China and Australia finally reached a key trade agreement Monday. Both nations sought this pact for the last decade and it finally came to fruition in Canberra, the capital city of Australia. Economic analysts expect this trade agreement to greatly benefit both sides and to “open up markets work billions of dollars” (BBC News). Numerous players in the Australian economy including dairy farmers, winemakers, and the coal industry will have tariff-free access to the Chinese Market. Meanwhile, Chinese investment in Australia will be greatly increased, as the threshold for Chinese Investment without need for government review has been increased more than four-fold.
Earlier this semester, I highlighted how China’s relationship with Australia was on the rocks as China had imposed both a 3% and 6% tariff on Australian coal. This greatly angered Tony Abbot, Australia’s Prime Minister and led him to publicly condemn his nations biggest trading partner (China). This agreement immediately removes these coals tariffs and within a few years 95% of Australian exports into China will not incur tariffs (BBC News).
China has been pushing the Asian Infrastructure Investment Bank extremely hard and need Australia to join to give the bank increased credibility. Australia previously balked at joining the bank due to U.S. pressure. With this new trade agreement I wonder if there will be backroom chatter for Australia to join the Bank.
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