
national income and hence the demand for nontradables, which would cause mobile
resources to move into the production of nontradable goods and services, further
reducing farm and industrial production (Corden 1984; Garnaut 2014; Freebairn
2015). As port etc. infrastructure is develops and costs of trading internationally fall
for the country, more products move from the nontradable to the tradable category
(Venables 2004).
At early stages of development of a country with a relatively small stock of
natural resources per worker, wages would be low and the country is likely to have
an initial comparative cost advantage in unskilled labour-intensive, standardtechnology manufactures. Then as the stock of industrial capital grows, there would
be a gradual move toward exporting manufactures that are relatively intensive in their
use of physical capital, skills and knowledge. Natural resource-abundant economies,
however, may invest more in capital specific to primary production and so would not
develop a comparative advantage in manufacturing until a later stage of
development, at which time their industrial exports would be relatively capital
intensive.
The above theory of changing comparative has been used successfully to
explain Asia’s resource-poor first- and second-generation industrializing economies
becoming more dependent on imports of primary products from their resource-rich
trading partners (see, e.g., Anderson and Smith 1981). But how helpful is that theory
for explaining comparative advantage in wine?
Grape-based wine is dependent on winegrapes as an input, and they are too
perishable to be transported internationally without at least the first stages of
processing. The lowest-quality winegrapes and wine can be produced in less-thanideal regions and sold as an undifferentiated commodity without a great deal of
107
knowhow, but only at prices barely above the cost of production for most
grapegrowers. To produce a higher-quality product that can be differentiated from
other wines by consumers, and thus attract a higher price, requires far more
technological knowledge and skills in grape growing, wine making and wine
marketing in addition to access to high-quality vineyard land or at least grapes
therefrom. To be economically sustainable the producer also needs ready access to
financial capital to cover the very considerable up-front establishment costs and to
finance the years when receipts fall short of outgoings, including the first seven years
before cash income begins to exceed cash outlays. Secure property rights over the
vineyard land are essential as well, since the lifetime of vines can be 30+ years.
Three determinants of particular importance to a country’s competiveness in
producing wine rather than other farm products are terroir, traditions, and
technologies.
Terroir refers to various pertinent aspects of climate, topography, soils,
geology, etc. that determine the quality of the vine’s growing conditions. Vineyard site
selection therefore is crucial. Experience has determined the best sites and mostsuitable grape varieties in long-established regions, whereas in new regions science
has to be used to speed the process of approaching the potential of any region to
produce quality winegrapes. The conventional wisdom is that winegrapes grow best
between the 30o and 50o temperate latitude bands north and south of the equator,
and where rain is concentrated in the winter and summer harvest times are dry.
Lower latitudes typically result in lower-quality winegrapes. However, simultaneously
moving to higher altitudes can help, because temperatures decline about 5 o
centigrade per 1000 metres of elevation (Gladstones 1992; Ashenfelter and
Storchmann 2014).
Traditions determine not only how a product is produced but also the extent of
local consumer demand. This is important for wine because typically local demand is
the easiest and least costly for producers to satisfy, as there are relatively high fixed
costs of entry into new export markets. Stigler and Becker (1977) argue that
economists should begin by assuming tastes are stable over time and similar among
people, and then focus on explaining differences in consumption patterns using
standard determinants such as relative prices and real incomes. Social norms and
108
religion can also influence interest in consumption of alcoholic beverages, and those
can alter with economic integration/globalization (Aizenman and Brooks 2008).
As for technologies, there is always potential to improve the efficiency of
traditional production, processing, entrepreneurship and marketing, be that by trial
and error of practitioners over the generations or via formal investment in private and
public research and development (R&D). The New World wine-producing countries
have been more dependent on newly developed technologies and less on terroir than
have producers in Western Europe, although both sets of countries have made major
R&D investments – and expanded complementary tertiary education in viticulture,
oenology and wine marketing – over the past half-century (Giuliana, Morrison and
Rabellotti 2011). Those technologies potentially are transferrable to other countries, a
process that has been greatly accelerated over the past two decades through two
mechanisms. One is the emergence of fly-in, fly-out viticulturalists and winemakers
from both Old World and New World wine-producing countries (Williams 1995). The
other mechanism is via foreign direct investment joint ventures: by combining two
firms’ technical and market knowledge, the latest technologies can be diffused to new
regions more rapidly.
New technologies in agriculture have long tended to be biased in favour of
saving the scarcest factor of production, as reflected in relative factor prices. Hayami
and Ruttan (1985) emphasize that the focus of R&D investments has been driven in
part by changes in factor prices, and in particular by the rise in real wages. That has
resulted in the development and/or adoption of labour-saving technologies such as
mechanical harvesters and pruners for vineyards and super-fast (even robotic)
bottling/labelling equipment for wineries in viticultural land-abundant, labour-scarce
countries. The adoption of labour-saving technologies has helped countries with
rapidly rising real wages retain their comparative advantage in what traditionally had
been (at least at the primary stage of grape growing) a labour-intensive industry. This
in turn means poorer countries need to find sources of comparative advantage other
than just low wages.
Relative factor endowments affect the comparative advantage of a country in
terms also of the quality of its exported products. New trade theory suggests richer,
capital-abundant countries will export higher-quality and hence higher-priced goods
(Fajgelbaum, Grossman and Helpman 2011).
109
A further set of influences on comparative advantage that can be important at
certain times relates to currency exchange rate movements. A macroeconomic shock
such as Argentina’s devaluation against the US dollar by two-thirds in late 2001, or a
doubling in the Australian-US dollar exchange rate over the subsequent decade due
largely to Australia’s mining boom, have had major (and opposite) impacts on the
international competiveness of wineries in those two Southern Hemisphere countries
(Anderson and Wittwer 2013).
Asia’s Wine Production, Consumption and Trade to Date
The previous section provides plenty of reasons for not expecting much winegrape
production in most Asian countries. There is almost no tradition of wine consumption
domestically, most people’s incomes until very recently have been too low for wine to
be a priority, there are very few regions with suitable terroir especially where it is not
hot and/or humid, and in numerous Islamic Asian countries their religion frowns on
alcohol. It is thus not surprising that the only Asian countries with a significant area of
grapevines (of which only a small fraction is used in wine making) are parts of Japan,
Korea and China. About 1% of South Korea’s small crop area has been devoted to
vines over the past two decades, and just 0.4% of Japan’s since the 1970s, with little
change in either country over those periods. By contrast, the share of crop area
under vines in China has been growing rapidly, more than doubling since the turn of
the century. Even so, that share in China is still not quite as high as in Japan, which
suggests there is scope for substantially more expansion without encroaching very
much on land used for food production (bearing in mind also that quality winegrapes
grow better on poor slopes than on fertile flat land).35 China has been open to foreign
direct investment in vineyards and wineries, and has welcomed flying vignerons as
consultants. It even seems to have found ways to provide adequate property rights
for investors, notwithstanding the fact that farm land cannot be privately owned in
35
Australia also had only 0.4% of its crop area under vines in 2008. By contrast, shares that year are as high as
4% in France, 6% in Spain and New Zealand, 8% in Italy and 14% in Portugal (Anderson and Nelgen 2011, Table
6). It should be noted that the quality of grape and wine data for China are lower than for the other countries
mentioned in this paper, but they are the best the author has been able to assemble.
110
China. Its vineyards are heavily focusing on red varieties (considered by Chinese
people to be best for their health), especially ones originating in France.36
China’s volume of wine production has been growing more than twice as fast
as its area under vines. This has been possible not just because the share of
domestically grown grapes destined for wine has risen but also because China
imports a lot of wine in bulk and blends it with wine made from Chinese grapes. This
is legally feasible because national labeling laws are such that a bottle marked
‘Product of China’ is required to have only 10% local content.
Turning to consumption, there are only five Asian countries plus Hong Kong
and Taiwan where per capita grape-based wine consumption has yet to exceed 0.2
litres per year. In each of those countries the level in 2012 was well above that of
2000, but the most dramatic increase has been in China (Figure 1(a)). Since China is
also the most populous country, its growth has overwhelmingly dominated Asia’s
overall increase in wine consumption, which has increased more than six-fold since
2000 (Figure 1(b)). China accounted for barely half of Asia’s wine consumption in
2000, but now it accounts for all but one-fifth. Populous India, by contrast, has a wine
industry that is less than one-fiftieth the size of China’s, notwithstanding its doubledigit growth during the past decade.
During the first decade of this century wine doubled its share of Asia’s
recorded consumption of alcohol, but that brought it to just 3%, or only one-fifth of
wine’s global share of recorded alcohol consumption. The same handful of Asian
countries are the only ones in which wine’s share is above the Asian average (Figure
2).
So despite the recent rapid growth in wine consumption in Asia, the potential
for further expansion remains enormous, given the current very low level of per
capita consumption and share of wine in total alcohol purchases. The rapid aging
and educating of the populations in Asia’s emerging economies also lends itself to a
continuing expansion of demand for wine there. Certainly the new Chinese
Government’s austerity/anti-corruption drive has been discouraging consumption of
expensive wines and other luxuries since 2014 but, as suggested below, that
36
In 2010, 96% of China’s winegrape area was planted to red varieties (mostly Cabernet Sauvignon), and the
country of origin of 97% of the varieties is France (Anderson 2013, pp. 243 and 635).
111
influence is much less on lower-quality wines – which are by far the most voluminous
(Table 1).
No Asian country has yet produced grape-based wine for export in noticeable
quantities. As for import dependence, it varied in 2009 from 15% in China (up from
8% in 2000-05) to 68% in Japan, 96% in Korea, and 100% for all other Asian
countries (Anderson and Nelgen 2011, Table 54). Thus China’s share of Asian wine
imports is much less than its share of consumption, especially when expressed in
value terms because the unit value of China’s imports in 2009 was only half the
Asian average. Even so, China together with Hong Kong (which re-exports perhaps
one-fifth of its wine imports to China) dominates Asia’s aggregate wine imports and
their growth (Figure 3).37 Not surprisingly, therefore, Australia’s exports to those two
destinations have grown exponentially this century (Figure 4).
One needs to be careful not to diminish the role that some other Asian
countries play as significant importers of high-quality wine though. As can be seen in
Figure 3, the shares of those countries in the value of world imports far exceed their
volume shares, reflecting the fact that the average price of their imports is well above
that of most other countries. For small producers of super-premium wines, especially
in nearby Australia, they are important and profitable markets.
Needless to say, Asian wine imports would be considerably larger if import
tariffs and excise taxes on wine were less. In numerous Asian countries they exceed
those for beer and spirits on a per-litre-of-alcohol basis (Table 2). The decision by
Hong Kong to eliminate its tariff on wine imports in early 2008 is partly why its imports
in Figure 3 are so much higher by the end than the beginning of the previous decade,
and why Australia’s wine exports to Hong Kong grew so rapidly over the past seven
years (Figure 4).
Even without any reforms of those taxes, consumption and imports of wine in
Asia are destined to rise over the years to come. How much they might rise, and how
much domestic wine production might expand to satisfy at least some of that demand
increase, is not easy to predict. A recent study nonetheless has focused on
projecting the world’s wine markets over the next few years. The next section reports
on its findings as they relate to Asia, and how recent policy changes could impact on
Australia’s wine exports.
37
For Google motion charts on the growth of China’s wine imports during 1997 to 2011, see Lewis (2013).
112
Projecting the World’s Wine Markets to 2018
Anderson and Wittwer (2013) have a model of the world’s wine markets in which
those markets are disaggregated into non-premium (including bulk), commercialpremium, and super-premium wines.38 Two types of grapes are specified, premium
and non-premium. Non-premium wine uses non-premium grapes exclusively, superpremium wines use premium grapes exclusively, and commercial-premium wines use
both types of grapes. The model divides the world into 44 individual nations and 7
composite regions.
The model’s database is calibrated initially to 2009, based on the
comprehensive volume and value data and trade and excise tax data provided in
Anderson and Nelgen (2011, Sections V, VI and VII). It is projected forward in two
steps. The first step involves using actual aggregate national consumption and
population growth between 2009 and 2011, together with changes in real exchange
rates (RERs). The second step assumes aggregate national consumption and
population grow from 2011 to 2018 at the rates shown in Appendix Table 1, and that
RERs over that period either (a) remain at their 2011 levels or (b) return half-way to
their 2009 rates (except for China, whose RER is assumed to continue to slightly
appreciate, by 2 percent per year between 2011 and 2018). In each of those steps, a
number of additional baseline assumptions are made regarding preferences,
technologies, and capital stocks.
Concerning preferences, there is assumed to be a considerable swing towards
consumption of all wine types in China, as more Chinese earn middle-class incomes.
Since aggregate wine consumption is projected by the major commodity forecasters
to rise by 70 percent rise over that 7-year period, the increase in China’s
consumption is calibrated to that in the more-likely scenario in which exchange rates
revert half-way back from 2011 to 2009 rates. That implies a rise in per capita
consumption from 1.0 to 1.6 litres per year. This may be too conservative. Per capita
38
Commercial-premium still wines are defined by Anderson and Nelgen (2011) to be those between US$2.50 and
$7.50 per litre pre-tax at a country’s border or wholesale, with those below $2.50 called non-premium and those
above $7.50 called super-premium. Sparkling wines are treated as an additional category, but trditionally they
have been of very minor importance to Australia’s wine exports.
