China's Free Trade Agreements (FTAs)
This backgrounder piece was prepared by Dr. Xiaobo Zhang, associate professor in International Relations at Southwestern University of Finance and Economics in China. Since August 2015, he has been with the China Institute at the University of Alberta as a post-doctoral research fellow. Dr. Zhang attended Hubei University for a B.A. in Political Science and received his MA in Political Science from Utah State University and PhD in Political Science (with a major in International Relations and minor in Comparative Politics) from the University of Georgia.1. China's FTAs in Force
| China's FTAs in Force |
Signed | Brought into Force |
|
| 1 | China - ASEAN FTA | November 2004 | July 2005 |
| 2 | China - Pakistan FTA | November 2006 | July 2007 |
| 3 | China - Chile FTA | November 2005 | October 2006 |
| 4 | China - New Zealand FTA | April 2008 | October 2008 |
| 5 | China - Singapore FTA | October 2008 | January 2009 |
| 6 | China-Peru FTA | April 2009 | March 1, 2010 |
| 7 | China-Costa Rica | April 2010 | August 2011 |
| 8 | China - Iceland FTA | July 2013 | July 2014 |
| 9 | China - Switerland FTA | July 2013 | July 2014 |
| 10 | China-South Korea FTA | June 2015 | December 2015 |
| 11 | China-Australia FTA | June 2015 | December 2015 |
2. China's FTAs Concluded
| China's FTAs Concluded | Signed | |
| 1 | Mainland-HK (SAR) Closer Economic and Partnership Arrangement | November 2015 |
| 2 | Mainland-Macau (SAR) Closer Economic and Partnership Arrangement | November 2015 |
3. China's FTAs under Negotiation
- China-Japan-South Korea FTA
- China-Norway FTA
- China-GCC (Gulf Cooperation Council) FTA
- China-ASEAN FTA Upgrade Negotiation
- Regional Comprehensive Economic Partnership (RCEP)
- China-Sri Lanka FTA
- China-Maldives FTA
- China-Georgia FTA
4. China's FTAs under Consideration
- China-India Regional Trade Arrangement Joint Feasibility Study
- China-Columbia FTA Joint Feasibility Study
- China-Moldova FTA Joint Feasibility Study
- China-Fiji FTA Joint Feasibility Study
- China-Nepal FTA Joint Feasibility Study
5. China's Most Recent FTA with Australia
China became Australia's largest trading partner since 2006-07 on a financial year basis, with two-way trade valued at $150 billion in 2014-15. The China-Australia FTA negotiations began on May 2005 after a joint feasibility study, while the deal was finally completed and the details of the deal were released on 17 November 2014. The China-Australia FTA was signed by both countries on 17 June 2015 and came into force on December 20, 2015. The China-Australia FTA consists of 17 chapters and related annexes; of its outcomes, the important ones can be summarized as follows：
Exports：More than 85 per cent of Australia's goods exports to China (by value in 2015) now enter duty free or at preferential rates, and this percentage will rise to 93 per cent by 1 January 2019 and 97.9 per cent when the FTA is fully implemented (1 January 2029). Australian Minister for Trade and Investment Andrew Robb said tariffs have been cut on a range of important Australian exports including dairy, beef, lamb, wine, seafood, fruit and vegetables, processed foods, vitamins and health products. Tariffs on coking coal (with exports worth $4.8 billion in 2014-15) have been eliminated, while the phased elimination of tariffs on non-coking coal also starts.
Agricultural Produce: China buys more of Australia's agricultural produce than any other country. In 2014-15, this market was worth $9 billion to Australian farmers and the broader agricultural sector. The FTA provides Australia with an advantage over its major agricultural competitors, including the United States, Canada and the European Union. It also counters the advantages Chile and New Zealand currently enjoy through their FTAs with China. FTA completely eliminated tariffs on barley and sorghum on 20 December 2015, and a rapid tariff reduction on other agriculture exports, including seafood, sheep meat, pork and a variety of horticulture. Other key agriculture outcomes include: Dairy: tariffs up to 20 per cent eliminated by 1 January 2026; Beef: tariffs of 12 to 25 per cent eliminated by 1 January 2024; Wine: tariffs of 14 to 20 per cent eliminated by 1 January 2019; Wool: a new Australia-only duty free quota (commencing 1 January 2016), in addition to continued access to China's WTO quota.
Resource, Energy and Manufactured Products: Starting from 20 December 2015, 92.8% of China's imports of these products from Australia now enter duty free, with most remaining tariffs to be removed by 1 January 2019. On full implementation of the Agreement (1 January 2029), 99.9% of Australia's resources, energy and manufacturing exports will enjoy duty free entry into China. Key outcomes are: Iron ore, gold, crude petroleum oils and liquefied natural gas: FTA locks-in existing zero tariffs on these major exports providing greater certainty for Australian exporters; Coking coal: tariff of 3 per cent was completely eliminated on 20 December 2015; Thermal coal: tariff of 6 per cent was reduced to 4 per cent on 20 December 2015, fell to 2 per cent on 1 January 2016 and will be completely eliminated on 1 January 2017; Refined copper and alloys (unwrought), aluminium oxide (alumina), unwrought zinc, unwrought aluminium, unwrought nickel and titanium dioxide: tariffs of up to 10 per cent eliminated, many on 20 December 2015; Pharmaceuticals, including vitamins and health products: elimination of tariffs up to 10 per cent, either on 20 December 2015 or progressively by 1 January 2019; Car parts and engines, plastic products, opals and other precious stones: elimination of tariffs on these and some other manufactured products will take place by 1 January 2019.
