After a meeting with the Chinese Minster of Finance Lou Jiwei, Australia's Treasurer Joe Hockey indicated that, under the terms of the proposed free trade agreement (FTA) between the two countries, Australia will be exempted from China's new tariffs on imported coal.

Earlier this month, in what was said to be a move to aid Chinese mining companies, and also to restrict carbon emissions in the country, China imposed three percent and six percent duties on imported coal used in steel mills and power stations, respectively.

If the tariffs are not eliminated from the prospective FTA, they will affect around AUD9bn (USD7.9bn) of annual Australian coal production, which is the country's second-largest export contributor after iron ore. The duties, for example, have placed Australian coal exports at a disadvantage in comparison with those from Indonesia, which benefits from zero tariffs under China's FTA with the Association of Southeast Asian Nations.

Hockey recognized that, until the Australia-China FTA is in effect, Australian coal exporters will continue to suffer the tariffs. He suggested, however, that their imposition should give further impetus to completion of the agreement, for which, although it has been in negotiation since 2005, hopes have been expressed that its terms can be concluded by the end of this year.

While there has been no official indication as to what differences remain between the two sides in the trade talks, improved market access for Australian agricultural products into China has been a prominent Australian target, and a concern for the Chinese farming sector, since FTA discussions began.

On the other hand, the Chinese Government has expressed the hope that Australia could provide more favorable conditions for Chinese investment, that has already been banned from certain sensitive projects.

China is already Australia's biggest market, with mineral resources, energy and food top of its export list. The countries' total trade reached over USD135bn last year, but investment is of equal importance as Australia is also the largest overseas investment destination for Chinese companies.

Source: Tax News