113
wine consumption grew faster than that in several West European wine-importing
countries in recent decades, and Vinexpo claims China’s consumption was already
1.4 litres by 2012. True, annual per capita wine consumption in Hong Kong is only 3
litres, and Japan’s is rarely above 2 litres; but with the number of middle class in
China currently around 250 million and growing at 10 million per year (Kharas 2010;
Barton, Chen and Jin 2013), and with grape-based wine still accounting for less than
4 percent of alcohol consumption by China’s 1.1 billion adults, it is not unreasonable
to expect large increases in volumes of wine demanded. However, if China’s income
growth were to grow slower than the rate assumed in the base case, and if that
meant China’s RER did not continue to appreciate slightly, wine import growth would
be slower. As for the rest of the world, the long trend preference swing away from
non-premium wines is assumed to continue.
Both grape and wine industry total factor productivity is assumed to grow at 1
percent per year everywhere, while grape and wine industry capital is assumed to
grow net of depreciation at 1.5 percent per year in China but zero elsewhere. This
means that China’s production rises by about one-sixth, one-quarter and one-third for
non-premium, commercial-premium and super-premium wines between 2011 and
2018 – which in aggregate is less than half that needed to keep up with the modeled
baseline growth in China’s consumption. Of course if China’s wine production from
domestic winegrapes were to grow faster than the rate assumed in the base
scenario, wine imports would increase less.
Given the uncertainty associated with several dimensions of developments in
China’s wine markets, the more likely of the two main scenarios to 2018 (in which
RERs for all but China revert half-way back from 2011 to 2009 rates, called
Alternative 1) is compared with a third scenario (called Alternative 2) in which three
dimensions are altered: China’s aggregate expenditure growth during 2011-18 is
reduced by one-quarter (from 7.8 to 5.6 percent per year), its RER does not change
from 2011 instead of appreciating at 2 percent per year over that period, and its
grape and wine industry capital is assumed to grow at 3 instead of 1.5 percent per
year. Each of those three changes ensures a smaller increase in China’s wine
imports by 2018 in this Alternative 2 scenario. However, this should be considered a
lower-bound import projection because, even if China’s growth in GDP,
industrialization and infrastructure spending were to slow down more than assumed
114
in the Base and Alternative 1 scenarios, Chinese households nonetheless are being
encouraged to lower their extraordinarily high savings rates and consume more of
their income. In addition, grape wine is encouraged as an alternative to the dominant
alcoholic beverages of (barley-based) beer and (rice-based) spirits because of its
perceived health benefits and because it does not undermine food security by
diminishing foodgrain supplies.
This global model has supply and demand equations and hence quantities
and prices for each of the grape and wine products and for a single composite of all
other products in each country. Grapes are assumed to be not traded internationally,
but other products are both exported and imported. Each market is assumed to have
cleared before any shock, and to find a new market-clearing outcome following any
exogenously introduced shock. All prices are expressed in real (2009) terms.
To project global wine markets forward, it is assumed that aggregate national
consumption and population grow from 2011 to 2018 at the rates shown in Appendix
Table 1 and that preferences, technologies, and capital stocks continue to change as
described above, plus that RERs over that period either remain at their 2011 levels
(the Base Scenario) or return half-way to their 2009 rates (except for China). The
latter RER changes began to happen in mid-2013 and had been achieved by mid2015, so the Alternative 1 scenario is more likely to be representative of the real
world by 2018 than the Base Scenario. The third scenario (Alternative 2) presents a
lower-bound projection of what might happen to Chinese wine import demand if
China’s economy slows by one-quarter, its RER ceases to appreciate, and
simultaneously its domestic grape and wine production capital grows twice as fast. In
all three of these scenarios in this section of the paper, new FTAs and China’s
austerity drive are ignored, but are considered in the following section.
Table 3(a) suggests China’s production of grapes and wine would grow at
similar rates in the first two scenarios: by one-sixth for non-premium wine and a bit
over one-quarter for premium wines. In the third scenario those rises increase to onequarter for non-premium wine and to more than one-third for premium wines.
The income, population and preference changes together mean that Asian
consumption volumes grow dramatically over the period to 2018 except in Japan
where the increase is confined to super-premium wine (Table 4). For China the
115
increase is around two-thirds in the first two scenarios and a little less than one-half
in the third (slower growth) scenario, whereas for other emerging Asian countries
they increase only one-seventh or one-sixth. Given the vast differences between
Asian countries in their 2011 consumption levels though, China dominates the
volume growth globally while Western Europe sees a decline in its consumption
which dampens somewhat global consumption growth (Figure 5). The fall in Europe
is mainly due to the hefty weight in its consumption of the declining non-premium
wine sub-sector – continuing the trend in that region of the past three decades.
When combined with the changes projected in production, it is possible to get
a picture of what is projected to happen to wine trade. Table 5 provides projections
for the main wine-trading regions. In terms of volumes, world trade expands 6% by
2018 in the base scenario, and 7% in the Alternative 1 scenario in which RERs
change. Virtually all of that increase in those two scenarios is due to China’s import
growth. In the Alternative 2 scenario, in which China imports less, global trade also
expands less (by only 4%). In terms of the real value of global trade, however, the
upgrading of demand elsewhere means that China accounts for smaller fractions of
the growth in the global import value, namely 36%, 43%, and 30% in the Base,
Alternative 1 and Alternative 2 scenarios, respectively. In all three scenarios China
dominates Asian import growth, and the value of global wine trade rises by about
one-sixth (last row of Table 5).
It is not surprising that China is such a dominant force in these projections,
given the dramatic growth in its wine consumption over the past dozen years (Figure
1), the expectation of continued high growth in its income over the next five years
(albeit somewhat slower than in the past five years), and the assumption that China’s
winegrape production growth cannot keep pace with domestic demand growth. As a
result, China’s share of consumption supplied domestically falls from its 2009 level of
85% to 57%, 54% and 67% in 2018 in the Base, Alternative 1 and Alternative 2
scenarios for 2018, respectively.
France is projected to remain dominant in imports by China, but in the morelikely Alternative 1 scenario with a part-reversal of recent exchange rate movements,
the increase in China’s imports from Australia is slightly greater than that from France
in value terms and each of the other exporters’ shares are less than one-third those
of Australia and France in value terms (Figure 6).
116
Projected bilateral trade changes for Australia and Chile are summarized in
Table 6 for the most-likely Alternative 1 scenario. They benefit greatly from China's
burgeoning demands. In volume terms that is slightly at the expense of growth in
their exports to other regions, although not in value terms because of the modeled
upgrading of quality in those other markets. Projected growth in real export values in
local currency terms is even larger than in the US$ terms shown in Table 6 due to the
modeled real depreciation of the currencies of those two countries. For example,
Australia's export value growth of US$987 million converts to an Australian dollar
increase of AUD1440 million. Australia’s projected volume growth in this scenario is
an extra 21ML of wine per year being exported to China during 2011 to 2018. That
should be manageable, as it is the same rate of increase in Australia’s sales to the
United States during the first decade of this century.
Impacts on Projections of Recent Policy Developments: China’s FTAs and Austerity
The above results have not taken into account the signing of bilateral free-trade
agreements (FTAs) with China, nor the austerity/anti-corruption drive that began in
2013 and has impacted heavily on official banqueting and expensive gift-giving.
The pertinent FTAs involve the gradual lowering of tariffs on China’s wine
imports from wine-exporting countries. The general tariffs in 2008 were 14% on
sparkling and still bottled wine and 20% on bulk wine. They have since been phased
down to zero by 2012 for New Zealand and will be zero by 2016 for Chile. They will
also be zero for Australia by 2016 for bottled wine and by 2018 for bulk wine.
To model the impact of those FTAs, we do so in two steps, starting with the
Alternative 1 scenario from the previous section. In the first step we send to zero by
2018 the China tariffs on wine from Chile and New Zealand, they being the earlier
FTAs (signed in 2006 and 2008, respectively). In the second step we then also phase
out tariffs on China’s wine imports from Australia, it being the most-recent country to
sign a bilateral FTA with China (in 2015).
Tables 3(b) and 7 reveal that these FTAs will have almost no discernible
impacts on grape and wine production or on wine consumption in China, especially
117
compared with the changes between 2011 and 2018 expected from the Alternative 1
projections shown in the first column of those tables.
The FTAs’ impacts on international trade in wine are somewhat more
significant, but still not large. Table 8(b) suggests that Chile and New Zealand have
been gaining market share in China (especially in volume terms for Chile), partly at
Australia’s expense; but with the signing of the Australia-China FTA those trade
gains for Chile and New Zealand are to be somewhat reduced while Australia’s
export gain will more than offset the reduction it otherwise would have suffered from
those two earlier-signed FTAs. From China’s viewpoint it benefits more in volume
than value of wine imports from the earlier two FTA’s, in contrast to adding the FTA
with Australia which boosts value much more than volume of its wine imports.
The impact of the three FTAs on bilateral trade patterns is summarized in
Table 9. China’s imports from its new FTA partners in the Southern Hemisphere will
grow at the expense of its imports from the United States and Europe, and those FTA
partners’ wine exports to countries other than China will shrink – although by less
than the increase in their exports to China. That is, global trade creation outweighs
trade diversion from these FTAs in the case of wine, according to these results, as
also confirmed in the bottom rows of Tables 8(a) and 8(b).
The other policy development of significance to wine is China’s austerity drive.
That is simulated with a leftward shift in China’s domestic demand for super-premium
wines sufficient to reduce the projected expansion during 2011-18 in those quality
wines by 9.2% (see Table 7). That has very little impact on China’s grape and wine
production (last column of Table 3), and only a minor influence on the overall volume
of wine imports by China. However, the austerity drive’s impact on the value of
China’s wine imports and of France and Australia’s wine exports to China is nontrivial, because the drive is depressing the prices of super-premium wines. As a
result, the estimated value of China’s imports will be $80 million less in 2018, with
Australia and France bearing most of that fall: their exports are lower by about 2%, or
$19 million and $46 million, respectively (Table 10).
Summary and Implications
118
China has already become by far the most important wine-consuming country in
Asia, and the above projections point to the enormous speed with which China may
become an even more dominant market for wine exporters, with a projected extra
620-940 ML to be added by 2018 to its consumption of 1630 ML in 2011. Since
China’s domestic production is projected to increase by ‘only’ about 210-290 ML by
2018, its net imports are projected to rise by between 330 and 740 ML – or 50ML
more once the full impact of the three FTAs with Southern Hemisphere countries are
felt. Certainly the recent austerity drive is going to dampen the growth in superpremium and iconic wine sales in China, but because those quality wines are still
only a small share of the total sales volume the drive’s impact on China’s aggregate
wine consumption and imports is very minor.
While the recent and projected rates of increase in per capita wine
consumption in China are no faster than what occurred in several northwestern
European countries in earlier decades, it is the sheer size of China’s adult population
of 1.1 billion – and the fact that grape wine still accounts for less than 4 percent of
Chinese alcohol consumption – that makes this import growth opportunity
unprecedented. It would be somewhat less if China’s own winegrape production
increases faster, as in the Alternative 2 scenario above, but certainly in as short a
period as the next five years that is unlikely to be able to reduce the growth in
China’s wine imports very much, especially at the super-premium end of the
spectrum and notwithstanding that country’s recent austerity drive.
Of course these projections are not predictions. Where exchange rates move,
and how fast various countries’ wine producers take advantage of the projected
market growth opportunities in Asia, will be key determinants of the actual changes in
market shares over the coming years. Not all segments of the industry are projected
to benefit, with non-premium producers in Australia and elsewhere facing falling
prices if demand for their product continues to dwindle as projected above. But
Australia’s exporting firms willing to invest sufficiently in building relationships with
their Chinese importer/distributor – or in grapegrowing or winemaking as joint
venturers within China – may well enjoy long-term benefits from such investments,
and more so because of ChAFTA.
