Chinese companies will gain the right to sue Australian governments in international tribunals under an agreement that will eventually allow 95 per cent of Australian goods exports to enter China duty-free.
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Declaring Wednesday a "momentous day", prime minister Tony Abbott said he and China's commerce minister Gao Hucheng would one day be able to say to their grandchildren: "yes, we were there the day this extraordinary agreement was signed".
The free-trade deal will eliminate the tariffs of up to 20 per cent on dairy exports within 11 years, eliminate the 12 to 15 per cent tariff on beef over 9 years and the 14 to 20 per cent tariff on wine over 4 years and give Australia an extra duty-free quota for wool.
When it comes into force 92 per cent of China's exports will enter Australia duty free, with most remaining tariffs removed after 4 years.
But the agreement also includes an investor-state dispute settlement clause which will allow Chinese companies that believe they have been discriminated against to appeal to an extraterritorial tribunal. Australian companies gain reciprocal rights to appeal against Chinese government decisions.
The tobacco giant Philip Morris is at present using such a clause in an Australia-Hong Kong agreement to sue Australia over its plain packaging laws.
The exact criteria that could be used for such lawsuits is not spelt out in the agreement and is left to be determined by a review after three years.
"It looks as if the governments could not agree about the details, but were desperate to announce the agreement so they delegated these definitions to a review," said Patricia Ranald of the Australian Fair Trade and Investment Network. "This means there is no definition of indirect expropriation or fair and equitable treatment for foreign investors. These are the provisions which foreign investors have used to sue."
Trade minister Andrew Robb said the chapter on dispute settlement included explicit provisions to protect legitimate government regulation in areas such as public health and the environment.
The agreement also appears to allow Australian firms to bring in an unlimited number of temporary workers from China, a provision attacked by the Australian Council of Trades Unions.
Labor's trade spokeswoman Penny Wong said the clause should not "be used as a mechanism to bypass local workers".
The agreement will be examined by the parliament's joint standing committee on treaties which will report within 20 days.
