Think HBR

Understanding Australia’s International Trade Agreements

Greg Farrow
Pitcher Partners
Australia’s prosperity is more connected than ever to developments in the global economy. Our trade with the world is equivalent to 42% of our GDP – a number that has not dropped below 25% since 1900.
The stock of foreign investment in Australia is at record highs of A$2.8 trillion, while Australia’s investments around the world total A$2.0 trillion (2014). Sustaining our performance as the world’s 12th largest economy, with the fifth highest GDP per capita will require strong international engagement.
This was further emphasised by the Treasurer Joe Hockey in the 2015 Federal Budget, which announced government intention to assist businesses in taking advantage of the growing services export opportunities in Asia, in higher education, tourism, health care and financial services. Australian-based businesses exporting home grown skills – from advanced manufacturing to services – are seen as the big new drivers of wealth creation and job creation over the next decade.
The Budget commits an investment in new trade agreements with China, Korea, Japan and India.
Free Trade Agreements with China and South Korea, and the Economic Partnership Agreement with Japan, signed in 2014, are indicative of a strategic push to enable greater access and increase the global competitiveness of Australian goods and services providers.
To access these international market opportunities, SMEs must ingrain their export and international engagement plan into their business strategy, rather than have it positioned as an optional bolt on. Understanding the specific way in which a Free Trade Agreement impacts a particular business transaction is key to achieving a positive impact on the bottom line.
To succeed in foreign markets, Australian service providers must look for their niche, deepen their understanding of the competitive landscape, develop internationally capable leaders and position their A team on the ground. If this seems too onerous an investment for an individual SME, collaborating with industry peers, academia and government can help create more innovative and sustainable models for international engagement.
Australia currently has the following trade agreements in force:
1. ASEAN – Australia – New Zealand FTA
2. Australia – Chile FTA
3. Australia – New Zealand Closer Economic Relations
4. Australia – United States FTA
5. Japan – Australia Economic Partnership Agreement
6. Korea – Australia FTA
7. Malaysia – Australia FTA
8. Singapore – Australia FTA
9. Thailand – Australia FTA
10. Australia – China FTA*
(*Intention to sign agreement concluded, but the FTA has yet to be signed).
It is important to recognise that signing of Free Trade Agreements between countries do not in themselves result in “trouble free trade”.
All trade agreements are different and need to be looked at separately in the context of specifically identified trade opportunities.
That being established, below are some examples of how
businesses can use and benefit from Free Trade Agreements:
1. Increasing goods exports to a market due to preferential treatment, quota expansion or simplified customs procedures in partner countries.
2. Commencing new goods exports to a market due to newly introduced incentives such as lower tariffs or increased attractiveness of Australian goods to new importers.
3. Achieving efficiencies through cheaper imported or better quality and technologically advanced inputs due to Australian commitment to eliminate tariffs.
4. Harnessing new or more secure access to services markets with the help of liberalising market access and reduced regulatory barriers in different service sectors.
Trade Agreements can be complicated documents, with various caveats to ensure they are not disruptive to local industry. In some instances, behind the border measures can act as effective barriers even when trade agreements have negotiated open access. To understand the specific impact trade agreements can have on your business, it is wise to seek advice.
For further information contact Pitcher Partners on (02) 4911 2000, email or visit
Greg Farrow Greg Farrow
is the Managing Partner of the Pitcher Partners in the Hunter Valley with offices in Newcastle, Maitland and Singleton. He provides clients with expert advice and services in a range of areas including business structuring and evaluation, GST, property development, superannuation and taxation planning.