119
Figure 1: Per capitaa and total consumption of grape wine in Asia, 2000 to 2014
(a) Per capita consumption (litres)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2000
2012
(b) Total wine consumption (ML)
a
All other Asian countries consume less than 0.2 litres per capita per year
Source: Updated from Anderson and Nelgen (2011) using Euromonitor International
120
Figure 2: Wine’s share of total alcohol consumption in Asia,a 2000 and 2009
(percent)
16
14
12
10
8
2000
2009
6
4
2
0
a
For all other Asian countries wine’s share of alcohol consumption is less than 3%
Source: Anderson and Nelgen (2011)
121
Figure 3: Shares in the volume and value of global wine imports, developing Asia,
2009
(%)
2.5
Volume 2000
2.0
1.5
Volume 2009
Value 2000
Value 2009
1.0
0.5
0.0
a
Japan’s volume (value) shares are 5.8% (5.3%) in 2000 and 3.9% (2.1%) in 2009
Source: Anderson and Nelgen (2011)
122
Figure 4: Value of Australia’s wine exports to China and Hong Kong, 2001 to 2015
(AUD million)
Source: Wine Australia (see its Winefacts website at www.agwa.net.au)
123
Figure 5: Projected changes in consumption of all wines, 2011-2018a
(ML)
1200
1000
Base
800
ALT 1
600
ALT 2
400
200
0
-200
-400
-600
‘Base’ refers to the simulation assuming there are no changes in real exchange
rates between 2011 and 2018; ‘Alt. 1’ assumes real exchange rates revert half way
back from 2011 to 2009 rates by 2018 except for China’s which appreciates 2%pa;
and ‘Alt. 2’ assumes China’s RER does not change from 2011, and its aggregate
expenditure grows one-quarter less while its grape and wine capital grow twice as
fast as in ‘Alt. 1’.
a
Source: Anderson and Wittwer (2013)
124
Figure 6: Shares of China’s wine import value, by source, 2009 and projected 2018a
(percent)
45
40
35
30
25
20
15
10
5
0
2009
2018
‘Base 2018’ refers to the simulation assuming there are no changes in real
exchange rates between 2011 and 2018; ‘Alt. 1’ assumes real exchange rates revert
half way back from 2011 to 2009 rates by 2018 except for China’s which appreciates
2%pa; and ‘Alt. 2’ assumes China’s RER does not change from 2011, and its
aggregate expenditure grows one-quarter less while its grape and wine capital grow
twice as fast as in ‘Alt. 1’.
a
Source: Anderson and Wittwer (2013)
125
Table 1: China’s wine production, consumption and trade, by quality categories, 2009
(ML)
Production
Imports
Consumption
600
344
18
962
80
86
7
173
680
430
25
1135
Non-premium
Commercial premium
Super premium
TOTAL
Selfsufficiency
(%)
88
80
72
85
Source: Anderson and Nelgen (2011, Section VI).
Table 2: Ad valorem consumer tax equivalenta of excise plus import taxes on
alcoholic beverages, 2008
(%)
China
Japan
Hong Kong
India
Korea
Philippines
Taiwan
Thailand
Vietnam
Nonpremium
wine
(A$2.50/litre
)
Commercial
premium
wine
(A$7.50/litre
)
Super
premium
wine
(A$20/litre)
Beer
(A$2
/litre)
Spirits
(A$15
/litre)
32
32
0
165
46
22
23
232
88
25
11
0
155
46
12
14
117
88
25
4
0
152
46
9
12
81
88
18
0
0
100
124
10
2
51
96
21
12
100
151
114
35
23
52
115
a
At the prices shown in the column headings (expressed in Australian dollars),
excluding VAT/GST. Vietnam rates refer to 2012
Source: Anderson (2010), expanded to include China and Vietnam.
126
Table 3: Projected grape and wine output volume changes for China, 2011 to 2018a
(%)
(a) Core scenarios to 2018
Non-premium wine
Commercial-premium wine
Super-premium wine
Premium grapes
Non-premium grapes
BASE
ALT 1
ALT 2
18
26
29
20
18
17
25
29
20
17
24
35
39
31
27
(b) Policy change scenarios: impacts relative to ALT 1 in 2018
Non-premium wine
Commercial-premium wine
Super-premium wine
Premium grapes
Non-premium grapes
FTAs with NZ
and Chile
ALT 1
(% from ALT 1 base)
17.1
25.1
28.8
19.9
17.4
-0.1
-0.1
0.0
0.0
0.0
FTA with
Australia
Austerity
scenario
(% from NZ+Chile (% from 3 FTAs
FTAs scenario)
scenario)
-0.1
-0.1
-0.1
-0.1
-0.1
0.1
0.1
-0.1
0.0
0.0
‘Base’ refers to the simulation assuming there are no changes in real exchange
rates between 2011 and 2018; ‘Alt. 1’ assumes real exchange rates revert half way
back from 2011 to 2009 rates by 2018 except for China’s which appreciates 2%pa;
and ‘Alt. 2’ assumes China’s RER does not change from 2011, and its aggregate
expenditure grows one-quarter less while its grape and wine capital grow twice as
fast as in ‘Alt. 1’. ‘FTA’ refers to removing the tariffs on China’s wine imports from the
country(-ies) mentioned with whom it has signed a bilateral Free Trade Agreement.
The ‘Austerity’ simulation assumes China’s demand for super-premium wines
expands by one-eleventh less than in the simulation involving the 3 FTAs.
a
Source: Anderson and Wittwer (2015)
Table 4: Projected changes in quantities of wine consumed in Asia, 2011 to 2018
(%)
(a) Base scenario (assuming no RER changes from 2011)
127
Non-premium wines
Commercial-premium
wines
Super-premium wines
All wines
CHINA
29
JAPAN
-14
OTHER ASIA
0
87
-3
10
87
62
9
-1
27
17
(b) Alternative 1 (assuming RERs return half-way from 2011 to 2009 rates)
Non-premium wines
Commercial-premium wines
Super-premium wines
All wines
CHINA
31
95
100
70
JAPAN
-14
-4
9
-2
OTHER ASIA
1
9
27
16
(c) Alternative 2 (assuming also slower Chinese import growth)
Non-premium wines
Commercial-premium
wines
Super-premium wines
All wines
CHINA
26
JAPAN
-14
OTHER ASIA
-1
73
-3
10
69
46
9
-1
25
14
Source: Anderson and Wittwer (2013)
Table 5: Projected change in global wine import and export volumes and values,
2011 to 2018a
(a) Imports
China
Japan
Other Asia
United Kingdom
North America
Other Europe
Other
Volume (ML)
Base
Alt. 1
627
739
-10
-13
30
24
-54
-36
-23
11
-122
-176
152
151
Alt. 2
334
-10
26
-29
37
-140
141
Value (US$m)
Base
Alt. 1
1948
2309
262
235
615
520
98
179
961
1106
1012
740
498
259
Alt. 2
1178
230
539
93
1015
552
318
128
WORLD
600
700
359
5394
5548
3925
(b) Exports
Australia
Other New
World
Old World
WORLD
Volume (ML)
Base
Alt. 1
0
92
78
222
521
600
(6%)
387
702
(7%)
Alt. 2
59
75
224
359
(4%)
Value (US$m)
Base
Alt. 1
336
987
469
965
Alt. 2
675
597
4370
5394
(17%)
2653
3925
(15%)
3537
5602
(17%)
‘Base’ refers to the simulation assuming there are no changes in real exchange
rates between 2011 and 2018; ‘Alt. 1’ assumes real exchange rates revert half way
back from 2011 to 2009 rates by 2018 except for China’s which appreciates 2%pa;
and ‘Alt. 2’ assumes China’s RER does not change from 2011, and its aggregate
expenditure grows one-quarter less while its grape and wine capital grow twice as
fast as in ‘Alt. 1’.
a
Source: Anderson and Wittwer (2013)
129
Table 6: Changes in export volumes and values of Australia and Chile in the
Alternative 1 scenario, 2011 to 2018b
(a) Volumes (ML)
Exporter:
Importer:
United Kingdom
United States
Canada
New Zealand
Germany
Other W.
Europea
China
Japan
Other Asia
Other countries
WORLD
Australia
Chile
-24
-15
-3
-2
-2
-10
-9
-3
0
-7
-9
150
-1
0
-2
92
-18
194
-2
1
1
147
Australia
Chile
50
114
38
9
0
33
1
22
6
0
-4
-2
662
6
51
24
987
237
4
8
43
325
(b) Values (US$m)
Exporter:
Importer:
United Kingdom
United States
Canada
New Zealand
Germany
Other W.
Europea
China
Japan
Other Asia
Other countries
WORLD
a
Other W. Europe = Belgium, Denmark, Finland, Ireland, the Netherlands, Sweden
and Switzerland
The ‘Alternative 1’ scenario assumes real exchange rates revert half way back from
2011 to 2009 rates by 2018 except for China’s which appreciates 2%pa.
b
Source: Anderson and Wittwer (2013)
130
Table 7: Policy-induced wine consumption volume changes for China, 2018a
(%)
ALT 1
(%
change
from
2011)
Non-premium wine
Commercial-premium wine
Super-premium wine
ALL WINES
31
95
100
70
FTAs with NZ
and Chile
+FTA with
Australia
(% from NZ+Chile
(% from ALT 1 base)
FTAs scenario)
0.2
0.3
0.3
0.3
0.2
0.5
0.9
0.4
Austerity
scenario
(% from 3 FTAs
scenario)
0.0
0.0
-9.2
-0.2
‘Alt. 1’ assumes real exchange rates revert half way back from 2011 to 2009 rates
by 2018 except for China’s which appreciates 2%pa. ‘FTA’ refers to removing the
tariffs on China’s wine imports from the country(-ies) mentioned with whom it has
signed a bilateral Free Trade Agreement. The ‘Austerity’ simulation assumes China’s
demand for super-premium wines expands by one-eleventh less than in the
simulation involving the 3 FTAs.
a
Source: Anderson and Wittwer (2015)
131
Table 8: Policy-induced changes in global wine import and export volumes and
values, 2018
(a) Imports
Volume (ML)
FTAs
+FTA with
with NZ
Australia
and
ALT 1
(ML from
Chile
(ML
NZ+Chile
China
Japan
Other Asia
United Kingdom
North America
Other Europe
Other
WORLD
Value (US$m)
FTAs
+FTA with
with NZ
Australia
and
ALT 1
($m from
Chile
($m
NZ+Chile
change
from 2011)
(ML from
ALT 1 base)
FTAs
scenario)
change
from 2011)
($m from
ALT 1 base)
FTAs
scenario)
739
-13
24
-36
11
-176
153
702
52
0
0
-1
-5
-1
0
43
4
0
0
-2
-9
-1
0
-6
2309
235
520
179
1106
740
313
5602
34
0
0
3
0
4
0
43
86
0
1
7
0
1
0
104
(b) Exports
Volume (ML)
FTAs
+FTA with
with NZ
Australia
and
ALT 1
(ML from
Chile
(ML
NZ+Chile
Australia
Other New World
Old World
WORLD
Value (US$m)
FTAs
+FTA with
with NZ
Australia
and
ALT 1
($m from
Chile
($m
NZ+Chile
change
from 2011)
(ML from
ALT 1 base)
FTAs
scenario)
change
from 2011)
($m from
ALT 1 base)
FTAs
scenario)
92
222
387
702
-1
44
0
43
10
-11
-5
-6
987
965
3537
5602
-11
60
-5
43
135
-18
-12
104
‘Alt. 1’ assumes real exchange rates revert half way back from 2011 to 2009 rates
by 2018 except for China’s which appreciates 2%pa. ‘FTA’ refers to removing the
tariffs on China’s wine imports from the country(-ies) mentioned with whom it has
signed a bilateral Free Trade Agreement.
a
Source: Anderson and Wittwer (2015)
132
133
Table 9: Marginal impact of three FTAs on changes in export volumes and values of
wine-exporting countries in the Alternative 1 scenario, 2011 to 2018b
(a) Volumes (ML)
Exporter: Australia
Importer:
United Kingdom
United States
Canada
New Zealand
Germany
Other W.
Europea
China
Japan
Other Asia
Other countries
WORLD
Other
Southern
Hemisphere
United
Western
States European
exporters
-10
-13
-2
-1
-1
-2
-5
-1
0
-2
1
0
1
0
0
7
3
2
0
1
-4
42
0
-1
-1
9
-3
54
-1
0
-4
36
0
-6
0
0
1
-3
5
-30
1
1
3
-7
Exporter: Australia
Importer:
Other
Southern
Hemisphere
(b) Values (US$m)
United Kingdom
United States
Canada
New Zealand
Germany
Other W.
Europea
China
Japan
Other Asia
Other countries
WORLD
United
Western
States European
exporters
-15
-23
-5
-1
-1
-1
-5
-1
0
-1
2
0
2
0
0
22
23
6
1
3
-7
187
-2
-7
-2
125
-5
76
-1
-2
-2
58
1
-23
0
1
1
-16
13
-104
2
6
11
-17
a
Other W. Europe = Belgium, Denmark, Finland, Ireland, the Netherlands, Sweden
and Switzerland
The ‘Alternative 1’ scenario assumes real exchange rates revert half way back from
2011 to 2009 rates by 2018 except for China’s which appreciates 2%pa.
b
Source: Anderson and Wittwer (2015)
134
Table 10: Impact of China’s austerity drive on global wine import and export volumes
and values, 2018a
(a) Imports
Volume (ML)
ALT 1 Austerity
scenario
(ML
China
Other Asia
UK + Other
Europe
North America
Other
WORLD
Value (US$m)
ALT 1 Austerity
scenario
($m
change
from 2011)
(ML from
ALT 1 base)
change
from 2011)
($m from
ALT 1 base)
739
11
-212
-3
1
2309
755
919
-80
-6
11
151
702
0
1
0
-1
1106
313
5602
-3
2
0
-87
(b) Exports
Volume (ML)
ALT 1 Austerity
scenario
(ML
Australia
Other New World
France
Other Old World
WORLD
Value (US$m)
ALT 1 Austerity
scenario
($m
change
from 2011)
(ML from
ALT 1 base)
change
from 2011)
($m from
ALT 1 base)
92
222
185
202
702
0
0
-1
0
-1
987
965
2657
880
5602
-19
-10
-46
-12
-87
‘Alt. 1’ assumes real exchange rates revert half way back from 2011 to 2009 rates
by 2018 except for China’s which appreciates 2%pa. The ‘Austerity’ simulation
assumes China’s demand for super-premium wines expands by one-eleventh less
than in the simulation involving the 3 FTAs.
a
Source: Anderson and Wittwer (2015)
135
Appendix Table 1: Cumulative consumption and population growth, 2011 to 2018
(percent)
France
Italy
Portugal
Spain
Austria
Belgium
Denmark
Finland
Germany
Greece
Ireland
Netherlands
Sweden
Switzerland
United Kingdom
Other W.
Europe
Bulgaria
Croatia
Georgia
Hungary
Moldova
Romania
Russia
Ukraine
Other E.
Europe
Aggregate
consumption
10.0
10.0
10.0
Population
0.7
0.7
0.7
Aggregate
consumption Population
Australia
17.8
7.3
NewZealand
15.4
5.9
Canada
14.2
5.6
United
States
15.5
5.2
Argentina
30.0
4.9
Brazil
27.3
3.8
Chile
23.4
5.0
Mexico
22.0
4.6
Uruguay
25.6
7.3
Other L. Am
25.6
7.3
South Africa
23.1
3.0
Turkey
31.8
9.1
North Africa
31.8
9.1
Other Africa
55.8
15.1
Middle East
31.8
9.1
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
0.7
10.0
23.1
23.1
23.1
23.1
23.1
23.1
20.6
23.1
0.7
1.9
1.9
1.9
1.9
1.9
1.9
-1.7
1.9
China
Hong Kong
India
Japan
Korea
Malaysia
Philippines
Singapore
Taiwan
69.0
23.7
63.1
7.1
22.0
34.4
34.4
18.6
34.6
2.7
4.7
7.0
-1.3
0.7
8.2
9.8
5.6
2.3
23.1
1.9
Thailand
Other Asia
36.0
32.2
2.6
11.2
Source: Projections from global economy-wide modeling by Anderson and Strutt
(2012).
136
APPENDIX 2: SERVICES & INVESTMENTS
A. SERVICE SECTORS INCLUDED ON THE FIVE COMPARED TRADE AGREEMENT AND THE
COMPARISON OF SERVICE SECTOR DIFFERENCES WITH CHAFTA IN REGARDS TO CHINA’S
COMMITMENTS
B. COMMITMENTS ON FOREIGN DIRECT INVESTMENT SET ON THE OTHER COMPARED
AGREEMENTS
137
A. Service Sectors Included on the Five Compared Trade Agreement and the
Comparison of Service Sector Differences with ChAFTA in regards to China’s
Commitments
China-Australia Free Trade Agreement (ChAFTA)
Sectors included
Australia
Sectors included on Annex III, part 1: schedule of Australia on specific commitments on services are
(Negative list):
2. Security services
3. Professional services
a. Patent attorney services
b. Trustee company services
c. Auditing services
d. Architecture services
e. Migration agent services
f. Customs broker services
4. Communication services
a. Courier services
b. Telecommunication
5. Research and Development services*
6. Real Estate and Distribution services
7. Fishing and Pearling services
8. Mining and Related Services
9. Other Business
a. Escort agency services
10. Distribution services
a. Marketing board arrangements – Rice
b. Marketing board arrangements – Potatoes
c. Firearms retail service
d. Liquor, tobacco and kava retail services
e. Wine merchant/producer services*
11. Health services
a. Serum laboratories
12. Tourism and Travel-related services
a. Travel agent operator
13. Recreational, Cultural and Sporting services
a. Nature conservation services
14. Transport services
a. Maritime transport services(ocean carrier)
b. Air transport services
c. Road transport
15. Financial services
a. Banking and other financial services
Part B – maintenance of existing, or adoption of new or more restrictive measures
1. Communication services
a. Broadcasting services
b. Audiovisual services
2. Recreational, Cultural and Sporting services
a. Creative arts, cultural and other cultural industries services
b. Library, archive, museums and other cultural services
138
3. Distribution services
a. Wholesale and retail trade services of tobacco products, alcoholic beverages, or firearms
4. Education services
a. Primary education services
b. Other education services
5. Gambling and Betting services
6. Maritime Transport
7. Air Transport
8. Financial services
a. Banking and other financial services
b. Insurance and insurance-related services
China
Sectors included on Annex III, part 2: schedule of the People’s Republic of China on specific commitments
on services are:
2. Business Services
a. Professional services
i. Legal services (excluding Chinese law practice)
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning services (except general urban planning)
viii. Medical and dental services
b. Computer and related services
c. Research and Development services
d. Real Estate services
e. Other Business services
i. Advertising services
ii. Market research services (only limited to investigation services designed to
secure information on the prospects and performance of an organisation’s
products in the market)
iii. Services incidental to agriculture39, forestry, hunting and fishing
iv. Management consulting services
v. Services related to management consulting (only limited to the following subsector)
1. Project management services other than for construction
vi. Technical testing and analysis services and freight inspection, excluding statutory
inspection services for freight inspection services
vii. Services incidental to mining (only including oil and natural gas)
viii. Services incidental to manufacturing (except for CPC 88442, and excluding
prohibited foreign investment industries defined in Catalogue for the Guidance of
Foreign Investment Industries published by the Chinese Government)
ix. Related scientific and technical consulting services
x. Maintenance and repair services
xi. Maintenance and repair of office machinery and equipment including computers
xii. Building-cleaning services
xiii. Photographic services
xiv. Packaging services
xv. Printing and publishing services (only limited to the printing of packaging
materials)
39
CPC 881 includes wine manufacturing services (88182)
139
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
xvi. Convention services
xvii. Translation and interpretation services
xviii. Rental and leasing services (excluding CPC 83202)
Communication Services
a. Courier services (except for those specifically reserved to Chinese postal authorities by
law
b. Telecommunication services
c. Audiovisual services
Construction and Related Engineering Services
Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retailing services (excluding tobacco)
d. Franchising
e. Wholesale or retail trade services away from a fixed location
Education services (excluding special education services e.g. military, police, political and party
school education)
a. Primary education services (excluding national compulsory education)
b. Secondary education services (excluding national compulsory education)
c. Higher education services
d. Adult education services
e. Other education services (including English language training)
Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Solid waste disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Nature and landscape protection services
f. Other environmental protection services
g. Sanitation services
Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services
Health Related and Social Services
a. Hospital services (excluding Traditional Chinese Medicine hospitals)
b. Social services (services for the aged)
Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
Recreational, Cultural and Sporting services
Transport services
a. Maritime Transport services
b. Auxiliary Services
i. Maritime cargo-handling services
ii. Customs clearance services
iii. Container station and depot services
iv. Maritime agency services
c. Internal Waterways Transport
d. Air Transport services
e. Rail Transport services
f. Road Transport services
g. Services Auxiliary to all Modes of Transport
140
141
New Zealand – China Free Trade Agreement
Sectors included
New Zealand
Sectors included on Annex 8, part B: New Zealand schedule of specific commitments on services are:
1. Business Services
a. Professional services
i. Legal services
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Veterinary services
b. Computer and related services
c. Real Estate services
d. Rental/Leasing of Equipment without Crew
e. Other Business services
i. Advertising services
ii. Services incidental to agriculture, forestry, hunting and fishing
iii. Cleaning of buildings and similar services
iv. Photographic services
v. Translation services
vi. Duplicating services
2. Communication Services
a. Telecommunication services
b. Audiovisual services
3. Construction and Related Engineering Services
4. Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retail trade services
5. Education services (excluding special education services e.g. military, police, political and party
school education)
a. Primary education services (in private institutions)
b. Secondary education services (in private institutions)
c. Tertiary education services (in private institutions)
d. Other education services (in respect of the following services only):
i. Training provided in private specialist language institutions;
ii. Language assessment services provided through private Chinese language testing
centres;
iii. Tuition in subjects taught at the primary and secondary levels, provided by private
specialist institutions operating outside the New Zealand compulsory school system 40.
6. Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Solid waste disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Nature and landscape protection services
f. Other environmental protection services
g. Sanitation services
40
Examples of these services might include the provisions of extension or remedial tuition in relation to Maths, Science or history.
142
7. Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services
8. Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
9. Recreational, Cultural and Sporting services
10. Transport services
a. Maritime Transport services
b. Auxiliary Services
i. Maritime cargo-handling services
ii. Customs clearance services
iii. Container station and depot services
iv. Maritime agency services
c. Internal Waterways Transport
d. Air Transport services
e. Rail Transport services
f. Road Transport services
g. Services Auxiliary to all Modes of Transport
China
Sectors included on Annex 8 part A: China schedule of specific commitments on services are:
1. Business Services
a. Professional services
i. Legal services (excluding Chinese law practice)
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning services Except general urban planning)
viii. Medical and dental services
b. Computer and related services
c. Real Estate services
d. Other Business services
i. Advertising services
ii. Services incidental to agriculture, forestry, hunting and fishing
iii. Management consulting services
iv. Services related to management consulting
v. Technical testing and analysis services and freight inspection, excluding statutory
inspection services for freight inspection services
vi. Related scientific and technical consulting services
vii. Maintenance and repair services
viii. Maintenance and repair of office machinery and equipment including computers
ix. Photographic services
x. Packaging services
xi. Convention services
xii. Translation and interpretation services
xiii. Rental and leasing services
2. Communication Services
a. Courier services
b. Telecommunication services
c. Audiovisual services
143
3. Construction and Related Engineering Services
4. Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retailing services (excluding tobacco)
d. Franchising
e. Wholesale or retail trade services away from a fixed location
5. Education services (excluding special education services e.g. military, police, political and party
school education)
a. Primary education services (excluding national compulsory education)
b. Secondary education services (excluding national compulsory education)
c. Higher education services
d. Adult education services
e. Other education services (including English language training)
6. Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Solid waste disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Nature and landscape protection services
f. Other environmental protection services
g. Sanitation services
7. Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services
8. Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
9. Recreational, Cultural and Sporting services
10. Transport services
a. Maritime Transport services
b. Auxiliary Services
i. Maritime cargo-handling services
ii. Customs clearance services
iii. Container station and depot services
iv. Maritime agency services
c. Internal Waterways Transport
d. Air Transport services
e. Rail Transport services
f. Road Transport services
g. Services Auxiliary to all Modes of Transport
144
Sector differences between ChAFTA and ChNZFTA – China’s schedule
ChAFTA
Research & Development Services (Business)
Market research services (other business)
services incidental to mining, only including oil and
natural gas (other business)
Services incidental to manufacturing (other
business)
- Field services for iron, copper, manganese, coal
bed methane and shale gas (Related scientific
technical consulting services – other business)
Building-cleaning services (other business)
Printing of packaging materials, on a fee or
contract basis (other business)
Hospital services (excluding Traditional Chinese
Medicine hospitals) (health related and social
services)
Social services – services for the aged (health
related and social services)
- Selling and marketing of air transport (Air
transport)
Airport Operation services (Air transport)
Ground Handling services (Air transport)
Specialty Air services (Air transport)
Passenger transportation (Road Transport)
ChNZFTA
Maintenance and repair service of motor vehicle
(Road Transport)
Other, excluding freight inspection (Services
Auxiliary to all Modes of Transport)
145
ASEAN-China Free Trade Area
Trade in Services Agreement (TIS Agreement)
Sectors included
China
Sectors included on Annex 1/SC1 of ASEAN-China Agreement on Trade in Services: schedule of the
People’s Republic of China on specific commitments on services for the first package of commitments are:
1. Business Services
a. Computer and related services
b. Real Estate services
c. Other Business services
i. Market research services
ii. Management consulting services
iii. Placement and supply services of Personnel
iv. Building-cleaning services
v. Photographic services
vi. Printing of packaging material, on a free or contract basis (only limited to the
printing of packaging materials)
vii. Translation and interpretation services
2. Construction and Related Engineering Services
3. Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Solid waste disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Nature and landscape protection services
f. Other environmental protection services
g. Sanitation services
4. Recreational, Cultural and Sporting services
5. Transport services
a. Air Transport services
b. Road Transport services
c. Services Auxiliary to all Modes of Transport
Sector differences between ChAFTA and ASEAN-China TISA – China’s schedule
ChAFTA
Legal services (excluding Chinese law practice)
(Business)
Accounting, auditing and bookkeeping services
(Business)
Taxation services (Business)
Architectural services (Business)
Engineering services (Business)
Integrated engineering services (Business)
Urban planning services (except general urban
planning) (Business)
Medical and dental services (Business)
Research & Development Services (Business)
Technical testing and analysis services and freight
inspection covered by CPC 749, excluding
statutory inspection services for freight inspection
services
ASEAN-China TISA
146
Services incidental to agriculture, forestry, hunting
and fishing
Services incidental to mining, only including oil
and natural gas (other business)
Services incidental to manufacturing (other
business)
Placement and supply services of personnel
(other business)
Related scientific technical consulting services
(other business)
Packaging services (other business)
Convention services (other business)
Maintenance and repair services (other business)
Maintenance and repair services of office
machinery and equipment including computers
(other business)
Rental and leasing services
Courier services (communication services)
Telecommunication services (communication
services)
Audio-visual services (communication services)
Commission Agents’ services (distribution service)
Wholesale trade services (distribution services)
Retailing services (excluding tobacco) (distribution
services)
Franchising (distribution services)
Wholesale or retail trade services away from a
fixed location (distribution services)
Primary education services (educational services)
Secondary education services (educational
services)
Higher education services (educational services)
Adult education services (educational services)
Other education services (educational services)
All Insurance and Insurance-related services
(financial service)
Banking and other financial services (excluding
insurance and securities) (financial services)
Motor vehicle financing by non-bank financial
institutions (financial services)
Provision and transfer of financial information, and
financial data processing and related software by
suppliers of other financial services (other financial
services)
Advisory, intermediation and other auxiliary
financial services on all activities listed in
subparagraphs (a) to (k) on other financial
services (other financial services)
Securities (financial services)
Hospital services (excluding Traditional Chinese
Medicine hospitals) (health related and social
services)
Social services – services for the aged (health
related and social services)
Hotel (including apartment buildings) and
Restaurants (tourism and travel related services)
Travel agency and Tour operator (tourism and
travel related services)
Maritime transport services (transport services)
147
Maritime cargo-handling services (auxiliary
services – transport)
Customs clearance services (auxiliary services –
transport)
Container station and depot services (auxiliary
services – transport)
Maritime agency services (auxiliary services –
transport)
Internal waterways transport (transport services)
Selling and marketing of air transport services (air
transport services)
Airport operation services (air transport services)
Ground handling services (air transport services)
Specialty air services (air transport services)
Rail transport services (Transport services)
Maintenance and repair service of motor vehicle
(Road Transport services)
148
China-South Korea Free Trade Agreement (ChKFTA)
Sectors included
South Korea
Sectors included on Annex 8-A-1 of ChKFTA: schedule of the Republic of Korea on specific commitments
on services are:
1. Business Services
a. Professional services
i. Legal services
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning and landscape architectural services
viii. Veterinary services
b. Computer and related services
c. Research and Development services
d. Real Estate services
e. Rental/Leasing services without operators
f. Other
i. Advertising services
ii. Market research and public opinion polling services
iii. Management consulting services
iv. Project management services
v. Technical inspection services
vi. Consulting services related to agriculture and animal husbandry
vii. Services incidental to forestry and logging excluding aerial firefighting and disinfection
viii. Consulting services related to fishing
ix. Services incidental to mining
x. Services incidental to manufacturing: Only consulting services related to manufacturing
technologies of new products
xi. Placement services of personnel
xii. Related scientific and technical consulting services
xiii. Maintenance and repair of equipment
xiv. Photographic services
xv. Packaging services
xvi. Printing
xvii. Publishing
xviii. Convention agency services
xix. Stenography services
xx. Translation and interpretation services
xxi. Specialty design services
2. Communication Services
a. Courier services
b. Telecommunication services
c. Audiovisual services
3. Construction and Related Engineering Services
4. Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retailing services
d. Franchising
149
5. Education services
a. Higher education services
b. Adult education services
6. Environmental services
a. Sewage services
b. Refuse disposal services
c. Other
i. Cleaning services of exhaust gases and noise abatement services
ii. Environmental testing and assessment services
7. Financial Services
a. Insurance and insurance-related services
b. Banking and other financial services
8. Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
c. Tourist guides
9. Recreational, Cultural and Sporting services
a. Entertainment services
10. Transport services
a. Maritime transport services
b. Air transport services
c. Rail transport services
d. Road Transport services
e. Pipeline transport
f. Services auxiliary to all modes of transport
g. Other transport services
i. Combined transport services
China
Sectors included on Annex 8-A-2 of ChKFTA: schedule of the People’s Republic of China on specific
commitments on services are:
1. Business Services
a. Professional services
i. Legal services (excluding Chinese law practice)
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning services (except general urban planning)
viii. Medical and dental services
b. Computer and related services
c. Real Estate services
d. Other Business services
i. Advertising services
ii. Market research services (only limited to investigation services designed to
secure information on the prospects and performance of an organisation’s
products in the market)
iii. Management consulting services
iv. Services related to management consulting (only limited to the following subsector)
1. Project management services other than for construction
v. Technical testing and analysis services and freight inspection, excluding statutory
inspection services for freight inspection services
150
vi.
