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PERTH (miningweekly.com) – Australia’s free trade agreement with China could be a win for local coal exporters, as it relaxes coal tariffs, advisory firm Grant Thornton said on Monday.
Australian Prime Minister Tony Abbot on Monday announced a landmark free trade agreement with China, which was expected to unlock substantial benefits for years to come.
Following the G20 meeting in Brisbane, Abbott reached an agreement with China’s President Xi Jinping for a free trade agreement between the two nations.
The Prime Minister said on Monday that under the agreement, Australian businesses would have unprecedented access to the economy of a world giant.
“It greatly enhances our competitive position in key areas such as agriculture, resources and energy, manufacturing exports, services and investment.”
More than 85% of Australian goods exports will be tariff free upon entry into force, rising to 93% in four years. Some of these goods are currently subject to tariffs of up to 40%.
For the resources sector, the free trade agreement meant that tariffs would also be reduced on a range of resources and energy products, including the current 8% tariff on aluminium oxide, benefiting exports worth around A$1.3-billion a year.
Furthermore, the current 3% tariffs on coking coal would also be removed from the first day of the trade agreement, while the 6% tariff on thermal coal would be phased out in two years.
Grant Thornton energy and resources partner Brock Mackenzie said on Monday that the removal or relaxation of coal tariffs was ultimately a good outcome for the broader Chinese economy, as it would lead to relatively cheaper energy prices.
“While Australia’s comparably high-quality coal will always been in demand, any move by the Chinese government to relax protectionist practices regarding the importing of coal or other commodities is ultimately a good outcome for Australia exporters.
“While ideally they would be removed immediately, the phasing out of the coking and thermal coal tariffs is a tremendous result for local Australian exporters, and it continues the message that China is very much open for business,” said Mackenzie.
A recent report by the Bureau of Resources and Energy Economics revealed that Australia also exported some 11.5-million tonnes of metallurgical coal during the quarter to June, as well as 12.8-million tonnes of thermal coal.