FTAs and your business

After nearly a decade of negotiations, Australia signed a much-lauded free trade agreement with China in November 2014. The effects of which, are expected to have far reaching implications for all Australians, particularly those in the business community.

One of many

While the Chinese-Australia free trade agreement might be the most recent and highly publicised, Australia actually has several free trade agreements, including deals with New Zealand, the US, Chile, Vietnam, Japan, South Korea, Malaysia, Singapore and the Association of South East Asian Nations (ASEAN).

Opportunities

Alan Oxley, Australia’s top trade envoy in the 1980s, told Dynamic Business that he thought the opportunities of the Chinese-Australia FTA were ripe for business owners willing and able to target the Chinese market. “What it means is that it draws their attention to the fact the Chinese market is open and it should encourage them to go up and have a look themselves.” “There are business opportunities there,” he said. “What people should do is go and visit, and they should talk to other businesses that have been successful. They’ll tell you what the problems are.”

Look at options

While many Australian businesses and heads of industry are eagerly awaiting the changes that will be rolled out as part of the new FTA, it’s prudent to reflect on a 2010 report conducted by the Productivity Commission that played down the possible benefits of FTAs in general: The report found that the “potential impact [of fair trade agreements] is limited and other options often may be more cost-effective”. In addition, the report argued that our current processes for assessing trade agreements “lack transparency and tend to oversell the likely benefits” and that “pre-negotiation modelling should include realistic scenarios and be overseen by an independent body”.

What content and conditions generally sit within a FTA?

There are several aspects involved in a free trade agreement, some of which carry obvious implications, and others with a more abstract effect on business in Australia. Primarily, a free trade agreement is an international treaty that removes typical trade barriers between two countries or more. According to the Department of Foreign Affairs and Trade: “An FTA is an international treaty that removes barriers to trade and facilitates stronger trade and commercial ties, contributing to increased economic integration between participating countries. FTAs can cover entire regions with multiple participants or link just two economies.” It’s important to note that each fair trade agreement is unique – as is evidenced by the amount of time it has taken Australia and China to negotiate the terms of the recent contract.

What’s in it for me as a business owner?

So how do FTAs – and more specifically the China-Australia FTA – benefit Australian business owners? The answer is multi-layered, and depends largely on which industry you are in and how that industry has been addressed in the agreement. Economist Tim Harcourt from the UNSW Business School and author of Trading Places - The Airport Economist's guide to International Business, says that the China-Australia deal will see “tariffs slashed on agriculture and consumer goods, as well as new changes to financial services and architecture”. In terms of how the deals around agriculture and consumer goods will change the way we do business in this country, Tim opines that it will “allow Australian exporters to go from the mining boom to the dining boom, and our architects will help build the great mall of China”.

According to DFAT, the following are some of the ways in which FTAs can benefit business owners in Australia:

• FTAs foster freer trade flows and create stronger ties with our trading partners.

• FTAs can increase Australia's productivity and contribute to higher GDP growth by allowing domestic businesses access to cheaper inputs, introducing new technologies, and fostering competition and innovation.

• FTAs don't just eliminate tariffs, they also address behind-the-border barriers that impede the flow of goods and services between parties, encourage investment, enhance cooperation, and can address other issues, such as intellectual property, e-commerce and government procurement.

 As a business owner, who can help me navigate the different FTAs?

Because the implications of FTAs vary so much depending on your industry, the first point of call for information is to visit the Austrade FTA Portal on the DFAT website. Here you can find a range of information on the broader aspects of FTAs as well as the specifics on the agreements currently in place. Another valuable resource is the Australia-China Chamber of Commerce and Industry.

With international barriers to trade becoming more and more navigable, there are countless opportunities for Australian business owners to take advantage of the changes in investment and export regulations. The more you know about the way politics abroad impact business at home, the better-placed you will be to grow your business.

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