vii.
viii.
ix.
x.
xi.
xii.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Services incidental to agriculture, forestry, hunting and fishing
Placement and supply services of personnel
Related scientific and technical consulting services
Building-cleaning services
Photographic services
Packaging services
Printing of packaging materials, on a fee or contract basis (only limited to the
printing of packaging materials)
xiii. Convention services
xiv. Translation and interpretation services
Communication Services
a. Courier services (except for those specifically reserved to Chinese postal authorities by
the related law at the time of China’s accession to WTO on December 11th 2001)
b. Telecommunication services
c. Audiovisual services
Construction and Related Engineering Services
Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retailing services (excluding tobacco)
d. Franchising
e. Wholesale or retail trade services away from a fixed location
Education services (excluding special education services e.g. military, police, political and party
school education)
a. Primary education services (excluding national compulsory education)
b. Secondary education services (excluding national compulsory education)
c. Higher education services
d. Adult education services
e. Other education services (including English language training)
Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Solid waste disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Nature and landscape protection services (excluding the construction and operation of
Natural Reserves and Ramsar sites)
f. Other environmental protection services
g. Sanitation services
Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services (excluding insurance and securities)
Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
Recreational, Cultural and Sporting services
Transport services
a. Maritime Transport services
b. Auxiliary Services
i. Maritime cargo-handling services
ii. Customs clearance services
iii. Container station and depot services
iv. Maritime agency services
c. Internal Waterways Transport
151
d.
e.
f.
g.
Air Transport services
Rail Transport services
Road Transport services
Services Auxiliary to all Modes of Transport
Sector differences between ChAFTA and ChKFTA China’s schedule
ChAFTA
Research & Development Services (Business)
Services incidental to mining, only including oil and
natural gas (other business)
Services incidental to manufacturing (other business)
ChKFTA
Placement and supply services of personnel
(other business)
Related scientific technical consulting services (other
business)
- Filed services for iron, cooper, manganese, coal bed
methane and shale gas
- Offshore oil-field services geological, geophysical
and other scientific prospecting services
Nature
and
landscape
protection
services
(environmental services)
Sanitation services (environmental services)
Hospital services (excluding Traditional Chinese
Medicine hospitals) (health related and social
services)
Social services – services for the aged (health related
and social services)
Recreational, cultural and sporting services (other
than audiovisual services):
- Sporting and other recreational services (only limited
to CPC 96411, 96412, 96413, 96419 excluding golf)
Nature and landscape protection services,
excluding the construction and operation of
Natural
reserves
and
Ramsar
sites
(environmental services)
Recreational, cultural and sporting services
(other than audiovisual services):
- Other entertainment services (only limited to
CPC 96191, 96192)
- Sporting and other recreational services (only
limited to CPC 96411, 96412, 96413, excluding
golf & E-sports)
Selling and marketing of air transport services (air
transport services)
Airport operation services (air transport services)
Ground handling services (air transport services)
Specialty air services (air transport services)
152
The Mainland and Hong Kong Closer Economic Partnership Arrangement
“The Agreement adopts a hybrid approach of negative and positive listings in further liberalization. The
negative list is a more transparent and comprehensive way of listing liberalization commitments. The main
text of the Agreement consists of ten chapters and 15 articles which cover, inter alia, provisions for national
treatment, most-favoured treatment, safeguard measures, exceptions, and investment facilitation; the
annexes of the Agreement set out the specific commitments in trade in services.” (Trade Industry
department – Government of Hong Kong Special Administrative Region 2015)
Generally speaking, trade in services can be classified into four modes of service supply 41. With respect
to the mode of commercial presence, the Agreement sets out, in the form of a negative list, the measures
reserved by the Mainland in Guangdong on Hong Kong that are consistent with or applicable to the
obligation of national treatment under the 134 services trade sub-sectors42. Except for those inconsistentinapplicable measures reserved as well as the horizontal management measures, the Mainland will not
impose any particular restrictions for eligible Hong Kong service suppliers in Guangdong Province in terms
of market access requirement, i.e. they can enjoy the same treatment as the Mainland enterprises. As for
the mode of cross-border supply, consumption abroad, movement of natural persons (collectively known
as “cross-border services”), as well as sectors of telecommunication and cultural services, the Mainland
addition liberalization measures for Hong Kong in Guangdong will remain positively listed.” (Trade Industry
Department – Government of Hong Kong Special Administration Region 2015)
Mainland’s liberalization measures in the service sectors
“With regards to the Mainland’s commitments to Hong Kong in Guangdong’s services market, the
Agreement has achieved breakthrough both in terms of depth and breath. Key liberalization areas are
summarized as follows” (Trade Industry Department – Government of Hong Kong Special Administration
Region 2015):
•
•
•
•
Overall speaking, Mainland has opened up to 153 services trade sub-sectors in Guangdong to
Hong Kong services industry accounting for 95.6% of all services trade sub-sectors. In respect of
the mode of commercial presence”, national treatment will be applied to Hong Kong in 58 subsectors;
In respect of the mode of “commercial presence”, the negative list covers 134 services trade subsectors setting out 132 measures as inconsistent with or inapplicable to the obligation of national
treatment;
Measures under the mode of cross-border supply, consumption abroad and movement of natural
persons, as well as the sectors of telecommunications and culture are positively listed, covering a
total of 27 new liberalization measures;
With regards to investment facilitation, the investment projects in the majority of services subsectors by a Hong Kong service supplier in Guangdong will be subject to the same authority and
procedures as Mainland investment projects, and the establishment of a company and the related
contract/articles of association will be subject to filing of record instead of prior approval.
Sectors included on Ch-HKG CEPA
China
Sectors included on Annex IV of Mainland and Hong Kong CEPA: China’s specific commitments on
services are:
1. Business Services
a. Professional services
i. Legal services
ii. Accounting, auditing and bookkeeping services
The four modes of service supply include:
1.
From the area of one side into the area of the other side, referred as “cross-border supply”;
2.
In the area of one side to the service consumer of the other side, referred as “consumption abroad”;
3.
By a service supplier of one side, through commercial presence, in the area of the other side, referred to as “commercial
presence”;
4.
By a service of one side, through presence of natural persons of one side in the area of the other side, referred to as “movement
of natural persons”.
42 According to the World Trade Organization’s services classification system, there are 160 services sub-sectors under trade in services.
41
153
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning and landscape architectural services
viii. Construction Engineering Cost Consulting services
ix. Construction and related engineering services
x. Medical and dental services
xi. Services provided midwives, nurses, physiotherapists and para-medical personnel
xii. Pharmaceutical services
xiii. Veterinary services
b. Computer and related services
c. Research and Development services
d. Real Estate services
e. Rental/Leasing services without operators
f. Other
i. Advertising services
ii. Market research services
iii. Market research and public opinion polling services
iv. Patent agency, Trade mark agency etc.
v. Services incidental to agriculture, hunting and forestry
vi. Services incidental to fishing
vii. Management consulting services
viii. Services related to management consulting
ix. Project management service other than for construction
x. Technical testing and analysis services and freight inspection, excluding statutory
inspection services for freight inspection services
xi. Services incidental to mining
xii. Services incidental to manufacturing
xiii. Public utility services
xiv. Services incidental to energy distribution
xv. Placement or supply services of personnel
xvi. Investigation and security services
xvii. Related scientific and technical consulting services
xviii. Maintenance and repair of equipment (personal and household goods repair services;
repair services related to metal products; machinery and equipment)
xix. Building-cleaning services
xx. Photographic services
xxi. Packaging services
xxii. Printing and publishing services
xxiii. Convention services and exhibition services
xxiv. Other
1. Duplicating services
2. Translation and interpretation services
3. Specialty design services
2. Communication Services
a. Courier services
b. Telecommunication services
c. Audiovisual services
3. Construction and Related Engineering Services
a. General construction work for building
b. Installation and assembly work
c. Building completion and finishing work
d. Other
154
4. Distribution Services
a. Commission Agent’s services
b. Wholesale trade services
c. Retailing services
d. Franchising
e. Other distribution services (except the auction of cultural relics)
5. Education services
a. Primary education services
b. Secondary education services
c. Higher education services
d. Adult education services
e. Other education services
6. Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Refuse disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Natural and landscape protection services
f. Other environmental protection services
g. Sanitation services
7. Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services
c. Other
8. Health Related and Social Services
a. Hospital services
b. Other human health services
c. Convalescent hospital services
d. Social services
9. Tourism and Travel Related Services
a. Hotels (including apartment buildings) and Restaurants
b. Travel Agency and Tour Operator
c. Tourist guides
d. Others
10. Recreational, Cultural and Sporting services
a. Library, archive, museum and other cultural services
b. Sporting and other recreational services
11. Transport services
a. Maritime transport services
b. Internal Waterways transport
c. Air transport services
d. Rail transport services
e. Road Transport services
f. Services auxiliary to all modes of transport
g. Freight forwarding agency services (excluding freight inspection)
h. Space transport
i. Pipeline transport
j. Other transport services
12. Other services not included elsewhere
a. Service of membership organizations
b. Other services
c. Private households with employed persons
d. Service provided by extraterritorial organizations and bodies
155
13. Service sectors (sectors not set out in GNS/W/120)
a. Logistics services
b. Qualification examinations for professionals and technicians
c. Individually owned stores
d. After-death services facilities
The updated list on China’s commitment on the service sectors, Annex of the Agreement between the
Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong (signed on
18 December 2014)43 include the following sectors:
Reserved Restrictive Measures under Commercial Presence (Negative List)
1. Business Services
a. Professional services
i. Legal services
ii. Accounting, auditing and bookkeeping services
iii. Taxation services
iv. Architectural services
v. Engineering services
vi. Integrated Engineering services
vii. Urban planning and landscape architectural services
viii. Medical and dental services
ix. Services provided midwives, nurses, physiotherapists and para-medical personnel
x. Veterinary services
b. Computer and related services
c. Research and Development services
d. Real Estate services
e. Rental/Leasing services without operators
f. Other
i. Advertising services
ii. Market research and public opinion polling services
iii. Patent agency, Trade mark agency etc.
iv. Services incidental to agriculture, hunting and forestry
v. Services incidental to fishing
vi. Management consulting services
vii. Services related to management consulting
viii. Technical testing and analysis services
ix. Services incidental to mining
x. Services incidental to manufacturing
xi. Services incidental to energy distribution
xii. Placement or supply services of personnel
xiii. Investigation and security services
xiv. Related scientific and technical consulting services
xv. Maintenance and repair of equipment (personal and household goods repair services;
repair services related to metal products; machinery and equipment)
xvi. Building-cleaning services
xvii. Photographic services
xviii. Packaging services
xix. Printing and publishing services
xx. Convention services
xxi. Other (CPC 8790, except read-only optical discs duplication services)
2. Communication Services
a. Postal services
b. Courier services
3. Construction and Related Engineering Services
43
https://www.tid.gov.hk/english/cepa/legaltext/cepa12.html
156
4.
