Impact of China-Australia Free Trade Agreement on Beef Trade

This article discusses the China-Australia Free Trade Agreement (CHAFTA) and its impact on the beef trade between the two countries. It explores the benefits and drawbacks of the agreement, as well as the reactions from various stakeholders. The article also analyzes the effects of the tariff reduction on consumers, producers, and government revenues. Overall, it highlights the importance of trade agreements and the need for countries to carefully consider the terms before signing.

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Introduction
The China –Australia free trade agreement or CHAFTA as is commonly referred to was signed
on the 17th of June 2015 between the governments of china and Australia.it was only after the
20th of December of the same year that the agreement came into force.it is a bilateral agreement
between the two countries on how to carry out trade without the usual restrictions that are
normally imposed by countries without the free trade agreement. The agreement is going to
eliminate trade tariffs that were present in most of the goods and services being traded between
the two countries. This will ensure that about 95% of Australian exports to china will be less of
tariff .It is expected that by signing this agreement with china Australia will now be on the same
level with other countries that already have a free trade agreement with china. (Anderson, and
Yotov, 2016).
The CHAFTA agreement is a positive listing as it involved presentation of request from one side
to the other. The request were carefully considered and counter offers made until a common
ground was arrived at.In this case it was about what the Australia government was requesting
against what the Chinese government was willing to concede for the betterment of trade between
them.( Amundson, 2017).The agreement therefore puts certain limits on the benefits that the
Australian industry shall receive.
There are 3 main sectors that have stood to benefit from this agreement. They are
 Agriculture-tariffs on beef from Australia, dairy, wine, sheep meat and some grains have
been removed for a number of years.
 Mining-tariffs on coal and some metals have been eliminated

 Services-there will be increased market access on areas such as tourism education and
health care
REACTIONS
The signing of the free trade agreement brought with it a lot of reaction from different industry
players within Australia. There were both positive and negative sentiments from stakeholders
and especially those that were directly affected by the removal of the tariffs.( Niepmann, and
Schmidt-Eisenlohr, 2017)
There are those that are of the opinion that the agreement has a number of negatives for the
Australian nation. First since it was a positive listing, there are several sectors that were left out
of the deal which include sugar, rice wheat among many others. Some of these sectors are very
critical to the economy and thus they should have been part and parcel of the deal.( Antras, and
Foley, 2015)
China is mostly viewed as the country that has most benefited for the trade agreement, this is due
to the fact that they seem to have discretion on some of the issues negotiated in the deal. For
example, in the case of china importing more beef than the recommended limits, they have the
power to apply more custom duties. Thus most economists have reacted angrily to this.
Also the trade unions have come out strongly to oppose the agreement. This is based on the fact
that the deal allows more Chinese people to come and work in Australia. They are concerned that
this influx will bring about unemployment to the local people. It is their believe that the Chinese
will be given job opportunities without the same being advertised locally for obvious reasons
( Avdjiev, McCauley, and Shin, 2016.)

In terms of positive reaction most of the players in the industry believe that the signing of the
free trade agreement is of much benefit to the country. This is due to the fact that the consumers
mat start to enjoy cheaper prices on manufactured goods from China. This is due to lower tariffs
imposed. (Blecker, 2016)Also the tariff reduction or elimination for products such as beef and
processed food ill help the farmers get more market easily and thus increase their revenues.
Question 1
When it comes to the imposing of trade tariffs, countries are grouped into either being a small or
a large nation. This is normally based on the economic power of a country and its capacity in
terms of conducting trade. Also the control of the world trade market is a critical factor that is
considered when determining whether a country is a small or large nation.
Therefore, China can be considered as a large nation as its economy has grown rapidly over the
years even surpassing countries such as the US in some of the sectors of economy. China boasts
itself as a super power when it comes to trade as they are engaged in virtually every sector of the
economy and control a bigger share of the world trade market. China controls a big chunk of the
world market. This has been achieved through numerous investments and innovations in almost
every sector of the economy together with technology.( Bulatova, and Panchenko, 2018)
Question 2
The CHAFTA agreement provided for the reduction of tariff on the importation of beef from
Australia to china. This would translate o an increase in the number of beef imported to china as
the product will be relatively cheaper with the trade agreement in place.

