ChAFTA (China – Australia FTA) Undoes Abbott

He Falls to Turnbull Charge

Experts speculate that the growing domestic opposition to the China-Australia free trade agreement is one reason why members of the Liberal Party questioned Abbott’s leadership credibility, despite his earlier successes in concluding negotiations for trade deals with Japan and South Korea, both of which were later ratified.

Abbott’s policies largely focused on expanding economic growth by increasing exports of Australia’s three top commodities, including iron ore mineral, coal, and liquefied natural gas (LNG). The deal with Adani on coal was also concluded in this period.

In 2014, iron ore exports comprised 56 percent of Australia’s exports to China, one of Australia’s key Asian trading partners.

The recent economic turbulence in China has resulted in decreased demand for Australian exports and is among the leading causes of the current economic downturn.

In recognition of Australia’s vulnerabilities and to increase competitiveness, Abbott attempted to diversify an export-focused economy by making progress on a China-Australia free trade agreement that has been a decade in the making.

The deal formally referred to as ChAFTA witnessed a landmark event in June when both countries formally signed the 17-chapter long agreement.

The FTA would substantially increase Australia’s access to certain Chinese services sectors, while also making 85 percent of Australian goods exports duty-free upon entry into force, moving to 95 percent over time, among other provisions.

Labour affected

However, recent pushback from labour union leaders, as well as concerns raised by some Labor Party members over whether the deal could negatively impact domestic labourers, has put the agreement’s future in jeopardy.

Turnbull, the new Premier has repeatedly voiced support for this trade agreement in the past, and made specific reference to the deal’s importance as a “foundation to prosperity” during his speech on Monday explaining why he was challenging Abbott to be premier.

The Liberal Party is now looking to Turnbull to build consensus between lawmakers ahead of a vote expected before year’s end on the enabling legislation that would allow the agreement to enter into force. Prior to the vote, a joint parliamentary committee is set to release a report regarding the FTA in mid-October.

Repeal of Carbon Tax, No Trading of Emissions

The leadership reshuffling has also drawn the interest of climate watchers, given the long-standing differences between Turnbull and his predecessor on this subject.

Abbott passed sweeping climate policy reforms during his time in office, most particularly the repeal of the country’s controversial carbon tax, which in turn resulted in a cascade of criticism from both the international community and industry experts tired of policy uncertainties.

The carbon tax was in place for barely two years, having been enacted during the tenure of then-Prime Minister Julia Gillard of the Labor Party. Had it remained in place, the tax would have transitioned into an emissions trading scheme this year.

In its place, Abbott put a voluntary emissions reduction scheme, entitled the Emissions Reduction Fund, through which the government purchases emissions reductions from pre-approved projects on the basis of price per tonne of carbon dioxide, following an auction process.

The crediting and purchasing elements of that system are now in operation, with the safeguard mechanism of the plan due to debut next year. The latter aims to ensure that emissions paid for under the Fund are not counteracted by an increase of emissions in other sectors.