A way through on the China-Australia FTA

Economic Note 19


Negotiations for a China-Australia Free Trade Agreement (ChAFTA) began in 2005. In 2012, as Australia’s Trade Minister, I judged that after 17 rounds of negotiations no outcome was in sight. I proposed to the Chinese side that instead of including every conceivable matter in the agreement we conclude a foundational agreement on which the two countries could build over time. The Chinese side welcomed this new approach and negotiations began on the foundational agreement. The incoming Coalition Government followed this path and successfully concluded ChAFTA.

The agreement

ChAFTA was announced on 17 June 2015. Trade Minister Andrew Robb did a very good job in expanding the scope of the agreement and in bringing the negotiations to a successful conclusion. The agreement greatly reduces China’s tariffs on imports of Australian agricultural produce and offers tangible benefits to the financial services sector and other service industries.

Controversially, ChAFTA eases labour market testing requirements. Labour market testing involves assessing whether Australian workers are available to perform the jobs before issuing work visas to foreign nationals.

Labour market testing under ChAFTA

The Government claims labour market testing is mandatory under the agreement: “There is no possibility of placing foreigners in Australian jobs without labour market testing.”[1] This is incorrect.

·         Chapter 10 of ChAFTA removes the Australian Government’s ability to apply labour market testing to 457 visas that currently are subject to such testing, including for nurses, engineers, electricians, plumbers, welders and carpenters.

·         In a Memorandum of Understanding, the minimum size of projects to which Investment Facilitation Agreements (IFAs) for 457 visas apply is set at $150 million, compared with $2 billion for Enterprise Migration Agreements (EMAs). Whereas the EMAs related to major resource projects, the IFAs extend to food and agribusiness, resources and energy, transport, telecommunications, power supply and generation, the environment and tourism.

While the Immigration Department can apply labour market testing at the stage of issuing work visas under IFAs, it has the discretion to waive this requirement, as acknowledged by the Department itself.[2] However, the Immigration Minister can remove the Department’s discretion by stipulating in the IFA approval that labour market testing shall apply.

The solution: amending the migration regulations

A simple solution is available: amend the relevant regulation of the Migration Act to make labour market testing mandatory for the lower-skill 457 visa categories in work agreements. Since the Government claims labour market testing is already mandatory, this proposed amendment would simply give effect to stated Government policy. The change would cover all lower-skilled 457 visa categories associated with work agreements, not only those related to ChAFTA.

The amendment would be to Migration Regulation 2.72AA dealing with labour market testing and would add work agreements to that regulation.

Advantages of the proposed solution

The proposed simple amendment to the Migration regulations would: 

·           Give effect to the Government’s stated policy; 

·           Require no amendment to or renegotiation of ChAFTA;  

·           Avoid any delay in the passage of the enabling legislation for ChAFTA; and

·           Apply on a non-discriminatory basis to all countries.


A simple, one-line amendment to the relevant migration regulation could offer a resolution enabling the early passage of the legislation for the China-Australia Free Trade Agreement.

[1] Prime Minister Abbott, Parliamentary motion on ChAFTA, 8 September 2015.

[2] See http://www.abc.net.au/news/2015-08-12/china-free-trade-agreement-cost-australian-jobs-fact-check/6653214 See also https://theconversation.com/factcheck-could-the-china-australia-fta-lock-out-australian-workers-43470