S1 P
P S S
S1
D D
Q Q
TARIFF IMPOSED REDUCED TARIFF
Impact on china consumers
The trade agreement is going to have a slight increase in the number of beef entering the china
market. The low price that will be occasioned by the tariff reduction will make the beef to be
competitive in the market and thus the Chinese people will be able to consume more than they
did before the agreement was negotiated. This in turn means that the demand for beef in China
will be high and therefore the Australia producers would need to supplement the gap that would
have come about.
Impact on Australia producers
The beef producers in Australia will have to try and satisfy the increased demand for the beef in
the Chinese market. This will in turn create a producer surplus as producers will strive to
produce more. Also there will be creation of employment in the beef sector and the overall

revenues are also expected to rise significantly. The value addition of beef cattle will also rise as
is the same with the profits from the beef sector.
Impact on China revenue.
A reduction in tariff simply means that the prices of the commodity will be lower and this may
see a dip in the revenues collected. The reduction in tariff in China will result in the price of the
Australia beef to decrease from the previous price that was there before the negotiation of the
trade deal. The total revenues that will be posted after the agreement will be lower than when
there was no tariff reduction. However this is something the government is willing to take as it
will open up other form of revenues.( Chorafas, 2016)
Question 3
A trade off can be defined as a situation where one has to accept to lose a bit on one side in order
to gain from another point.in drafting trade agreement the countries involved have to agree to
incur loss on one side and make profit on the other side. The CHAFTA also witnessed a trade off
by china
In agreeing to this deal, china made a decision to compromise on the revenue that it normally
earned with the previous tariff in place. This is give situation on the part of the Chinese.
( Connolly, and Swoboda, 2018) On the other hand the trade agreement allowed the importation
of Chinese labor force into the Australia market. The Chinese laborers will have easy access to
come and work in Australia and thus they would be able to take up several job opportunities.
This will in the end benefit them as they will get huge contracts than the local counterparts due to
their expertise and also still repatriate their earnings back home.

Question 4
The fat that the agreement may cease to exist in future means that the Australia government must
work with speed to ensure that they provide the best quality beef which will make the Chinese
people to still consume the product whether or not there are tariffs in place. The Australia
producers in conjunction with their government must strategize on the various approaches that
they need to take in order to make the quality of their beef and its related products even more
better. If this is done, beef from other countries will be neglected creating low sales for them.(
Rugman, and Verbeke, 2017).Even though there was a reduction in tariff, the Chinese
government will realize that there is an increased sale from Australia which guarantees them a
stream of revenue and which will be more in the long run and thus will be unlikely to re impose
the tariff as they too would still want to gain from the labor point.( Foley, and Manova, 2015)
P
D1
D
D1
D
Q
Brand loyalty means that the consumer will consume the products no matter what and thus an
increase in price due to imposing of tariff will still lead to the demand for the product.

Question 5
The Chinese asked for the clause touching on limitations of visas granted included in the trade
deal for their own benefit. This is because they would want to maximize as much as possible the
importation of its workers so as not to lose out on the benefits that come with it. There will not
like to envision a situation whereby the Australia government may notice that they are losing out
on the employment sector and thus try to limit the influx of Chinese labor into the country. This
kind of trade barrier is known as the temporary entry where a country may try to restrict the
number of people being granted entry in order to protect their own workers. There are also other
types of barrier that are related to this such as the cross border movement which tries to regulate
on the number of people crossing from one border to another. There is also the immigrant
integration barrier which is a form of barrier that tries to curtail the level of integration that may
be there between the immigrants and the locals. This is done mostly to reduce elements of
criminal activities.( Komar, Uniiat, and Lutsiv, 2016)
Question 6
The trade agreement provides for a tariff reduction on the coal being exported to China. This will
result in increase of the exports due to the increase in demand for the product in the Chinese
market. Increased exports will translate to changes in the exchange rate between the two
countries due to differences in currencies.( Melvin, and Norrbin, 2017) The exchange rate effect
will affect negatively some of the agribusiness sectors in the sense that although the sector may
record increased production and sales, the local currency may decrease in value and thus it will
lead to the output gained to reduce marginally. The effect of exchange rates in country trade

dealing is always a key factor that countries should try and analyze even as they proceed on with
international trade.
P
S1
S
D
D1
Q
There is more concentration on the sectors that have reduction in tariffs and therefore some of
the agribusiness that will have no tariffs will suffer reduced demand for their products and also
the supply will go down
Conclusion
One of the key lessons learnt is that each and every country must look critically on the kind of
benefits that they are going to get before signing any form of trade agreement. Some of the deals
might look good on the outside while there are few details that may harm the economy of one
country.it is also important to note that more countries need to come up with the free trade
agreement with other countries in order to boost the levels of trade.( Leamer, and Stern, 2017) If

more countries engaged in this and signed several free trade deals, the process of carrying out
trade will be simplified and consumers will enjoy a variety of products that they did not have
access to before.
Australia can take advantage of this trade deal by ensuring that they market their products as
much s possible in China. The fact that a lot of goods will now be able to reach china much more
cheaper than before means that they need to provide quality products which will be able to attract
huge number of sales.( McGovern, 2018) If the products are fully accepted within the Chinese
market, the country will still be able to earn revenue even when and if the free trade agreement
lapses or is cancelled for whatever reasons.

