How do FTAs work?
Free trade agreements are pacts made between two or more countries to reduce the amount of limitations placed on trade. Both tariffs and trade quotas are examples of popular forms of barriers that are used to protect a nation’s internal markets and industries against competition from other countries.
Utilization of free trade agreements is a critical factor in Australia’s ability to maintain its current level of economic growth (FTAs).
Free trade agreements, sometimes known as FTAs, are pacts made between two or more states with the intention of reducing or eliminating certain trade and investment barriers and fostering tighter economic relationships between the parties involved.
Australia has free trade agreements (FTAs) with a total of 20 countries. Australia is now in the process of negotiating new bilateral and regional free trade agreements (FTAs).
Tariffs as a roadblock to trade
For instance, prior to the two nations signing a free trade agreement (FTA), the tax on Australian cattle was 38.5 percent. Exporters of beef from Australia will have to pay a lower price to serve the Japanese market as a result of the progressive lowering of that tariff that will occur as a result of the Japan-Australia Economic Partnership Agreement.
Trade quotas as an entry barrier
A protectionist trade restriction such as a trade quota is another type of a trade restriction that is used to control the volume of commerce that occurs between countries. The government of a country may set trade quotas, which limit the amount of goods or the total value of those goods that can be sent out of the country within a particular period of time.
If you are exporting items that are subject to a trade quota, you are out of luck after the predetermined quota has been reached.
What FTAs entail for your company
If you want to sell your products or services on a foreign market, exporting them to a country that has a free trade agreement (FTA) with Australia will make it much simpler. And by expenditures, we mean things like limits on duty-free commerce, export taxes, and customs duties. These are all examples of obstacles.
When a free trade agreement is in effect, these costs will be decreased or abolished entirely, and you may anticipate more relaxed trade quotas, if there are any at all. When you conduct business in accordance with an FTA, your export company may be eligible to receive significant rewards.
The benefits of free trade agreements
Free trade agreements provide chances for both large and small Australian firms to profit from increased trade and investment, which in turn boosts economic activity and job creation in Australia.
Non-tariff obstacles that might otherwise obstruct the flow of products and services can also be addressed through free trade agreements, which can serve to enhance regulations governing matters like intellectual property, e-commerce, and public procurement.
Australian businesses and consumers now have better access to a greater variety of reasonably priced goods and services, cutting-edge technologies, and creative business methods thanks to free trade agreements.
Australia can gain more from international investment thanks to free trade agreements.
Free trade agreements strengthen shared approaches to trade and investment between Australia and our trading partners and encourage regional economic integration.
Increased trade and investment opportunities provided by free trade agreements can help less developed economies prosper economically.
Free trade agreements foster more robust business-to-business and people-to-people ties, strengthening Australia’s overall bilateral connections with FTA partners.
Over time, free trade agreements can continue to benefit Australia and its trading partners in other ways, such as through built-in agendas that promote continued domestic reform and trade liberalisation.
Lower tariffs
If tariffs are lowered or eliminated totally, you will have greater financial flexibility to set your prices for your goods and services in a manner that is more competitive in international markets. If, for example, your goods were required to pay a tariff of 40 percent in a country that did not have a free trade agreement with Australia, your only options would be to raise your selling price to account for this or to completely ignore the market.
When that tariff is lowered or eliminated entirely, there is a huge increase in the market’s profitability.
When you price your products in a more aggressive manner, you will benefit not only your customers but also your bottom line in the long run.
Removing trade restrictions
The removal of trade quotas is one way to remove the element of uncertainty. When trade quotas restrict the importation of products and services, you may have consumers in other countries who are hungry for your goods; nevertheless, once the restrictions have been reached, there is no means to reach those consumers (by your business or your competitors).
Working with countries that have eased or eliminated these entry restrictions gives you the ability to meet demand, based on the objectives that you have set for yourself.
When deciding where you might export your goods or services, one factor to take into consideration is whether or not the destination country has a free trade agreement (FTA). With a free trade agreement (FTA) in effect, you can anticipate more generous trade quotas, fewer impediments, and lower tariffs, if any at all (if any).
It is possible that the commitment of each nation to fostering two-way trade was another factor that made the process of exporting goods easier to understand and carry out.
Nations with which Australia has free trade agreements
In 2014, the value of Australia’s export market was 327 billion Australian dollars. During that time period, the five most important markets were China, Japan, the Republic of Korea, the United States of America, and New Zealand.
The table below illustrates the current standing of Australia’s free trade agreements with other countries.
Among the FTAs that are in use are:
China-Australia FTA (ChAFTA).
Australia-Chile FTA (ACLFTA).
Japan-Australia EPA (JAEPA).
Korea-Australia FTA (KAFTA).
Malaysia-Australia FTA (MAFTA).
Singapore-Australia FTA (SAFTA).
Thailand-Australia FTA (TAFTA).
Australia-New Zealand CER (ANZCERTA).
ASEAN-Australia-New Zealand FTA (AANZFTA).
Australia-USA FTA (AUSFTA).
In negotiation
The following contracts are up for discussion:
Australia-Gulf Cooperation Council (GCC) FTA.
Australia-India Comprehensive Economic Cooperation Agreement.
Indonesia-Australia Comprehensive Economic Partnership Agreement.
Pacific Agreement on Closer Economic Relations (PACER) Plus.
Regional Comprehensive Economic Partnership.
Trade in Services Agreement.
Trans-Pacific Partnership Agreement.
Where can I get help?
FTAs are large and complex agreements, but full of opportunities for Australian business to expand overseas sales.
To help you get the facts, the Australian Government has just launched the Open For Business website . It directs you to a range of government resources on:
- understanding FTAs
- business support for exporters
- expanding your export business.
To make sure you’re up to date with how FTAs can help you, you can also:
- join the Open For Business Facebook community
- follow Open For Business on Twitter .
Summary
An essential component of Australia’s sustained economic growth is the use of free trade agreements (FTAs). FTAs are agreements between two or more nations to lower trade restrictions. Free trade agreements provide opportunities for both large and small Australian firms to profit from increased trade and investment. Australia can gain more from international investment thanks to free trade agreements. Free trade agreements strengthen shared approaches to trade and investment between Australia and our trading partners.
FTAs are large and complex agreements, but full of opportunities for Australian business. Take into account whether or not there is an FTA in place when choosing where you might export your products or services. The value of Australia’s export market in 2014 was A$327 billion.
