Trade and Aid

Trade Agreements – Bilateral

A bicycle is a machine that has two wheels, and so it shouldn’t surprise you to discover that a bilateral trade agreement is an agreement about the way in which trade will be conducted between two countries. Australia is involved in several agreements of this type.

Recently, the Australian government has chosen to pursue the possibility of free trade agreements with several of our most important trading partners. A free trade agreement is one in which tariffs are effectively reduced to zero, and quotas on imports and exports are also removed. The complexity of these agreements sometimes means that these trade restrictions are removed very slowly. For example, even though the free trade agreement with the United States came into effect on January 1st 2005, the out of quota tariff on Australian beef entering the USA is currently 26.4%, and this will only be completely phased out by 2023.

Bilateral free trade agreements to which Australia is a signatory are:

AUSFTA - The Australia United States Free Trade Agreement

This agreement became law at the beginning of 2005, and at the time it was the largest free trade agreement that had been negotiated between any two countries in the world. Critics argue that most of the benefits in the short term flow to the USA, and that the Australian negotiators were unable to gain any increase in the quota for Australian sugar. However, since the agreement was signed exports to the USA have increased. For example, dairy exports to the USA are now very significant, and if we could produce at higher levels they would probably buy even more from us. Also, Australia is now the only country in the world (other than the USA) that can bid for US government contracts. This is a $US200 billion a year industry.

TAFTA – Thailand Australia Free Trade Agreement

Although the AUSFTA agreement certainly received most of the press, you should know that Australia successfully began an agreement with Thailand at exactly the same time. This agreement was less complicated, as the number of transactions between our countries is significantly smaller. Despite this, it is worth noting that Thailand is a country with a high level of protection – some tariffs are as high as 200%. Nearly 80% of our exports to Thailand became tariff free from the first day, and by 2010, 95% of all Australian exports to Thailand will be free of tariffs.

SAFTA – Singapore Australia Free Trade Agreement

In July 2003, Australia and Singapore began a free trade agreement which continues to this day. This was Australia’s first free trade agreement since 1983. This agreement is beneficial, because Singapore represents a “gateway to Asia” for Australian businesses – the majority of Australian investment in Asia passes through this tiny island country. Successful negotiation of SAFTA meant that Australian business people are now able to travel and work in Singapore, and that service suppliers are given almost complete access to the country.

ANZCERTA - Australia New Zealand Closer Economic Relations Trade Agreement

This agreement has been in place since 1983, and is still a significant trade document for Australia. Despite its small size, New Zealand represents our fifth largest export destination. It is also significant that Australians and New Zealanders are able to travel and work between our two countries almost without restriction. This agreement has meant that trade between our countries has grown at an average of 9% per annum over the last twenty years.

You should also note that Australia is in the process of trying to negotiate even more bilateral free trade agreements. For example, working parties have been established to try and find a way forward for free trade agreements with China, Japan and Chile. We are also exploring the possibility of agreements with Malaysia, Korea and the Gulf States. You can expect to hear a lot more about these agreements as negotiations progress.

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