Promoting trade agreements

Budget Review 2015–16 Index

Tarek Dale

The 2015–16 Budget includes a measure which will provide $24.6m over two years from 2015–16 to:

... promote business understanding of the recently concluded Free Trade Agreements in North Asia and to assist businesses to access and maximise their benefits under these agreements.[1]

A press release by the Minister for Trade notes that the funding will cover:

  • ‘the continued roll-out of a national FTA [free trade agreement] seminar series over the next two years’, by the Department of Foreign Affairs and Austrade
  • ‘an online dashboard-portal–including a comprehensive tariff finder’
  • FTA kits which ‘will include fact sheets and a video presentation’
  • ‘enhanced help-desk support’
  • ‘a grants program and training’, and
  • ‘a promotional campaign to explain the benefits of the FTAs to businesses and consumers, and showcase Australia as a trade and investment destination for offshore business’.[2]

The difficulty for businesses in utilising preferential trade agreements (PTAs—frequently referred to as free trade agreements, or FTAs), and resulting under-utilisation, is a frequently identified issue.[3] A survey by HSBC found that:

On average each FTA signed by Australia is used only by 19% of Australian exporters, compared to an average of 26% among Asian exporters using their respective markets' FTAs.

... half of the Australian respondents had limited or no understanding of one or more of Australia's FTAs, citing complexity of trade terms, a lack of understanding of benefits, and deals with non-strategic markets being the key factors behind the subdued uptake.[4]

The low awareness and use of PTAs by businesses can be difficult to measure; however an analysis of the Thailand-Australia Free Trade Agreement (TAFTA) found that in 2010 only 10.4 per cent of eligible Australian exports to Thailand utilised the preferential tariff rates available under TAFTA.[5]

Following a 2015 survey of businesses, Kate Carnell, chief executive officer of the Australian Chamber of Commerce and Industry (ACCI), stated:

Raising awareness of all FTAs is an important first step, followed by education for businesses explaining how the agreements can create opportunities and save businesses money. Our research tells us there is a strong appetite for FTA knowledge, but many businesses don’t know where to go to find out more.[6]

ACCI has previously recommended a proactive approach by Government to inform industry about PTAs, including that:

... the Government provide appropriate annual resourcing to ensure that Australian industry is fully informed about the opportunities available in the markets covered by Australian trade agreements, and how they might utilise these agreements.[7]


[1].          Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 97. While the total expenditure on the measure is $24.6m, the net increase in expenses is $24.2m, with some of the funding offset ‘from within the existing resources of the Department of Foreign Affairs and Trade’. The funding offset from within the Department of Foreign Affairs and Trade is $0.3m (the reason the figures do not reconcile exactly is likely rounding differences).

[2].          A Robb (Minister for Trade), $25 million to help businesses boost exports, media release, 12 May 2015, pp. 1–2. The media release does not specify the cost of different components of the measure.

[3].          The Productivity Commission notes in relation to different types of trade agreements that ‘While most of these are commonly referred to as Free Trade Agreements ... it is important to distinguish the effects of these agreements from ‘free trade’. Free trade would require the removal of all tariffs, quotas, subsidies and other government measures that distort trade flows. FTAs involve preferential arrangements under which tariffs and some other barriers to trade are lowered ... but only for those countries party to the agreement. The barriers for other countries are not reduced by the agreement’ (Productivity Commission (PC), Bilateral and Regional Trade Agreements, PC, Canberra, November 2010, p. 5).

[4].          HSBC, ‘Australian companies under-utilising Free Trade Agreements, HSBC research’, HSBC website.

[5].          P Athukorala and A Kohpaiboon, ‘Australian–Thai Trade: Has the Free Trade Agreement Made a Difference?’, Australian Economic Review, 44(4), December 2011, p. 461. The article examined ‘the preference utilisation rate ... estimated as the percentage share of trade accounted for by the RoO [Rules of Origin] certificates issued by the Thai Bureau of Preferential Trade and the actual trade of products eligible for trade preferences’ (p. 460). TAFTA entered into force on 1 January 2005 (Department of Foreign Affairs and Trade, ‘Thailand-Australia FTA’, Department of Foreign Affairs and Trade website).

[6].          Australian Chamber of Commerce and Industry, Businesses hungry for more information on free trade agreements, survey finds, media release, 27 March 2015.

[7].          Australian Chamber of Commerce and Industry, Submission to the Joint Standing Committee on Treaties, Report 142: Treaty tabled on 13 May 2014–Free Trade Agreement between the Government of Australia and the Government of the Republic of Korea (Seoul, 8 April 2014), June 2014, p. 42.  

 

All online articles accessed May 2015. 

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