The China-Australia Free Trade Agreement (ChAFTA) was signed with much fanfare on June 17th. It is currently with the Joint Standing Committee on Treaties (JSCOT) and could pass through parliament as law in early 2016. What does it mean for the printing and packaging industry? Will we get the flow-on from the much touted ‘jobs, income, prosperity’ mantra?
ChAFTA took ten years to negotiate. During this time, Australia saw six Prime Ministers and three general elections. The People’s Republic of China (PRC) saw just two Premiers and one central communist government. The PRC is Australia’s largest trading partner, with 2-way trade currently around $152 billion and our exports accounting for 6% of GDP. Any notion of a ‘China slow-down’ can be compared to a Bathurst car slowing from 300 km/h to a mere 250 km/h.
Both sides of politics agree that Free Trade Agreements are good for the Australian economy, but they differ on the terms negotiated. ChAFTA is without doubt favourable to the ‘big four’ of Australian business – Resources & Energy, Agri/Aqua-business, Finance and Tourism. Tariffs will gradually reduce with most ultimately eliminated, making Australia much more competitive. The Minerals Council of Australia estimates that our coal industry alone will experience reduced costs of around $380 million a year.
Acknowledging the benefit to the overall Australian economy when ChAFTA is fully implemented; what about its impact on the printing and allied industries? Australian printers have long been accustomed to losing certain types of work offshore and Australian paper producers have experienced dumping of excess Chinese cut paper on the local market.
As expected, opinions on ChAFTA are polarized. On the one hand there are the supporters such as Bob Hawke (“I fully support it”), and former Victorian Premier John Brumby who now heads the Australia-China Business Council who believes ChAFTA is good for business and jobs, adding: “ChAFTA is overwhelmingly positive for Australia, delivering a platform to take our economic relationship to a new level and providing our businesses with immense competitive advantage in the large and rapidly growing Chinese market.”
457 visa scaremongering
On the other hand there are the detractors, by far in the minority, such as the CFMEU who state in their submission to JSCOT: “China is Australia’s largest trading partner and one of its most significant sources of foreign investment, so the fact that ChAFTA has been so poorly negotiated is nothing short of a disaster. JSCOT should recommend ChAFTA’s renegotiation.”
The union’s stance appears to be focused mainly on the fear of cheap Chinese labour flooding in and taking Australian jobs, and unqualified tradespersons putting lives in danger. These claims have been roundly dismissed by the DFAT and government, with Jan Adams, deputy secretary at DFAT in her statement to JSCOT, re-affirming the current 457 visa and other state level accreditations will still be in effect, adding: “Claims to the contrary are simply wrong.”
For our $6.7 billion printing industry and $12 billion packaging industry, plus the $7 billion Forest Products side including paper and timber, submissions to JSCOT were mainly on the paper, forestry and packaging side. They are lengthy but, in a nutshell, where forest plantation products and paper are concerned, China gets a better deal. Our export tariffs to them remain, but theirs to us drop to zero. The main concerns of the AFPA (Australian Forest Products Association) surrounded dumping and inequitable tariffs. Maybe this needs looking at. China’s pulp and paper capacity is huge and getting bigger as Eucalypt plantations mature and new mills abound. Once its output exceeds domestic demand, the temptation to dump in foreign markets is hard to resist.
The real impact and opportunities
I don’t think we are going to see a drastic escalation of printed material from China as a result of this ChAFTA; we are used to it anyway. If packaged foods and goods imports increase, then of course the printed packaging will be done in China but it works both ways.
With food, wine, pharmaceutical, meat and other agribusiness exports certain to take off like a rocket, savvy printers will be cozying up to the producers who will need labels, cartons, catalogues, and boxes. Financial services get a huge boost too and these will need prospectuses in Chinese and, yes, real estate brochures too for the anticipated increase in inward investment.
Wine in particular should do incredibly well – tariffs were once 64% - and Chinese regulators on labeling don’t like ‘removable stickers’ with just a bit of Chinese explanation on them. This is an opportunity for label printers to design and affix proper, creative labels and protect their brands in the word’s fastest growing wine market. The same goes for packaged Abalone, crayfish, sea cucumbers, honey, olives, organic produce; Australia is seen as a clean, healthy and dependable source of foods and health supplements – they all need packaging. Follow the product opportunities and supply the print.
Chinese demand for Australian Swisse vitamins resulted in a $1.67 billion buyout by HKSE-listed Biostime. This can only mean more access to the China market...so long as manufacturing does not move there too. It is all labeled and branded.
Overall, I think ChAFTA will be positive for the printing industry but business managers must take the initiative and seek out the opportunities which are undoubtedly there. We must accept that inward Chinese investment along the lines of Hong Kong’s 1010 Printing stake in Opus Group will increase. But we can go there too and form partnerships, alliances and joint ventures.
Services benefit enormously from this ChAFTA and, as I have said so many times here and in print; future printing is about it feeling like a service, not manufacturing. Here is another opportunity; online print ordering – W2P. E-commerce between China and Australia is in the remit of the ChAFTA. I am not sure if the concept of personalized print articles and photobooks has reached the average Chinese consumer but, if they can get access to the internet in Chinese and buy personalized chopsticks, family photobooks, canvas prints, coasters, stubbie holders and so on…the possibilities are huge.
A final note on sea cucumbers, from the DFAT ChAFTA website:
“Sea cucumbers are one of Australia’s oldest internationally traded commodities, known to have been traded as far back as the 1700s or possibly earlier, by Aboriginal Australians. The 10-14% tariffs on sea cucumbers to be eliminated within 4 years of entry into force; in 2014, exports of sea cucumbers to China were worth $23,000 representing just 0.2% of China’s total imports of sea cucumbers to a market worth nearly $10 million in 2014.”
Maybe one day, our grandkids might boast that Australia ‘rode on a sea cucumber’s back’ to prosperity? All packaged and labeled in Australia of course.
This link will take you to a comprehensive source of fact sheets and information about ChAFTA: