REGULATION IMPACT STATEMENT INTRODUCTION 1. This Impact Statement (SIF) refers to the China-Australia Free Trade Agreement (ChAFTA). Negotiations for a free trade agreement with China began in May 2005, following the completion of a joint government study on the feasibility of a bilateral free trade agreement in March of this year. After 21 rounds of formal negotiations, Prime Minister Tony Abbott and President Xi Jinping announced the conclusion of the negotiations on 17 November 2014. IDENTIFICATION OF PROBLEMS 2. Australia has extensive, growing and highly complementary economic relations with China. In 2013-14, trade in goods and services in both directions reached $159.7 billion, making China Australia`s largest trading partner. China is both Australia`s largest export market ($107.6 billion, or 32% of total exports – $100.1 billion in merchandise exports and $7.5 billion in services exports) and the largest source of imports ($52.1 billion, or 15% of total imports). Bilateral trade relations are also among the most dynamic: exports increased by 27 per cent between 2012-13 and 2013-14, while five-year growth reached 19 per cent in 2013-14. 3.

At the end of 2013, Chinese investment in Australia was $31.9 billion and Australian investment in China was $29.6 billion. While bilateral investment is modest compared to other trade and investment relationships, investment in both directions is growing rapidly: at the end of 2013, Australian investment in China increased by 39% and Chinese investment in Australia increased by 41% over the previous year. 4. Despite the strength of bilateral trade and investment relations and the continued development of Australia`s economic relations with China, the absence of a bilateral trade agreement: limiting trade opportunities due to the persistence of high import duties, particularly in the agricultural sector; suspends Australian exporters of goods and services from erosion of competitiveness due to China`s existing and future preferential agreements with other countries; limits the ability of Australian businesses to take full advantage of the growing focus of the Chinese economy towards consumption and services; Australian exporters enjoy greater security in processing their goods and services as well as investments in the Chinese market; risks of making Australia less attractive to Chinese investment; deprives us of a framework for Australia and China to deepen liberalization and extend market access in the long term. High import duties limit trade opportunities, particularly in agriculture 5. China is Australia`s largest merchandise export market, worth $100.1 billion in 2013-14. 6.C is Australia`s largest agricultural market, with already $9 billion in exports. There is considerable growth potential. The Australian Bureau of Resource Economics and Science predicts that China will account for 43% of global growth in agricultural demand by 2050.

The opportunities for Australia, with our reputation for quality, safe and sustainable food production, will be significant. Page 4 Tariff Change (implementation of the China-Australia Free Trade Agreement) Bill 2015 (c) Documentation. The provisions of Section 10.8 (a) of this section, which relate to documentation requirements for goods under sub-positions 9802.00.40 or 9802.00.50 HTSUS, apply to imports of goods returned from Australia after export for repairs or modifications and which are considered duty-free. Chapter 4 of the AFTA contains provisions relating to the trade in textile and clothing products between Australia and the United States under the AFTA.