5.
6.
7.
8.
9.
10.
11.
12.
a. General construction work for building
b. Installation and assembly work
c. Building completion and finishing work
d. Other
Distribution Services
a. Commission Agent’s services
b. Wholesale trade services (except wholesale services of books, newspapers, magazines,
cultural relics)
c. Retailing services (except retail services of books, newspapers, magazines, cultural relics)
d. Franchising
e. Other distribution services (except the auction of cultural relics)
Education services
a. Primary education services
b. Secondary education services
c. Higher education services
d. Adult education services
e. Other education services
Environmental services (excluding environmental quality monitoring and pollution source
inspection)
a. Sewage services
b. Refuse disposal services
c. Cleaning services of exhaust gases
d. Noise abatement services
e. Natural and landscape protection services
f. Other environmental protection services
g. Sanitation services and similar services
Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services (excluding insurance)
c. Other
Health Related and Social Services
a. Hospital services
b. Other human health services
c. Social services
Tourism and Travel Related Services
a. Hotels and Restaurants
b. Travel Agency and Tour operator
c. Tourist guides
d. Others
Recreational, Cultural and Sporting services
a. Sporting and other recreational services
Transport services
a. Maritime transport services
b. Internal Waterways transport
c. Air transport services
d. Rail transport services
e. Road Transport services
f. Services auxiliary to all modes of transport
g. Space transport
h. Pipeline transport
i. Other transport services
Other services not included elsewhere
a. Service of membership organizations
b. Other services
157
c. Private households with employed persons
d. Service provided by extraterritorial organizations and bodies
Additional Liberalization Measures under Cross-border Services (Positive List) 44
1. Business Services
a. Professional services
i. Legal services
ii. Accounting, auditing and bookkeeping services
iii. Architectural services
iv. Engineering services
v. Integrated Engineering services
vi. Urban planning and landscape architectural services
vii. Medical and dental services
viii. Services provided midwives, nurses, physiotherapists and para-medical personnel
b. Other
i. Technical testing and analysis services
ii. Placemen
iii. t or supply services of personnel
2. Education services
a. Higher education services
3. Financial Services
a. All insurance and insurance-related services
b. Banking and other financial services (excluding insurance)
4. Health Related and Social Services
a. Hospital services
b. Other human health services
5. Transport services
a. Air transport services
Additional Liberalization Measures under Telecommunication (Positive List) 45
1. Communication Services
a. Telecommunication services
Additional Liberalization Measures under Cultural Services (Positive List)46
(a) Recreational, Cultural and Sporting services
a. Entertainment services (other than audiovisual services)
Under the cross-border services mode, the liberalization commitments by the Mainland to Hong Kong service suppliers in Guangdong
Province will keep adopting Positive List to set out the additional liberalization measures. The existing commitments involving crossborder services under CEPA and its supplements are still valid and will continue to be implemented. In the event that they are in conflict
with the Annex to this Agreement, the Annex to this Agreement shall prevails
45 With respect to the modes of commercial presence and cross-border services of telecommunication services sector (sub-sector), the
liberalization commitments by the Mainland to Hong Kong service suppliers in Guangdong Province will keep adopting Positive List to set
out the additional liberalization measures. The existing commitments involving telecommunication service sectors and sub-sectors under
CEPA and its Supplements are still valid and will continue to be implemented. In the event that they are in conflict with the Annex to this
Agreement, the Annex to this Agreement shall prevail.
46 With respect to the modes of commercial presence and cross-border services of cultural and related services sector (sub-sector), the
liberalization commitments by the Mainland to Hong Kong service suppliers in Guangdong Province will keep adopting Positive List to set
out the additional liberalization measures. The existing commitments involving cultural services under CEPA and its Supplements shall
still be valid and continue to be implemented. In the event that they are in conflict with the additional liberalization measures of the Annex
to this Agreement, the Annex to this Agreement shall prevail. In this Agreement and its Annex, the cultural sector includes service trade
sectors (and sub-sectors) of research and experimental development services on social sciences and humanities (CPC852), printing and
publishing services (CPC88442), read-only optical disc duplication services under other business services (CPC8790), motion picture and
video tape production and distribution services (CPC9611), motion picture projection service (CPC9612), radio and television services
(CPC9613), radio and television broadcast transmission services (CPC7524), sound recording services, other audiovisual services, retail
services of books, newspapers, magazines, cultural relics (CPC631+632+6111+6113+6121), cultural relic auctioning services under other
distribution services, entertainment services (CPC9619), news agency services (CPC962), library, archive, museum and other cultural
services (CPC963), etc., (including cultural information services of news, publishing, audio-visual programmes, sound and images, games
etc. provided through the internet, and cultural relic services.)
44
158
Mainland and Hong Kong CEPA Website list:47
47
Accounting
Advertising
Air Transport
Audiovisual
Banking
Building-cleaning
Computer and related services
Construction and Related Engineering
Convention and Exhibition
Cultural
Distribution
Education
Environmental
Freight Forwarding Agency
Individual Owned Stores
Insurance
Inter0disciplinary Research and Experimental Development Services
Legal
Library, Museum and Other Cultural Services
Logistics
Management Consulting
Maritime Transport
Market Research
Medical
Other Business services
Patent Agency
Photographic
Placement and Supply Services of Personnel
Printing
Public Utility
Rail Transport
Real Estate
Related Scientific and Technical Consulting Services
Research and Development
Road Transport
Securities and Futures
Services incidental to Manufacturing
Services incidental to Mining
Services related to Management Consulting
Social Services
Sporting
Storage and Warehousing
Technical Testing, Analysis and Product Testing
Telecommunications
Tourism
Trade Mark Agency
Translation and Interpretation
Examinations for Professional and Technical Qualification
Taxation
Rental/Leasing relating to personal and household goods without Operators
Services incidental to fishing, agriculture hunting and forestry
https://www.tid.gov.hk/english/cepa/tradeservices/trade_services_requirement.html
159
-
Investigation and security
Maintenance and repair of equipment
Packaging
Courier
Other Transport
Other Services
Hong Kong
“The two sides will, through consultations, formulate and implement further liberalisation of Hong Kong’s
service sectors for the Mainland. The relevant specific commitments will be listed in this table.” (Annex 4:
Specific Commitments on Liberalization of Trade in Services)
Sector differences between ChAFTA and ChHKG CEPA – China’s schedule
ChAFTA
Services incidental to mining only limited to oil and
natural gas (other professional services)
Maintenance and repair of office machinery and
equipment
including
computers
(other
professional services)
48
49
ChHKG CEPA48
Chinese law practice not excluded on legal
services
General urban planning is not excepted from
urban planning services
Construction engineering cost consulting services
(business)
Construction and related engineering services
Services provided by midwives, nurses,
physiotherapists and para-medical personnel
Pharmaceutical services
Veterinary services
Rental/Leasing services without operators
Market research services not limited to
investigation services designed to secure
information on the prospects and performance of
an organization’s products in the market (other
professional services)
Market research on public opinion polling services
(other professional services)
Patent agency, Trade mark agency etc. (other
professional services)
Services incidental to mining not only limited to oil
and natural gas (other professional services)
Services incidental to manufacturing including
CPC 8842 and the prohibited foreign investment
industries defined in the Catalogue for the
Guidance of Foreign Investment Industries
published by the Chinese Government 49 (other
professional services)
Public utility services (other professional services)
Services incidental to energy distribution (other
professional services)
Placement or supply services of personnel (other
professional services)
Investigation and security services (other
professional services)
Maintenance and repair of equipment (personal
and household goods repair services; repair
services related to metal products; machinery and
equipment) (other professional services)
Considering the Annex IV of Mainland and Hong Kong CEPA.
This permission is not expressed, nevertheless, the exclusion of these sectors is mentioned on ChAFTA’s service sector list.
160
Convention services (other professional services)
Courier services (except for those specifically
reserved to Chinese postal authorities by law)
(communication services)
Retailing services (excluding tobacco) (distribution
services)
Wholesale or retail trade services away from a
fixed location (distribution services)
Education services (excluding special education
services e.g. military, police, political and party
school education)
Primary education services (excluding national
compulsory education) (education services)
Secondary education services (excluding national
compulsory education) (education services)
Other education services (including English
language training) (educational services)
Solid waste disposal services (environmental
services)
Hospital services (excluding Traditional Chinese
Medicine hospitals)
Social services (services for aged)
Sporting and other recreational services (only
limited to CPC 96411, 96412, 96413, 96419
excluding golf) (recreational, cultural and sporting
services)
Customs clearance services (auxiliary services in
maritime transports)
Printing and publishing services not only limited to
the printing of packaging materials (other
professional services)
Convention services and exhibition services (other
professional services)
Duplicating services (other professional services)
Translation and interpretation services (other
professional services)
Specialty design services (other professional
services)
Courier services (communication services)
Retailing services (distribution services)
Other distribution services (except the auction of
cultural relics) (distribution services)
Education services
Primary education services (education services)
Secondary
education
services
(education
services)
Other education services (educational services)
Refuse disposal services (environmental services)
Other financial services
Hospital services
Other human health services
Convalescent hospital service
Social services
Tourist guides (tourist and travel related services)
Other tourist and travel related services (tourist
and travel related services)
Library, archive, museum and other cultural
services (recreational, cultural and sporting
services)
Sporting and other recreational services
(recreational, cultural and sporting services)
International transport
maritime transport)
(auxiliary
services
in
Maritime agency services (auxiliary services in
maritime transport)
Other auxiliary services in maritime transport
Service of membership organizations (other
services not included elsewhere)
Private households with employed persons (other
services not included elsewhere)
Service provided by extraterritorial organizations
and bodies (other services not included
elsewhere)
Other services not included elsewhere
161
Logistics services (service sectors no set out in
GNS/W/120)
Qualification examinations for professionals and
technicians (service sectors no set out in
GNS/W/120)
Individual owned stores (service sectors no set out
in GNS/W/120)
After death service facilities (service sectors no set
out in GNS/W/120)
B. Commitments on Foreign Direct Investment Set on the Other Compared
Agreements
ChAFTA - Investment (Chapter 9)
“The FTA takes a two-stage approach to investment: commitments on entry-into-force (stage one) and a
forward work program (stage two). Stage one is a ‘short-form’ investment chapter that will apply on entryinto-force. The short form investment chapter includes basic market access provisions and establishes a
committee on investment and a forward work program. As part of this, Australia has made its market
access commitments, including the more liberal Foreign Investment Review Board (FIRB) screening the
threshold, in stage one. The forward work program (stage two) includes a commitment to commence
negotiations for a future comprehensive investment chapter, including comprehensive investment
protections and China’s investment market access commitments, within three years of entry-into-force of
the FTA.” (Department of Foreign Affairs and Trade – Australian Government n.d.)
“This short-form Investment Chapter commits both Parties to non-discriminatory treatment of the other
Party’s investors and investments (national treatment). Australia’s national treatment obligations apply at
both the market access and post-establishment investment stages, subject to Australia’s schedule of nonconforming measures (e.g. on FIRB screening). In the absence of investment schedules, China’s national
treatment obligation applies only to established investments. The chapter commits both Parties to MFN
treatment at the market access and post-establishment stages. This means that Australian investors will
be entitled to treatment no less favourable than that which China accords to other foreign investors under
any future investment arrangements.” (Department of Foreign Affairs and Trade – Australian Government
n.d.)
“Australian and Chinese investors will be able to enforce the national treatment commitments through an
investor-state dispute settlement (ISD) mechanism. The mechanism excludes claims in relation to foreign
investment screening (e.g. by FIRB) and includes modern safeguards and exceptions to retain policy space
for legitimate public welfare regulation. Annex 9-A sets out the code of conduct applicable to arbitrators in
ISDS proceedings, while Annex 9-B specifies the Parties’ addresses for the service of documents.”
(Department of Foreign Affairs and Trade – Australian Government n.d.)
