Global Politics Explainer

CWA # 1775
Global Politics Explainer
China-Australia Free Trade Agreement after ten years:
What are the issues, and what next?

Femy Francis 
31 July 2025

Photo Source:

On 16 July, China’s Ministry of Commerce and Australia's Department of Foreign Affairs and Trade signed an MoU to review the China-Australia Free Trade Agreement (FTA). The agreement was first signed in 2015 and has been responsible for the development of their bilateral economy and trade relations. The year 2025 marks the 10th anniversary of the FTA implementation where “both sides will maintain close cooperation, continue high-quality implementation of the agreement, jointly conduct a review to identify areas for further improvement or expansion, enhance the liberalization and facilitation of trade and investment, and provide higher-level institutional guarantees for bilateral economic and trade cooperation,” said China’s Commerce Ministry. China has been Australia's largest trading partner and export destination, as well as the source of imports, for 16 years. Since the agreement of 2015, the trade has increased, estimated to be USD 210 billion in 2024. Australia China Business Council and the Bankwest Curtin Economics Center reported that trade with China has increased Australia's household income by USD 1709 and even supported 595,600 jobs. 

What is the background?
In 2015, the China-Australia Free Trade Agreement (ChAFTA) was signed after 21 rounds of negotiations. This was signed between Australia’s Trade and Investment Minister, Andrew Robb, and China’s Commerce Minister, Gao Hucheng. The deal was seen as a unique and liberal trade deal China signed with a developed country. Australia’s Prime Minister Tony Abbott said: “What you have collectively done is history-making for both our countries, it will change our countries for the better, it will change our region for the better, it will change our world for the better.” 

What is the agreement all about?
Three things. First, Tariff cuts. Before the agreement, only 8.4 per cent of China’s goods were duty-free, and after the signing of the agreement in 2015, 95 per cent of tariffs were slated for Australian goods. Second, Market access. China opened its market to Australia, extending it beyond goods to include services. Australia also got the status of most-favoured-nation (MFN), extended to the service sector and Australian firms. Third, the Binding clause. The agreement outlined a binding clause, where Australian goods were entering the Chinese market at a lower tariff than China’s commitment made at the World Trade Organisation (WTO). The clause commits that China will not raise the tariff to WTO standards.

What are the issues? 
The agreement was criticized domestically in Australia as a bad deal. The then-opposition party Labor Party, head Bill Shorten, declined to give support to the agreement, calling it a “dud deal.” The major criticism was about the labour mobility provision, where Shorten stated that the agreement should not allow unrestricted access to Australia’s labour market. And noted that they need Labour Market Testing (LMT) to test the availability of in-house Australian workers before recruiting individuals from overseas. ChAFTA’s labour mobility provision was called “a momentous concession for the Chinese.” This raised alarms that jobs will be given to Chinese nationals rather than locals, which will alter the labour market of Australia. Other criticisms include the inclusion of services from people from a country who have questionable records on industry safety. And that this will lead to one country’s dominance in the Australian market, hence creating larger strategic repercussions. 

What are the outcomes?  
Since the onset of the agreement, the following are the notable outcomes as reported by the University of Technology Sydney’s Australia-China Relations Institute (UTS: ACRI). The agreement cannot be attributed to Australia-China trade growth, as China has been Australia's largest trading partner for 16 years, much before the ChAFTA agreement. Therefore, the agreement did not kick off the economic collaboration, but opened avenues for increased investments and taking advantage of the lowering of trade barriers. In 2019, the ChAFTA utilization rate rose by 04.8 per cent and 96 per cent in 2021, which is the highest amongst all the FTAs Australia has signed. China’s imports of Australian goods increased by 90 per cent in 2017. China is Australia’s largest trading partner, with exports in 2024 reaching USD 70 billion. China imported USD 140 billion worth of Australian goods in 2024, according to COMTRADE. The trade saw a slight dip after COVID, when China imposed sanctions and duties on Australian goods. In retaliation for Australia citing the origins of the COVID strain to be Chinese. 

By 2024, the exports increased to USD 212.7 billion under the ChAFTA provision from USD 85.2 billion. China’s exports increased in minerals, fuels, manufacturing, agricultural products, and the service sector. The 2020, tariffs were removed in 2024, and ties were restored, and the trade was back on track. Other than Australia’s exports to China also increased from a mere USD 59 billion in 2014, to USD 112 billion in 2023, an 89.5 per cent increase. Additionally, under ChAFTA, the Australian beef was given a concessional tariff, but China can impose a tariff if the export exceeds a specified limit. In a poll conducted by UTS: ACRI on the domestic opinion of the ChAFTA, 52.3 per cent of Australians saw the agreement as beneficial, with 12.5 per cent disagreeing. The recent visit by Albanese focused on reviewing the FTA agreement between the two countries. The Prime Minister also expressed larger concerns regarding Australia’s refusal to join the “Hypothetical” war between the US and China. And the expanding presence of China in the Pacific region. The ChAFTA agreement has been beneficial for both China and Australia, opening up trade barriers, giving opportunities to local businesses to grow internationally. The political and geopolitical repercussions are yet to be gauged, but China’s increasing presence in the region has set the alarm off. What’s understood is that economic collaboration must go on, despite geopolitical tensions and scepticism. 

References:

Ma Jingjing and Yin Yeping, “China, Australia sign MoU to implement, review free trade agreement,” Global Times, 16 July 2025 
https://www.globaltimes.cn/page/202507/1338470.shtml

“Xi says Australia and China should ‘unswervingly’ work together despite global instability,” The Guardian, 15 July 2025
https://www.theguardian.com/australia-news/2025/jul/15/australian-journalists-confronted-china-security-guards-albanese-beijing-trip

Giulia Interesse and Yi Wu, “China-Australia Economic Ties: Trade, Investment, and Latest Updates,” , China Briefing, 08 July 2025
https://www.china-briefing.com/news/china-australia-bilateral-ties-opportunities-challenges-latest-updates

James Laurenceson, “The China-Australia Free Trade Agreement (ChAFTA): An Australian assessment of core outcomes a decade on,” UTS, 08 April 2025
https://www.uts.edu.au/news/2025/04/china-australia-free-trade-agreement-chafta-australian-assessment-core-outcomes-decade-on

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