DELAY TO AUSTRALIA’S TRADE DEAL WITH CHINA WILL IMPOSE $110 MILLION BURDEN ON COAL EXPORT TRADE

A delay to the start of the China Australia Free Trade Agreement into early 2016 will cost the Australian coal export trade up to $110 million dollars, give Indonesian exporters an unexpected boost and add a new risk to employment in key regional communities.

The China Australia free trade deal had been expected to formally enter into force in November this year, following the completion of parliamentary processes by both countries.

The timetable is now at risk in the wake of a scaremongering campaign by the CFMEU, raising the real prospect of delays to the parliamentary approval of enabling legislation.

If the China Australian trade deal does not formally start before the end of calendar 2015, Australia will miss the chance for two bites at tariff reductions on a range of products, including on thermal coal exports.  Under the terms of the deal, Chinese tariffs on coal will fall both on entry-into-force and again on 1 January 2016.

The failure to secure the agreement before the end of 2015 will mean that the tariff on Australian thermal coal exports will remain at 6 per cent.  Even if the deal eventually comes into force in early 2016, Australia will have missed the chance of a two-pronged tariff reduction, adding at least $1.2 million per week to the thermal coal trade, or $60 million over the course of 2016.

The biggest winner will be Indonesian thermal coal exporters, whose coal enters China duty-free, courtesy of a bilateral trade deal concluded several years ago.

The biggest loser will be coal exporters and their workforces who will face a completely unnecessary cost disadvantage in one of the world’s most important markets.

A delay to the start of the deal until March 2016 would also cost the coking coal trade dearly.  China’s 3 per cent tariff on coking coal imports currently adds $3.4 million to the coking coal trade every week.  A start to the trade deal in March 2016, instead of November 2015, will add about $50 million to the costs of the trade.

The bottom line is simple.  It is imperative that the China Australia Free Trade Agreement enter into force before the end of calendar year 2015. 

Parliamentary consideration of the trade deal is appropriate, but the passage of the enabling legislation should not be delayed by a scaremongering campaign by a trade union.

The Australian coal industry is Australia’s second biggest export earner, valued at approximately $40 billion.  It also directly employs around 50,000 Australians and makes a substantial community contribution to many rural and regional areas across Australia.

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