Home-grown businesses exporting skills from advanced manufacturing to services are the new drivers of wealth and job creation. A deeper understanding of the country’s International trade agreements is vital to its sustenance
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 5th 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 of $6 billion in new trade agreements with China, Korea, Japan and India.
As stated by Julie Bishop, Deputy Prime Minister, “If the goal of traditional diplomacy is peace, then the goal of economic diplomacy is prosperity.” Economic diplomacy uses our international diplomatic assets to advance the movement of Australian goods and services into international markets. Trade liberalisation through free trade agreements (FTA) is therefore central to the government’s agenda to support Australian businesses and boost economic growth.
Trade Agreements currently contribute to 42% of Australia’s international trade and two-way trade in goods and services was worth nearly $670 billion in 2013-14.
FTAs 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 FTA 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:
- ASEAN – Australia – New Zealand FTA
- Australia – Chile FTA
- Australia – New Zealand Closer Economic Relations
- Australia – United States FTA
- Japan – Australia Economic Partnership Agreement
- Korea – Australia FTA
- Malaysia – Australia FTA
- Singapore – Australia FTA
- Thailand – Australia FTA
- Australia – China FTA*
(*Intention to sign agreement concluded, but the FTA has yet to be signed).
It is important to recognise that signing of FTAs 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. Relationships are still the core of successful trade with countries such as China, Japan, Korea and India.
That being established, underlined below are some examples of how businesses can use and benefit from FTAs:
- Increasing goods exports to a market due to preferential treatment, quota expansion or simplified customs procedures in partner countries.
- 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.
- Achieving efficiencies through cheaper imported or better quality and technologically advanced inputs due to Australian commitment to eliminate tariffs.
- Harnessing new or more secure access to services markets with the help of liberalising market access and reduced regulatory barriers in different service sectors.
- Deepening engagement in global value chains by leveraging Regional FTAs and rules that allow production to be shared across countries while allowing the “accumulation” of origin for the purposes of meeting the FTA’s rules of origin.
- Investing with enhanced protections and certainty due tospecific provisions that guarantee protection and security for investments.
- Increased business mobility through entry and temporary stay visas for skilled service providers, investors and business visitors in each other’s country.
- Accessing international central, provincial, state and local government procurement markets with the help of specific rules, procedures and transparency standards that are consistent with non-discrimination and Australia’s existing procurement practices.
- Addressing ‘behind the border’ barriers to trade through measures such as preventing anti-competitive practices and protecting intellectual property.
- Contributing to trade negotiation business consultationsby providing feedback on specific experiences in International markets.
Accessing government support for your International engagement
Pitcher Partners works closely with Department Foreign Affairs and Trade (DFAT) and Austrade to ensure access to latest insights into International market opportunities, regulatory conditions and skilled in-market expertise across the globe.
DFAT is the official government agency responsible for managing Australia’s international presence. The department advances Australia’s national interest and prosperity through economic diplomacy, with a network of 96 overseas posts in five continents and over 4200 staff across international offices.
Austrade is a government agency responsible for building Australia’s export and other international economic interests by providing access to information, advice and services. As of June 2014, Austrade had 82 offices overseas in 48 markets and 11 offices across Australia.
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, clients may contact DFAT, Austrade and Pitcher Partners for assistance.
The author is Director Cross Border Business at Pitcher Partners. She can be contacted at Rohini.email@example.com