Service Sectors: China is Australia's largest services market, with exports valued at $8.8 billion in 2014-15. China offers Australia its best-ever services commitments in an FTA (other than China's agreements with Hong Kong and Macau). Most valuably, this includes new or significantly improved market access for Australian banks, insurers, securities and futures companies, law firms and professional services suppliers, education services exporters, as well as health, aged care, construction, manufacturing and telecommunications services businesses in China. Key outcomes are: Legal services: Guaranteed market access for Australian law firms to establish commercial associations with Chinese law firms in the Shanghai Free Trade Zone (SFTZ); Education services: Within one year of entry into force, China will list on a key Ministry of Education overseas study website 77 Australian private higher education institutions registered on the Commonwealth Register of Institutions and Courses for Overseas Students; Telecommunications services: Guaranteed market access for Australian companies investing in specified value-added telecommunications services in the SFTZ; Financial services: China has committed to deliver new or improved market access to Australian financial services providers in the banking, insurance, funds management, securities, securitisation and futures sectors; Tourism and travel-related services: China has guaranteed that Australian services suppliers will be able to construct, renovate and operate wholly Australian-owned hotels and restaurants in China; Health and aged care services: China will permit Australian service suppliers to establish profit-making aged care institutions throughout China, and wholly Australian-owned hospitals in certain provinces.
Tourism: Australia's tourism will be a big winner of the China-Australia FTA. The FTA will strengthen Australia's tourism industry. It is expected that 1.5 million Chinese will visit Australia by 2022-23 with the potential expenditure of more than $10.2 billion in Australia.
Canada's Free Trade Agreements (FTAs)
1. Canada's FTAs in Force
| Canada's FTAs in Force |
Brought into Force |
|
| 1 | Canada - Korea | January 1, 2015 |
| 2 | Canada - Honduras | October 1, 2014 |
| 3 | Canada - Panama | April 1, 2013 |
| 4 | Canada - Jordan | October 1, 2012 |
| 5 | Canada - Colombia |
August 15, 2011 |
| 6 | Canada - Peru | August 1, 2009 |
| 7 | Canada - European Free Trade Association | July 1, 2009 |
| 8 | Canada - Costa Rica | November 1, 2002 |
| 9 | Canada - Chile | July 5, 1997 |
| 10 | Canada - Israel | January 1, 1997 |
| 11 | North American Free Trade Agreement (NAFTA) | January 1, 1994 |
| 12 | Canada - U.S. Free Trade Agreement (CUSFTA) | January 1, 1989 (superseded by NAFTA, which includes Mexico) |
2. Canada's FTAs Concluded
| Canada's FTAs Concluded | Signed | |
| 1 | Canada - Trans-Pacific Partnership (TPP) | October 5, 2015 |
| 2 | Canada - European Union: Comprehensive Economic and Trade Agreement (CETA) | August 5, 2014 |
| 3 | Canada - Ukraine | July 14, 2015 |
3. Canada's FTA under Negotiation
- Canada - Caribbean Community (CARICOM)
- Canada - Canada-Guatemala, Nicaragua and El Salvador
- Canada - Dominican Republic
- Canada - India
- Canada - Japan
- Canada - Morocco
- Canada - Singapore
- Modernization of the Canada-Costa Rica Free Trade Agreement
4. The Benefits of Canada's Most Recent FTA: (Canada-Korea FTA)
According to Global Affairs Canada, in the CKFTA's first year of implementation since January 2014, Canada saw significant export gains across a number of sectors, notably in agriculture, fish and seafood, forestry products, and industrial goods.
Agriculture: Under the CKFTA, Korea will eliminate tariffs on approximately 70% of Canada's exports by 2019, and 97% of Canadian exports will be duty-free by 2029. For example: Canada's exports of potatoes went from $5.4 million in 2014 to $12.8 million in 2015 (increase of 135%), have benefited from the elimination on January 1, 2015 of Korean tariffs of 18%; Canada's exports of pig fat went from $2.6 million in 2014 to $7.8 million in 2015 (increase of 201%), have benefited from the elimination of Korean tariffs of 3%, and; Canada's exports of oats went from $3.0 million in 2014 to $8.1 million in 2015 (increase of 168%), have benefited from the elimination of Korean tariffs of 3%.
