Trade is an important part of Australia’s economy and impacts the daily lives of all Australians. An interesting feature of trade is the role of free trade agreements (FTAs) which will be explained in this blog. Firstly, we will talk about what FTAs are and how they promote trade. Then, we will list the different FTAs Australia has signed on to and the different categories FTAs fall into. Following this, we will explain why FTAs have been used to promote trade instead of using the World Trade Organisation (WTO). Lastly, we will look at Australia’s recently concluded FTAs and the outlook for future FTAs.
What are FTAs?
Free trade agreements or FTAs are treaties signed between two or more economies. (The term ‘economies’ is used instead of countries or states because some FTA signatories are not formally recognised as countries or states eg. Hong Kong.) FTAs have two central aims with the first ensuring that countries reduce or fully eliminate the barriers to trade and investment between each other. Secondly, FTAs aim to create greater opportunities for these countries to increase their level of trade and improve business ties between countries. A barrier to trade is a restriction or obstacle which prevents or is a hindrance to the exchange of goods and services between countries. FTAs help governments reduce or remove these barriers by enabling the reciprocal reduction or removal of barriers. That is, economies that signup to an FTA do so because the other FTA partner agrees to remove trade barriers that stop or hinder exports of their goods or services to that economy. The process of negotiating a package of outcomes means FTA partners both give and take to land on a package that has some benefits for all parties but also requires some concessions. When economies make FTA commitments, they also give businesses greater confidence as they faceless barriers to trade when exporting their good or service to a country plus provide greater certainty that the government will not change the conditions on which their trade relies.
Australia currently has eighteen FTAs with thirty different countries that haveentered into force. The section will list all the different FTA’s Australia hasentered into force. These are: Australia-NewZealand (ANZCERTA or CER),Singapore-Australia (SAFTA), Australia-Untied States(AUSFTA),Thailand-Australia (TAFTA), Australia-Chile (ACI-FTA),ASEAN-Australia-NewZealand (AANZFTA), Malaysia-Australia (MAFTA),Korea-Australia (KAFTA),Japan-Australia (JAEPA), China-Australia (ChAFTA),Comprehensive andProgressive Agreement for Trans-Pacific Pacific Partnership(CPTPP),Australia-Hong Kong (A-HKFTA), Peru-Australia (PAFTA), Indonesia-AustraliaComprehensive Economic Partnership Agreement (IA-CEPA), PacificAgreement onCloser Economic Relations (PACER) Plus, Regional ComprehensiveEconomicPartnership Agreement (RCEP), Australia-India Economic Cooperation andTradeAgreement (ECTA) and Australia-Untied Kingdom Free Trade Agreement (An-UKFTA). FTAs can be structured in different ways. This section will explain the different types of FTAs. The first type of FTA, which is very common, is a bilateral agreement between two economies such as Australia and New Zealand. Another is a regional FTA which is signed between multiple countries generally located in the same region. An example of this is the CPTPP whose members are located around the Pacific Ocean.
These regional agreements can include economies from outside the region. An example is the UK which is in the process of joining the CPTPP. The last example of a different form of FTA is a Plurilateral agreement which is a negotiation between economies generally regarding a certain topic.Recently Australia joined a Plurilateral agreement onE-Commerce. The key type of trade agreement is a multilateral agreement. These generally refer to agreements negotiated under the framework of the World TradeOrganisation and include currently 165 member economies. Nearly all FTAs incorporate commitments included in WTO agreements but go beyond those commitments. So the WTO is like the foundation on which most FTAs are built. You might ask why don’t economies just negotiate trade agreements in the WTO rather than use FTAs, regional and plurilateral agreements? The WTO was created in order to produce an international organisation that could help set guidelines and standards in order to regulate trade between countries.Over time, the WTO has faced challenges, such as a lack of meaningful reform to its guidelines and regulations due to continued disagreement between member states. The WTO‘ consensus’ requirement – that everyone has to agree before anything can be agreed has meant trade negotiations are difficult to conclude and generally very slow. In contrast, FTAs can be more ambitious and specific in their scope compared to negotiations in the WTO. Generally, they can also be concluded more quickly. Australia has used both FTAs and worked in the WTO to promote its trade interests. Equally, were the Australian Government to unfairly block or restrict imports or exports, our relationships with international partners can suffer. Using trade as a weapon can hurt businesses and erode trust between countries. The environmental impact of international trade has also attracted a lot of attention as a possible negative consequence ofAustralia’s reliance on international trade and investment.
This section will outline the most recent FTAs that Australia has concluded or is in the process of negotiating. India has become one of Australia’s fastest growing trade partners partly due to the trade agreement Australia negotiated with India – the ECTA – and which entered into force on 29 December2022. There are on going negotiations to build upon this original treaty to establish a Comprehensive Economic CooperationAgreement that would further increase the level of trade and cooperation between the two countries. The Australia-United Kingdom FTA (A-UKFTA) entered into force on 31 May 2023. Negotiations for the Australia-United Arab EmiratesComprehensive Economic Partnership Agreement concluded on 17 September 2024.This trade agreement will help to diversify Australia’s trade partners and helpexpand trade with countries in the Middle East. Finally, negotiations with theEuropean Union (EU) to create an FTA are ongoing. This would be a significant trade agreement for Australia as the EU is one of the largest trade blocks in the world and home to many trade and investment opportunities. There is no current timeline for concluding this FTA. FTAs have allowed Australian businesses to increase their trade with many different economies. Australia will continue to be proactive in this space with more trade deals currently being negotiated. If you are interested in this topic, ACITI will be posting further information specifically exploring each of Australia’s FTAs.