Australia’s Commitment
Australia’s commitments on foreign investment under the ChAFTA are established on Annex III, part 1:
Schedule of non-conforming measures on trade in services and investments:
“A. The following investments50 may be subject to objections by the Australian Government and may also
require notification to the Government:
(a) Investment by foreign persons51 of five per cent or more in the media sector, regardless of the value
of the investment;
“Investments” means activities covered by Part II of Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) or, where applicable,
ministerial statements on foreign investment policy. Funding arrangements that include debt instruments having quasi-equity
characteristics will be treated as direct foreign investments.
51 A “foreign person” means, as defined in section 5 of the FATA:
(f) A natural person not ordinarily resident in Australia;
(g) A corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest;
(h) A corporation in which two or more persons, each of whom is either a natural person no ordinarily resident in Australia or a
foreign corporation, hold the aggregate controlling interest;
(i) The trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a
substantial interest; or
(j) The trustee of a trust estate in which two or more persons, each of whom is either a natural person not ordinarily resident in
Australia or a foreign corporation, hold an aggregate substantial interest.
50
162
(b) Investments by foreign persons in existing52 Australian businesses, or prescribed corporations 53, the
value of whose assets exceeds 252 million54 Australian Dollars in the following sectors:
(i).
The telecommunication sector;
(ii).
The transport sector, including airports, port facilities, rail infrastructure, international and
domestic aviation and shipping services provided either within, or to and from, Australia;
(iii).
The supply of training or human resources, or the manufacture or supply of military goods,
equipment, or technology, to the Australian or other defence forces;
(iv).
The manufacture or supply of goods, equipment or technologies able to be used for military
purpose;
(v).
The development, manufacture or supply of, or provision of services relating to, encryption
and security technologies and communication systems; and
(vi).
The extraction of (or rights to extract) uranium or plutonium, or the operation of nuclear
facilities;
(c) Investments by foreign persons in existing Australian businesses, or prescribed corporations, in all
other sectors, excluding financial sector companies55, the value of whose total assets exceeds 1094
million56 Australian Dollars;
(d) Acquisitions by foreign persons of developed non-residential commercial real estate valued at more
than 1094 million Australian Dollars;
(e) Direct investments by foreign government investors, irrespective of size
Notified investments may be refused, subject to interim orders, and/or approved subject to compliance
with certain conditions. Investment referred to in (a) through (e) for which no notifications is required or
received may be subject to orders under Sections 18 through 21 and 21A of the FATA.”
“B. The acquisition of a stake in an existing financial sector company by a foreign investor, or entry into
and arrangement by a foreign investor, that would lead to an unacceptable shareholding situation or to
practical control57 of an existing financial sector company, may be refused, or be subject to certain
conditions58.”
“C. In addition to the measures identified in the entry, other entries in Section A or Section B set out
additional non-conforming measures imposing specific limits on, or requirements relating to, foreign
investment in the following areas:
(a) Telstra;
For the purpose of this entry, “existing’ means in existence at the time the investment is proposed or made.
For the purpose of this entry, “prescribed corporation” means:
(i) A trading corporation;
(j) A financial corporation;
(k) A corporation incorporated in a Territory under the law in force in that Territory relating to companies;
(l) A foreign corporation that, on its last accounting date, held assets the sum of the values of which exceeded 252 million
Australian Dollars (for item (b) of the entry) or 1094 million Australian Dollars (for item (c) of the entry), being assets consisting
of all or any of the following:
(i).
Land situated in Australia (including legal and equitable interests in such land);
(ii).
Mineral rights;
(iii).
Shares in a corporation incorporated in Australia;
(m) A foreign corporation that was, on its last accounting date, a holding corporation of an Australian corporation or Australian
corporations, where the sum of the values on that date of the assets of the Australian corporation or Australian corporations
exceeded 252 million Australian Dollars (for item (b) of the entry) or 1094 million Australian Dollars (for item (c) of the entry);
(n) A corporation that was, on its last accounting date, a holding corporation of a foreign corporation referred to in paragraph (d)
or (e) of this footnote;
(o) A foreign corporation that, on its last accounting date, held assets of a kind or kinds referred to in paragraph (d) of this footnote,
where the sum of the values on that date of those assets was not less than one-half of the sum of the values on that date of the
assets of the foreign corporation and of all the subsidiaries of that corporation; or
(p) A foreign corporation that was, on its last accounting date, a holding corporation of an Australian corporation or Australian
corporations, where the sum of the values on that date of the assets of that Australian corporation or those Australian
corporations was not less than one-half of the sum of the values on that date of the assets of the foreign corporation and of all
the subsidiaries of that corporation.
54 This figure as at 1 January 2015. To be indexed on 1 January each year to the GDP implicit price deflator in the Australian National
Accounts for the previous financial year. If the Agreement has not entered into force by 1 January 2016, this figure will be indexed on the
date of entry into force.
55 A “financial sector company” means, as defined in section 3 of the Financial Sector (Shareholdings) Act 1998 (Cth):
(d) An authorised deposit-taking institution; or
(e) An authorised insurance company; or
(f) A holding company of a company covered by paragraph (a) or (b) of this footnote.
56 This figure as at 1 January 2015. To be indexed on 1 January each year to the GDP implicit price deflator in the Australian National
Accounts for the previous financial year. If the Agreement has not entered into force by 1 January 2016, this figure will be indexed on the
date of entry into force.
57 “Unacceptable shareholding situation” and “practical control” as defined in the Financial Sector (Shareholdings) Act 1998 (Cth).
58 Ministerial statements on foreign investment policy including the Treasurer’s Press Release No. 28 of 9 April 1997.
52
53
163
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Commonwealth Serum Laboratories;
Qantas Airways Ltd;
Australian international airlines, other than Qantas;
Urban land;
Agricultural land;
Agribusiness
Federal leased airports; and
Shipping.”
Queensland
“Certain leases (obtained at ballot), and other leases at the discretion of the Minister, may be subject to a
condition that the lessee personally lives on the lease for the first seven years of its term.”
“While all changes to ownership of land must be registered, there is an additional duty on foreign land
holders to disclose, through a prescribed notification, present interests in and acquisitions of land, disposal
of interests in land and notification on ceasing to be or becoming a foreign person.”
“Failure to provide the information causes a breach of the Act that may result in prosecution, the imposition
of financial penalties and/or forfeiture of the interest in the land to the Crown.”
China’s Commitment on Foreign Investment
China’s commitments on foreign investment under the ChAFTA are established on Annex III, part 2:
schedule of the People’s Republic of China on specific commitments on services:
“In China, foreign invested enterprises include foreign capital enterprises (also referred to as wholly
foreign-owned enterprises) and joint venture enterprises and there are two types of joint venture
enterprises: equity joint ventures and contractual joint ventures.59”
“The proportion of foreign investment in an equity joint venture shall be no less than 25 per cent of the
registered capital of the joint venture.”
“The establishment of branches by enterprises of Australia is unbound, unless otherwise indicated in
specific sub-sectors, as the laws and regulations on branches of foreign enterprises are under formulation.”
“The land in the People’s Republic of China is State-owned. Use of lad by enterprises and individuals are
subject to the following maximum term limitations:
(a) 70 years for residential purposes;
(b) 50 years for industrial purposes;
(c) 50 year for the purpose of education, science, culture, public health and physical education;
(d) 40 years for commercial, tourist and recreational purpose;
(e) 50 years for comprehensive utilisation or other purpose.”
ChKFTA - Investment (Chapter 12)
Investment commitments from China and Korea are described on Chapter 12 of ChKFTA. According to
this chapter, both Parties shall encourage and create favourable conditions for investors of the other Party
to make investments in its territory. Subject to its rights to exercise powers in accordance with the
applicable laws and regulations, including those with regards to foreign ownership and control, each Party
shall admit investment in its territory.
The Investment Chapter includes the ‘national treatment’ clause, which determines that both countries
shall to treat investors and investment of the other country at least as well as they treat their own investors.
The obligation is subject to an exception for existing non-conforming measures (existing laws and
regulations that are not in conformance with the FTA) at the time the Agreement entered into force. Both
countries are also committed to adopt all appropriate steps to progressively remove all these nonconforming measures where applicable.
The terms of the contract, concluded in accordance with China’s laws, regulations and other measures, establishing a “contractual joint
venture” govern matters such as the manner of operation and management of the joint venture as well as the investment or other
contributions of the joint venture parties. Equity participation by all parties to the contractual joint venture is not required, but is
determined pursuant to the joint venture contract. “Foreign invested enterprise” in this Schedule means a foreign invested enterprise
duly constituted or otherwise organised under “Law on Chinese-Foreign Equity Joint Venture”, “Law on Chinese-Foreign Contractual Joint
Ventures” and “Law on Foreign-Capital Enterprises”.
59
164
Both countries have also agreed to give Most Favoured Nation treatment to investors and investors of the
other country, except in respect of aviation, fishery and maritime matters including salvage; preferential
treatment resulting from any customs union, free trade area, monetary union, similar international
agreement leading to such union or free trade are, or other forms of regional economic cooperation; or
resulting from any international agreement or arrangement for facilitating small scale trade in border areas.
The investment chapter also includes clauses of:





International law standards of fair and equitable treatment.
Access to the Courts of Justice
Prohibition of performance requirements
Commitment on transparency
Expropriation and compensation
ChNZFTA Investment (Chapter 11)
“The NZ-China FTA contains measures to encourage and promote the flow of investment between New
Zealand and China. The parties will also work together to increase the security of investments in each
country.” (New Zealand Ministry of Foreign Affairs & Trade 2015b)
“Both countries have agreed to treat investors and investment of the other country at least as well as they
treat their own investors (‘national treatment’). The obligation is subject to an exception for existing nonconforming measures (existing laws and regulations that are not in conformance with the FTA), although
it includes a ‘ratchet’ mechanism under which any improvement in such measures is automatically lockedin for Chinese investors. The scope of the obligation is also limited to the best treatment contained in
existing bilateral investment agreements with Hong Kong SAR and China.” (New Zealand Ministry of
Foreign Affairs & Trade 2015b)
“Both countries have also agreed to give Most Favoured Nation treatment to investors and investors of the
other country, except in respect of fisheries and maritime matters. This means that any better investment
treatment that New Zealand extends to third countries must also be extended to China. The obligation
does not extend to the treatment that New Zealand gives to its existing FTA partners (Australia, Thailand,
Brunei, Chile, Singapore and the Pacific Islands).” (New Zealand Ministry of Foreign Affairs & Trade 2015b)
“As in the case of services, the obligations on investment do not apply in respect of subsidies or
government procurement.” (New Zealand Ministry of Foreign Affairs & Trade 2015b)
“The FTA contains additional protections for investments, including” (New Zealand Ministry of Foreign
Affairs & Trade 2015b):



International law standards of fair and equitable treatment.
Compensation for losses arising from war, armed conflict or similar situations.
Protection from the funds of an investor being arbitrarily expropriated or nationalised.
“These protections are in line with New Zealand’s existing regulations and practice.” (New Zealand Ministry
of Foreign Affairs & Trade 2015b)
“The FTA also provides a framework for the settlement of disputes between foreign investors and the
government of the country in which the investment is made. This framework includes opportunities for
consultation and negotiations. If no settlement is reached, the dispute can be heard in the domestic court
system of the country concerned or can be taken to international arbitration.” (New Zealand Ministry of
Foreign Affairs & Trade 2015b)
New Zealand’s Commitment on Foreign Investment
New Zealand’s commitments on foreign investment under the ChNZFTA are established on Annex 8, part
B: New Zealand schedule of specific commitments on services:
“Under the Overseas Investment Regulations, 1985, issued under the Overseas Investment Act 1973,
Overseas Investment Commission approval is required for the following investment by an “overseas
person”:
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(a) Acquisition or control of 25 per cent or more of the shares or voting power in a company where
either the consideration of transfer or the value of the assets of the company exceeds $NZ10
million;
(b) The establishment of new business in New Zealand where the total expenditure in setting up the
business exceeds $NZ10 million;
(c) The acquisition of the assets of the business where the total consideration pair or payable for the
assets exceeds $NZ10 million;
(d) The issue of allotment of shares where the 25 per cent threshold has already been exceeded or
will be exceeded as a result of the issue and where the total consideration paid or payable exceeds
$NZ10 million.”
“OIC consent is required, regardless of the dollar value of the investment, for acquisition of rural land.
Approval is also required under the Land Settlement Promotion and Land Acquisition Act for the purchase
of some classes of land.”
“Unbound for enterprises currently in State ownership.”
China’s Commitment on Foreign Investment
China’s commitments on foreign investment under the ChNZFTA are established on Annex 8, part A: China
schedule of specific commitments on services:
“In China, foreign invested enterprises include foreign capital enterprises (also referred to as wholly
foreign-owned enterprises) and joint venture enterprises and there are two types of joint venture
enterprises: equity joint ventures and contractual joint ventures. 60”
“The proportion of foreign investment in an equity joint venture shall be no less than 25 per cent of the
registered capital of the joint venture.”
“The establishment of branches by foreign enterprises is unbound, unless otherwise indicated in specific
sub-sectors, as the laws and regulations on branches of foreign enterprises are under formulation.”
