Why ChAFTA is more than just another FTA

China's influence on global trade is undisputed. It will be the world's largest economy by around 2025 and is already Australia's largest two-way trading partner, accounting for about a quarter of our trade in 2013.

" A successful trade relationship with China will be the single most important factor in our future prosperity"
Mike Smith, Chief Executive Officer, ANZ

Even with China's annual economic growth slowing - to an enviable 7 per cent or roughly the size of the New South Wales economy, each year – a successful trade relationship with China will be the single most important factor in our future prosperity.

This is why I'm concerned to see a union-funded scare campaign attempting to confuse the Australian public with a one-sided perspective that borders on xenophobia.

To be clear: this agreement means more to Australia's future than any other of our Free Trade Agreements.

What makes this union campaign even more confusing is that the China Australia Free Trade Agreement, or CHAFTA as its known, is the result of 10 years of hard work by both sides of politics.

It's been pursued by successive Labor and Coalition Governments because once ratified it will be instrumental in creating new jobs for Australians and will get our economy ready for the 21st century.

I'm concerned however recent political rhetoric – more rooted in our 19th Century past - points to real danger of knocking back our nation's biggest economic gift.

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The union-funded advertisements suggest Australia will be flooded with Chinese workers, taking Australian jobs. The opposite is true with the agreement to create new Australian jobs, new markets for Australian business and new possibilities for the Australian economy.

And we should not be fooled into thinking China needs us more than we need China. After all, China is the world's biggest trading nation with two way trade of $US4.3 trillion in 2014.

If our Parliament delays in ratifying this agreement, China's leadership will turn their attention to our competitors such as Brazil, Indonesia or perhaps even Canada.

Other trading partners would also be more cautious when negotiating with Australia, assuming we will chop and change terms at the last minute after many years of complex negotiations.

Trade deals like CHAFTA or the TPP, which is still being negotiated, require goodwill and perseverance. We should not jeopardise long-term employment and economic benefits by playing short-term politics.

Despite the ill-informed noise I'm confident common sense will prevail and our elected representatives will not ignore the opportunity of a growing Chinese middle-class in favour of partisan political point scoring.

After all this is an unprecedented agreement that commits China to improve market access in around 40 service sectors to levels either equivalent to or better than those enjoyed by other nations.

Tariffs on agricultural exports such as beef, dairy and horticulture will be removed over time. Tariffs are also eliminated on resources, such as coal and alumina, as well as on pharmaceutical and processed food products. This is good news for economic growth.

Importantly though the agreement is not limited to just abolishing tariffs. It also liberalises market access for our services sector and our offshore businesses.

This was a vital development. A recent ANZ report suggests 'value-added' services exports to Asia could support over one million Australian jobs by 2030 and be worth more than $A163 billion – a 135 per cent increase from 2013.

This opportunity will help us diversify our economic base and create opportunities for many other businesses in sectors such as health and aged care, construction, tourism, finance and the law.

While every free trade agreement has industries and sectors that win more than others, it's vital we look at these agreements as a whole, rather than separate parts. It is a vast wood and it would be a mistake to focus on individual trees.

Mike Smith is chief executive of ANZ and chair of the Business Council of Australia's China Leadership Group.

This story was first published in The Australian Financial Review.