On the 17th November 2014, Australia and China signed a Declaration of Intent to enter the ChAFTA, marking the conclusion of negotiations on a landmark bilateral trade agreement. The announcement of the ChAFTA has been warmly received both in China and Australia. Entry into the ChAFTA is expected to further strengthen Australia's trade position in East Asia, following the conclusion earlier this year of the Japan-Australia Economic Partnership Agreement (the JAEPA) and the Korea-Australia free trade Agreement (the KAFTA). DFATreports that the ChAFTA will substantially increase the FIRB approval threshold for private entities investing in non-sensitive sectors. Under the ChAFTA, the FIRB approval threshold for investments by these investors will be increased to A$1.078 billion. Similar to its approach under the JAEPA and the KAFTA, China expects that Australia will reserve its right under the ChAFTA to impose lower limits for investments in agricultural land and agribusiness in line with the Australian Government's stated intention to introduce those limits generally. The proposed changes will not apply to investments by Chinese SOEs, who will remain subject to FIRB approval regardless of the value of their investment. These are investments where the interest acquired equals 10 per cent or more, or less than 10 per cent if it provides potential influence or control. Between 2007 and 2013, Chinese SOE investors accounted for 89 per cent of the total value of Chinese outbound direct investment in Australia. For this reason, it remains to be seen whether the increased thresholds will result in any material benefit for the largest class of Chinese investors in Australia. Moreover, like the KAFTA (and in contrast to the JAEPA), the ChAFTA contains an Investor-State Dispute Settlement mechanism, pursuant to which obligations within the Investment Chapter can be enforced directly by investors from the two countries. It is yet to see confirmation of whether the ChAFTA will include a “Most-Favoured Nation” clause enabling China to receive the benefit of any market access arrangements granted by Australia pursuant to free trade agreements with other nations. Australia has also agreed to create new avenues for Chinese companies to engage Chinese nationals in aspects of their Australian operations, as part of a mutual agreement to allow for greater workforce mobility. Specifically, it is reported that Australia will grant certain categories of Chinese citizens with rights to enter and work in Australia for a limited time period, including: · intra-corporate transferees, independent executives and contractual service suppliers, for up to four years and · business visitorsfor up to 90 days (or six months in the case of service providers). According to DFAT guidance, major concessions have been agreed in the agriculture, food and beverages sectors with the removal of all import tariffs on Australian dairy, meat, wine, seafood and horticultural products. Australia has also agreed that all remaining tariffs on agricultural and processed foods imported from China will be eliminated. Under the ChAFTA, China will remove all tariffs currently applicable to a wide range of Australian energy and resources products, manufactured goods and pharmaceuticals. The deal is also expected to improve market access for Australia's pharmaceuticals and manufacturing sectors. Tariffs will also be removed on products within the automotive, steel, aluminium and plastics sectors, which are currently subject to a 5 per cent tariff. China's concessions in the services sector are reported to be significant and represent China's 'best ever' services commitments in a free trade agreement. They include: financial services, telecommunications, and technical services. The ChAFTA is also reported to improve market access for Australian tourism and hospitality businesses. Finally, additional opportunities will also be provided for Australian service providers in the Shanghai Free Trade Zone. The gLAWcal team LIBEAC project Friday, 21 November 2014 (Source: Allens)