Fish & Seafood: Over 90% of Canadian exports in this sector will enter duty-free by 2019, and all remaining tariffs will be eliminated by 2026. Canadian exports have benefited from the reduction of Korean tariffs of 20%: Prepared lobsters, from $80,000 in 2014 to $51 million in 2015 (increase of 63,457%; Prepared crab and red crab meat, from $9,000 in 2014 to $2.3 million in 2015 (increase of 26,211%), and; Prepared shrimps and prawns, from $18 in 2014 to $2.5 million in 2015 (increase of 1,412,594%).
Forest Products: On January 1, 2015, Korea eliminated tariffs, which were as high as 10%, on nearly 79% of Canadian exports of forest products. 98% of Canadian exports in this sector will be duty-free by 2019, and all remaining tariffs will be eliminated by 2024. Canadian exports have benefited from the reduction of Korean tariffs of 5%: Softwood lumber, from $42 million in 2014 to $80 million in 2015 (increase of 90%), and; Maple, oak, ash and walnut lumber, from $2 million in 2014 to $3 million in 2015 (increase of 57%).
Industrial Products: Since January 1, 2015, over 96% of Canadian exports of industrial goods have benefited from duty-free access to Korea, and all remaining Korean tariffs will be eliminated by 2024. Canadian exports have benefited from the elimination on January 1, 2015 of Korean tariffs of 8%: Low voltage switch boards, from $12 million in 2014 to $27 million in 2015 (increase of 113%), and; Automatic control panels, from $2 million in 2014 to $16 million in 2015 (increase of 751%).
Services and Investment: Canada's services exports to South Korea - which include transportation, financial, and travel services, and commercial services such as financial, management, engineering and other professional services - are worth more than $750 million a year, and there is much potential for growth. The South Korean market offers areas of opportunities for Canadian exporters, including in professional services (e.g. foreign legal consultancy, commercial education and training, and research and development), financial services, and services incidental to air transportation and the sustainable technologies and information and communication technology (ICT) sectors.
5. Should Canada Negotiate a FTA with China?
There are complications involved in negotiating a FTA with China. Various polls, including those from the Asia Pacific Foundation of Canada and the China Institute at the University of Alberta, have clearly indicated that China has a challenging public image in Canada, based in part on human rights concerns. As well, there are concerns in Canada regarding the degree of state control exercised over China's enterprises, especially state-owned enterprises.
However, free trade agreements have proven to be an efficient way to promote both countries' companies and to export their products and services to each other's market. In the meantime, a FTA can make the trading process between trading partners more predictable and transparent, thus providing Canadian firms with greater and predictable access to the dynamic global market. Generally speaking, there are three main reasons why Canada would want to negotiate a FTA with China.
First, negotiating a FTA with China is consistent with the Canadian government's policy of opening up foreign markets to Canadian exporters. In recent years, the government of Canada has been vigorous in broadening its free trade relationships in order to enhance prospects for Canadian firms in the global market. To boost international trade and investment, the government of Canada has successfully concluded 15 FTAs (with 12 FTAs in force) and it has been negotiating 8 more FTAs. Canadian policymakers and commentators generally support the view that Canada should diversify its trade, and the Canada-South Korea FTA already went into force in January 2014. It is believed that high quality and comprehensive free trade agreements can remove barriers to trade, encourage bilateral investment, and will open new export markets for Canadian companies.
Second, a strong economic relationship between Canada and China could bring huge opportunities for Canadians. China is the world's largest trading country. In 2006, around 120 countries had the United States as the largest trading partner and 70 countries had China as the largest trading partner; but in 2016, about 128 countries (including the United States) has China as the largest trading partner and only around 70 countries has the United States - China now is Canada's second largest trading partner after the United States. China is also Canada's second-largest export market, absorbing $4.7 billion of Canadian agriculture and exports to China have been climbing steadily and did not fall during the global economic crisis. China is expected to become the world's largest agricultural importer, a strong argument in favour of Canada establishing a stable economic relationship with China in order to help secure its own future economic development. It is expected that a FTA with China would bring enormous business opportunities for Canada in agriculture, forest, energy, fishing, seafood, and service sectors.
Third, a FTA with China will not only secure Canada's greater share in the rapidly expanding Chinese market, but also counter the preferential advantages that Australia has already enjoyed and some Asian countries will seek through their FTAs with China. For China, its FTA with Australia, South Korea, ASEAN, Singapore are already in force; and it has been active in negotiating China-Japan-South Korea FTA, China-India FTA, China-Sri Lanka, and China-ASEAN Upgrade FTA. For Canada, it is necessary to avoid the trade diversion effects of FTA arrangements in Asia-Pacific region. For instance, as Canada has a similar economic structure as Australia, without a FTA with China, Canadian exports might gradually be marginalized in the growing Chinese market due to the China-Australia FTA settlement.
Sources:
(1) "China FTA Network", Ministry of Commerce PR China, http://fta.mofcom.gov.cn/english/index.shtml (2) "China-Australia Free Trade Agreement", Australian Government: Department of Foreign Affairs and Trade, http://dfat.gov.au/trade/agreements/chafta/Pages/australia-china-fta.aspx (3) "Canada's Free Trade Agreements", Global Affairs Canada, http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fta-ale.aspx?lang=eng