References
Anderson, J.E. and Yotov, Y.V., 2016. Terms of trade and global efficiency effects of free trade
agreements, 1990–2002. Journal of International Economics, 99,
pp.279-298.
Amundson, C., 2017. Free Trade or Protectionism.
Antras, P. and Foley, C.F., 2015. Poultry in motion: a study of international trade finance
practices. Journal of Political Economy, 123(4), pp.853-901.
Avdjiev, S., McCauley, R.N. and Shin, H.S., 2016. Breaking free of the triple coincidence in
international finance. Economic Policy, 31(87), pp.409-451.
Blecker, R.A., 2016. Beyond the" Twin Deficits": A Trade Strategy for the 1990's: A Trade
Strategy for the 1990's. Routledge.
Bulatova, O.V. and Panchenko, V.G., 2018. Regional trade agreements and the dialectics of
protectionism and liberalism: new vectors of competitiveness.
Chorafas, D.N., 2016. Globalization's limits: conflicting national interests in trade and finance.
Routledge.
Connolly, M.B. and Swoboda, A.K., 2018. International trade and money. Routledge.
Foley, C.F. and Manova, K., 2015. International trade, multinational activity, and corporate
finance. economics, 7(1), pp.119-146.
Komar, N., Uniiat, A. and Lutsiv, R., 2016. Efficiency of the North American Free Trade Zone.

Leamer, E.E. and Stern, R.M., 2017. Quantitative international economics. Routledge.
McGovern, E., 2018. International trade regulation (Vol. 1). Globefield Press.
Melvin, M. and Norrbin, S., 2017. International money and finance. Academic Press.
Niepmann, F. and Schmidt-Eisenlohr, T., 2017. International trade, risk and the role of
banks. Journal of International Economics, 107, pp.111-126.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.

Appendix A
Group dynamics
Decision making process
The group that I am in is no different from any other group when it comes to the issue of
decision making. There are several factors that come to play when trying to make a decision as a
group.
Unilateral decision
In the group there is indeed a participant who always wants to make the decision and proceed
with it without checking with the rest. He doesn’t want to consult and only feels that we should
go along with it. This decision is made based on what he likes and this often brings a lot of
conflict in the group as other members feel that they deserve to have a say on anything touching
on the group.
Topic drifting
There are times in which whatever topic is being discussed suddenly changes into another. There
are several people in the group who always jump in with a new topic even before you can
exhaust the other. It is not healthy as the group may fail to discuss and come up with concrete
solution for a topic at the end of discussion.
Decision support

When it comes to a member’s suggestion we first analyze the same and then give our opinion
regarding it. The opinion may be either in support of the suggestion or not. If all the members are
in agreement, then we will proceed with the suggestion. On the other hand if there are several
reservations we may opt to debate further and try to come to a common ground so as to have one
decision as a group.
Objections
There are a number of times when the majority in the group feels that they should have their way
and thus ignore other member’s objections. If the members who are raising the objections don’t
relent then they usually call for a vote to settle it knowing well that they have the numbers on
their side. This is unfair to the members but at the end of the day we have to come up with a
decision as a group and thus at times it is necessary.
Member’s participation
There are members in the group who are not active when it comes to making decisions. They
would rather leave it to the rest and indicate that they are okay with whatever decision the group
will arrive at. We normally try to get everyone involved in the process as the group is for
everyone and not for a selected few. The effect is that we do get everyone to participate even
though reluctantly by some members.
Ignored contributions
There are times when a certain member tries to make a contribution on the topic discussed but he
is ignored. Such members are people who have been viewed in the group as lacking sufficient
knowledge and thus nobody wants to listen to what he can offer. Once he has contributed and

ignored the member usually feels demoralized and his self-esteem may go down. This makes
him believe that he will never be intelligent and thus withdraws from contributing to anything
within the group.
Appendix B
Contribut
ion
Introduct
ion
Reacti
on to
Chafta
Anwers
to
Questio
ns
Conclusions
and
recommendat
ions
Overall
contribut
ion
Signatu
res
Comme
nts
John 2 3 5 1 4 None
Mary 1 4 2 2 3 None
Anne 3 1 4 1 3 None
Peter 2 3 2 2 2 None