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Mike Smith: China FTA deal worth the wait

There is a saying that good things come to those that wait. The free trade agreement between Australia and China, ten years in the making, has been well worth the wait.

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The new agreement is transformational. It puts many of our most important sectors on a more competitive footing internationally and will provide Australian companies the scope needed to boost trade. This will in turn increase growth and create more jobs for Australians.

"A lot of the hard work to bring this agreement to life starts now."
Mike Smith, Chief Executive Officer ANZ

Many of us in Australian business have often looked longingly to the success of New Zealand’s FTA with China with more than a hint of envy. 

The impact on the New Zealand economy has been broader than the economic benefits it has delivered. 

It has also changed the psyche of its people and its industries. They’re now a more confident nation open to foreign investment and its producers know they are the equal of anywhere else in the world. 

Of course the economic benefits of New Zealand’s FTA should not be overlooked. Estimates suggest, for example, its dairy industry has quadrupled as a result with New Zealand rightfully recognised as a global leader. 

Now it’s Australia’s turn. 

Many sectors of Australia’s domestic economy – in particular natural resources, agriculture and services – will have access to new sources of foreign investment and the confidence to make longer term investments given the enhanced export opportunities. 

The growing Chinese middle class is the major driver behind the estimates in our Greener Pastures report that Australia could gain additional $710 billion in agricultural exports by 2050. Our farmers are set to benefit in a similar way to how New Zealand farmers have already benefited. 

While the wide-reaching agreement is one of the most expansive FTAs ever signed by China, there is a danger we won’t capitalise on the platform provided by Prime Minister Abbott and President Xi. 

In essence, a lot of the hard work to bring this agreement to life starts now. 

This week, I had the privilege of Chairing the Australia-China CEO Roundtable in Canberra where the FTA was at the top of our agenda. It was acknowledged there the business community has a responsibility to build on the agreement and encourage deeper collaboration. 

We indicated to Prime Minister Abbott and President Xi that business leaders recognise their role in bringing the free trade agreement to life by delivering the partnerships that will allow us to boost trade and create jobs.   

We agreed with the leaders that where we identify challenges to its implementation from over-regulation or other barriers, we will openly discuss these with our respective governments. 

Specifically, Australian business needs to play more of a leadership role. We need to think creatively on how we articulate the significant benefit that Chinese investment provides to Australia given Chinese investment in Australia is already more than in the United States. 

In turn, while we welcome China’s continuing economic reform, particularly liberalisation of the exchange rate and foreign investment regime, there are still considerable barriers to Australian investment set out in China’s Foreign Investment Catalogue. This needs to be addressed. 

Given the Renminbi is expected to dominate Asian trade and could become a genuine rival to the US dollar as a global reserve currency, the separate confirmation of China’s commitment to make Sydney an RMB trading hub is a welcome step. Although Australian trade in RMB is still in its infancy, it will further strengthen economic ties between Australia and China. 

So, the message from business leaders yesterday was clear. We accept the mantle of implementation and will work hard to deepen and strengthen the business to business relationships that will help to grow our two economies and create jobs. 

After all, trade builds trust, friendships and mutual prosperity.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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