“The land in the People’s Republic of China is State-owned. Use of lad by enterprises and individuals are
subject to the following maximum term limitations:
(a)
(b)
(c)
(d)
(e)
70 years for residential purposes;
50 years for industrial purposes;
50 year for the purpose of education, science, culture, public health and physical education;
40 years for commercial, tourist and recreational purpose;
50 years for comprehensive utilisation or other purpose.”
ASEAN-Ch TISA Investment
Aside from increased trade, the TIS Agreement also aims higher levels of investment in the region,
particularly in sectors where commitments have been made, namely (ASEAN Secretariat n.d.):
(a) Business services such as compute related services, real estate services, market research,
management consulting;
(b) Construction and engineering related services;
(c) Tourism and travel related services;
(d) Transport services, educational services;
(e) Telecommunication services;
(f) Health-related and social services;
(g) Recreational, cultural and sporting services;
(h) Environmental services; and
The terms of the contract, concluded in accordance with China’s laws, regulations and other measures, establishing a “contractual joint
venture” govern matters such as the manner of operation and management of the joint venture as well as the investment or other
contributions of the joint venture parties. Equity participation by all parties to the contractual joint venture is not required, but is
determined pursuant to the joint venture contract. “Foreign invested enterprise” in this Schedule means a foreign invested enterprise
duly constituted or otherwise organised under “Law on Chinese-Foreign Equity Joint Venture”, “Law on Chinese-Foreign Contractual Joint
Ventures” and “Law on Foreign-Capital Enterprises”.
60
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(i) Energy services.
China’s commitments on foreign investment under the ASEAN-China TISA are established on Annex
1/SC1 of the TISA: schedule of the People’s Republic of China on specific commitments on services for
the first package of commitments:
“In China, foreign invested enterprises include foreign capital enterprises (also referred to as wholly
foreign-owned enterprises) and joint venture enterprises and there are two types of joint venture
enterprises: equity joint ventures and contractual joint ventures.61”
“The proportion of foreign investment in an equity joint venture shall be no less than 25 per cent of the
registered capital of the joint venture.”
“The establishment of branches by enterprises of Australia is unbound, unless otherwise indicated in
specific sub-sectors, as the laws and regulations on branches of foreign enterprises are under formulation.”
“The land in the People’s Republic of China is State-owned. Use of lad by enterprises and individuals are
subject to the following maximum term limitations:
(a)
(b)
(c)
(d)
(e)
70 years for residential purposes;
50 years for industrial purposes;
50 year for the purpose of education, science, culture, public health and physical education;
40 years for commercial, tourist and recreational purpose;
50 years for comprehensive utilisation or other purpose.”
The terms of the contract, concluded in accordance with China’s laws, regulations and other measures, establishing a “contractual joint
venture” govern matters such as the manner of operation and management of the joint venture as well as the investment or other
contributions of the joint venture parties. Equity participation by all parties to the contractual joint venture is not required, but is
determined pursuant to the joint venture contract. “Foreign invested enterprise” in this Schedule means a foreign invested enterprise
duly constituted or otherwise organised under “Law on Chinese-Foreign Equity Joint Venture”, “Law on Chinese-Foreign Contractual Joint
Ventures” and “Law on Foreign-Capital Enterprises”.
61
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Hoekman Indicator: The degree of openness of the services sector in ChAFTA: China’s
commitments to Australia
We adopt the Hoekman index to measure the degree of commitment of ChAFTA. Hoekman
(1995) proposed the framework to measure the degree of commitments in the service sector.
The Hoekman framework is given at the Annex. The higher value of the index will account for
more liberal the country’s service trade commitments in the FTA. The results are shown in
Figure 1. The results clearly indicate that ChAFTA has more open and liberal commitments in
services sector as compared to the other FTAs especially with reference to China-ASEAN FTA.
Figure 2:
Hoekman indices: average over all services sectors in various FTAs62
According to these values, the agreement with Australia would restore the terms of access for
Australian services exporters to those of New Zealand and Korea in general terms. In other
62
In the HI of the China Mainland-Hong Kong, we have different values of 0.32 and 0.46 separately; The Blue Bar
with the value of 0.32, which is calculated from the China Mainland FTA website (Trade and Industry Department),
however the value of the Yellow Bar with the value of 0.46, which is calculated from the Government of the Hong
Kong Special Administrative Region website. Due to the data come from different sources, we get two different
results.
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words, the agreement with Australia has corrected the discrimination in services that Australia
previously suffered.
At the same time, the level of the commitment to Australia far exceeds that to ASEAN, an
agreement signed much earlier. As an aside, this creates an interesting situation in the
dynamics of the RCEP agreement. We know that China and ASEAN are now negotiating their
agreement, and the commitments to Australia might become a benchmark in those
negotiations: ASEAN (led by Singapore) may ask for the same commitments as provided to
Australia, in which case Australia would then lose its advantage over Singapore based
suppliers. The dynamic interactions between agreements of these types are important to
consider.
The following figures show the results of the application of this methodology for various
categories of services.
Key Summary:
1. In Figure 2 for Business Services, China shows high commitments to Hong Kong, South
Korea, New Zealand and Australia in professional services, computer related services,
research, real estate and other sectors. Using the benchmark of the overall index values
from Figure 1, the commitments in Business Services are relatively high. However, there is
a lack of openness to other partners in some specific subsectors such as professional
services and research and development, particularly for ASEAN.
2. In Figure 3, China also shows relatively high commitments in courier, telecom and
audiovisual services to South-Korea, New Zealand, and Australia while there are lesser
commitments to ASEAN, but still above average.
3. Figure 4 illustrates an average level commitment in construction services, perhaps a little
more to Hong Kong.
4. Distribution services of franchising and other sectors in Figure 5 is relatively open under
ChAFTA, but other areas of wholesaling and retailing show only an average commitment.
5. According to Figure 6, Education Services remains relatively closed except for Hong Kong
(the HI is 0.5), also with variations in coverage. This sector might be expected to be
included in the forthcoming discussion with ASEAN.
6. China has made an even and relatively high level of commitment in environmental services,
according to Figure 7.
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7. Commitments on financial services (Figure 8) vary significantly among trading partners with
greater commitments in banking than in insurance.
8. Figure 9 shows hardly any commitments related to health services, while Figure 10 shows
relatively high but variable commitments in tourism.
9. In the Recreational areas, China still shows openness to Hong Kong in entertainment and
to Korea and Australia in sporting and other services (Figure 11).
10. In Figure 12, in transport services, the commitments vary by both trading partner and
services. Hong Kong and New Zealand appears to have some advantage in road transport.
The following sectors are listed as ‘L’ (Limited but unbound) in the Government of the Hong
Kong Special Administrative Region website, but not mentioned in the China FTA website:
01E Rental/leasing services without operators
02A Postal services
04E Distribution-Other
05 Educational services (A-E)
07C Financial services-Other
10C Recreational, Cultural and sporting services-Libraries, archives, museums and other
cultural services
11B Transport services-Internal waterways transport.
As the above subsectors are listed clearly in the Government of the Hong Kong Special
Administrative Region website, the value of the HI are all 0.5. The following bar charts in the
main eleven services subsectors demonstrate the differences of the openness for China+5
FTAs.
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Figure 3-1 Business services （Hong Kong website）
Figure 4-2 Business services (China FTA Website)
(Differences: 01E Rental/ leasing services without operator’s area is listed in the Hong Kong
version)
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Figure 5-1 Communication services （Hong Kong website）
Figure 6-2 Communication services （ChinaFTA website）
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(Differences: 02A Postal and 02B Courier area are listed in the Hong Kong version)
Figure 7 Construction and related engineering services (both Hong Kong website and
ChinaFTA website)
(Both versions are the same)
Figure 8-1 Distribution services (Hong Kong website)
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Figure 9-2 Distribution services (ChinaFTA website)
(Differences: Distribution 04E Other, Hong Kong is listed in Hong Kong version)
Figure 10-1 Education Services (Hong Kong website)
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Figure 11-2 Education Services (China FTA website)
(Difference: 05 A-E are listed in the Hong Kong version)
Figure 12 Environmental services (both Hong Kong and China FTA website)
(Both versions are the same)
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Figure 13-1 Financial services (Hong Kong website)
Figure 14-2 Financial services (China FTA website)
(07C Financial services-Other is listed in the Hong Kong version)
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Figure 15 Health and social services (both Hong Kong website and China FTA website)
(Both versions are the same)
Figure 16 Tourism and travel related services (both Hong Kong and China FTA website)
(Both versions are the same)
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Figure 17-1 Recreational, cultural, and sporting services (Hong Kong website)
Figure 18-2 Recreational, cultural, and sporting services (China FTA website)
(Difference: 10C Recreational. Cultural and sporting services-Libraries, archives, museums and
other cultural services is listed in the Hong Kong version.)
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Figure 19-1 Transport services (Hong Kong website)
Figure 20-2 Transport services (China FTA website)
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(Difference: 11B Transport services-internal waterways transport is listed in the Hong Kong
version)
To summarize,

China is relatively more open to more recent FTA partners of South Korea, New
Zealand and Australia

China shows high commitments in Business, Communication, Construction,
Distribution, Financial, Tourism, and Transport areas.

Some sectors such as Business, Construction, Environmental and others in the
Transport areas are less open.

China has opened all sectors to Australia, except Health.
Comparison of commitments within agreements
The previous section considered the general level of commitments in each agreement. Here
we examine the variations within agreements. The indicator we use is a coefficient to measure
the correlation of index values across the component sectors. The results are shown in Table
1.
Table 1 Correlation coefficients from the Government of the Hong Kong Special Administrative
Region Website
Hong Kong
Hong Kong
1.00
Australia
0.46
South Korea 0.46
New Zealand 0.43
ASEAN
0.21
Australia South Korea New Zealand ASEAN
1.00
0.92
0.85
0.37
1.00
0.91
0.40
1.00
0.48
1.00
Table 2 Correlation coefficients From ChinaFTA website
Hong Kong
Australia
South Korea
New Zealand
ASEAN
Hong Kong
1.00
0.44
0.52
0.52
0.47
Australia South Korea New Zealand ASEAN
1.00
0.92
0.85
0.37
1.00
0.91
0.40
1.00
0.48
1.00
Source: Project calculation
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The highest positive correlation (0.92) is observed between the China-South Korea FTA and
the China-Australia FTA, followed by the China-New Zealand FTA. We also observe low
correlation (0.18) between the China-Hong Kong FTA and the China-Australia FTA. In addition,
there exists negative correlation observed between the China-Hong Kong and China-ASEAN
FTAs (-0.05).
A high score indicates similarities in terms sectors which are opened in the agreement. For
instance for China-South Korea, China-New Zealand and China-Australia FTAs, the high
scores demonstrate that China has opened similar sectors and modes under the three FTAs.
This means these three economies are less likely to have any particular advantage in the
services sector in China, compared to each other. The correlations of their commitments with
those of ASEAN are much lower. Most disparate are those with Hong Kong and ASEAN,
where the negative correlation index indicates that China opens very different services sectors
in these two agreements.
Summary
Based on the data and information calculated by both the ChinaFTA Website and the
Government of the Hong Kong Special Administrative Region Website, the highest positive
correlation (0.92) is observed between China-South Korea FTA and the
China-Australia FTA, followed by the China-New Zealand FTA (0.85). The lower of correlation
is observed between the China-South Korea FTA and the China-ASEAN FTA (0.40), which
demonstrates that China opens different services sectors in these two agreements. However,
as we collect the data from ChinaFTA and the Government of the Hong Kong Special
Administrative Region Website, thereby the coefficients of the first column in the two tables are
quite different. In the Table 1, there exists quite low correlation (0.21) between the China-Hong
Kong FTA and China-ASEAN FTA. However, in the Table 2 the correlation between these two
FTAs is 0.47, which is more than a half of that in Table 1 (0.21). However, both the two tables
show that China open quite different services sectors in these two agreements. The correlation
between China-Hong Kong and China-New Zealand also varies from the two tables. From the
information of ChinaFTA Website, the correlation between China-Hong Kong and China-New
Zealand is 0.43, but the correlation calculated from the Government of the Hong Kong Special
Administrative Region Website is 0.52. These different results show that in the Table 1, the
services sectors which China open to Hong Kong and New Zealand are not quite similar, while
in the Table 2 these sectors which China opens to Hong Kong and New Zealand are similar to
some degree. The correlation of the China-Hong Kong and China-Australia, China-Hong Kong
and China-South Korea are almost similar. Overall, there exists no negative correlation
relations within these five FTAs signed with China. As we collect the information from the two
different sources, some differences in terms of the correlation efficient occur in the two tables.
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Openness of services sectors in China vs commitments in FTAs
The OECD has developed a methodology for assessing the restrictiveness of policy as it
applies to the services sector, called the Services Trade Restrictiveness Index (STRI).63The
methodology includes the scoring and weighting system for 18 services sectors. The STRIs are
composite indices taking values from zero and one, zero representing an open market and one
a market completely closed to foreign services providers (this is the reverse to the Hoekman
index). The index includes not just trade measures but also regulatory measures (see Box 1).
63
http://www.oecd.org/tad/services-trade/services-trade-restrictiveness-index.htm. The scoring system is based
on binary scoring, non-binary measures are broken down to multiple thresholds; complementary measures are
grouped and scored as zero only if all measures in the bundle are not restrictive. Finally in cases where one
restriction renders others irrelevant, those measures that are rendered irrelevant are automatically scored one.
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