What is a free trade agreement?
A Free Trade Agreement (FTA) is an international treaty which removes barriers to trade and facilitates stronger trade and commercial ties, and increased economic integration between participating countries.
FTAs open up opportunities for Australian exporters and investors to expand their business into key overseas markets. FTAs can improve market access across all areas of trade — goods, services and investment — and help to maintain and stimulate the competitiveness of Australian firms both internationally and domestically. This also benefits Australian consumers through access to an increased range of better value goods and services.
As a member of the World Trade Organization (WTO), Australia is required to meet certain legal disciplines in relation to FTA design. The Australian government considers these as positive standards which provide useful guidance to all potential FTA participants. Under WTO rules FTAs must:
- eliminate tariffs and other restrictions on 'substantially all the trade' in goods between its member countries, and
- eliminate substantially all discrimination against service suppliers from member countries (helping to increase trade in services).
An aspect of Australia’s FTA negotiations which is becoming more of a focus are the so-called 'behind the border' issues. A range of factors such as standards, professional qualifications, intellectual property rights and competition policies in trading partner countries may impact heavily on Australian companies exporting to those markets. Such barriers are often more of a problem for businesses than ‘border measures’ such as tariffs and quota restrictions which have been the focus of trade negotiations traditionally but which have become relatively less important over time as average tariff levels have fallen.
How many free trade agreements does Australia have?
Australia has seven FTAs currently in force (covering 27 percent of Australia's trade), eight more under negotiation, and one recently concluded but is still to enter into force (the latter nine account for a further 45 per cent of Australia's trade).
What are the benefits of free trade agreements?
The Government’s FTA policy aims primarily at maximising the economic benefits flowing to Australia from the negotiation of these agreements.
- FTAs foster freer trade flows and create stronger ties with our trading partners;
- FTAs don't just eliminate tariffs, they also address behind-the-border barriers that impede the flow of goods and services between parties, help to encourage investment, enhance cooperation, and address other issues, such as intellectual property, e-commerce and government procurement;
- FTAs increase Australia's productivity and contribute to higher GDP growth by allowing domestic businesses access to cheaper inputs, introducing new technologies, and fostering competition and innovation;
- FTAs promote regional economic integration and build shared approaches to trade and investment, including through the adoption of common Rules of Origin and through broader acceptance of product standards;
- FTAs can deliver enhanced trading opportunities that contribute to the sustainable economic growth of less-developed economies.
How can I take advantage of Australia's free trade agreements?
Australian businesses can take advantage of FTAs — find out more from the Australian Trade Commission, Austrade.