Overview and key outcomes of the ASEAN-Australia-New Zealand Free Trade Agreement

Department of Foreign Affairs and Trade speaking notes for presentation at Austrade’s ASEAN Now seminars,

15-30 October 2009 

1. Why Australia does FTAs

  • A successful conclusion to the Doha Round of WTO negotiations remains the Australian Government’s highest trade policy priority.
  • However, the Government, and the WTO itself, recognises that regional trade agreements can actually support the WTO’s multilateral trading system
    • by allowing groups of countries to negotiate rules and commitments that go beyond what is possible at the time multilaterally. 
  • FTAs are therefore an important element of Australia’s trade negotiating agenda. The approach recognises that FTAs can:
    • deliver economic benefits to Australian industry (more quickly than might be possible through the WTO round)
    • tackle specific issues in more depth and often at a higher level of ambition than is possible in the WTO, for example on investment which is largely outside the WTO’s remit
    • be more comprehensive, covering trade in goods and services, investment, as well as other trade-related issues such as competition policy and intellectual property
    • help secure Australia’s competitiveness in key export markets
    • enhance Australia’s broader economic and foreign policy and strategic interests.

2. Australia’s FTA agenda

  • AANZFTA is one example of an increasing global trend over the past decade towards the negotiation of FTAs.
  • In addition to AANZFTA, Australia has bilateral FTAs in place with three AANZTA parties: New Zealand, Singapore, Thailand
    • we also have FTAs with the United States and Chile.
  • All of these Agreements, with the exception of New Zealand, were negotiated since 2001.
  • Australia is currently negotiating FTAs with China, Japan, Korea, Malaysia and the Gulf Cooperation Council.
  • Australia will also participate in two plurilateral negotiations:
    • the Trans-Pacific Partnership (TPP) negotiations, which is likely to comprise Singapore, Brunei, New Zealand, Chile, Peru, the United States and Vietnam
    • agreement was reached in August by Pacific Island Forum leaders to commence PACER Plus FTA negotiations. 
  • Australia is currently considering possible bilateral FTAs with Indonesia and India
    • with the joint feasibility study on a possible bilateral FTA with Indonesia concluded and a study underway with India. 

3. AANZFTA

  • AANZFTA is the first Free Trade Agreement Australia has signed since the onset of the global financial crisis
    • it demonstrates the Government’s commitment to providing a solid platform for Australia’s trade and investment with the region.
  • AANZFTA is an important agreement for Australia
    • it is the largest FTA Australia has concluded and the most comprehensive FTA ASEAN has concluded, covering goods, services, investment, intellectual property, e-commerce, temporary movement of business people, competition and economic cooperation.
  • AANZFTA spans 12 economies, with over 600 million people and a combined GDP of $3.1 trillion.
  • The deal will eliminate tariffs on 96 per cent of Australia’s current exports to ASEAN nations by 2020
    • currently, only 67 per cent of Australia’s exports to the region are tariff-free.
  • The FTA will enter into force on 1 January 2010 following the conclusion of domestic processes by Australia, New Zealand and at least four ASEAN member countries.

4. Australia’s Trade with ASEAN

  • As a group, ASEAN and New Zealand account for a significant part of Australia’s trade
    • in 2008, Australia’s two-way trade with this group was valued at $112 billion, accounting for 20 per cent of Australia’s total trade
    • this is larger than Australia’s trade with any single country.
  • Australia’s two-way trade with ASEAN has grown by an annual average of 10 per cent over the last decade 
    • faster than Australia’s trade with any of its top 10 commercial partners, except China.

5. AANZFTA background

  • Consideration to link the ASEAN Free Trade Area (AFTA) and the Australia-New Zealand Closer Economic Relations (CER) Trade Agreement began in the early 1990s but progress was slow.
  • In 2000 a report, entitled “The Angkor Agenda”, argued in favour of an AFTA-CER Free Trade Area
    • but the proposal was not accepted and the decision was taken at the end of 2002 to develop a Closer Economic Partnership (CEP). 
  • Significantly, it was ASEAN that came to Australia (and New Zealand) in 2004 suggesting that the CEP be taken to a higher level through an FTA negotiation
    • this was part of ASEAN’s strategy to pursue a series of region wide FTAs to reap the benefits of increased economic integration
    • and to compete better with the rapid rise of China and India.

6. AANZFTA consultation process

  • A comprehensive consultation process was pursued to ensure AANZFTA delivered real outcomes for Australian business.
  • State and territory governments were consulted through regular meetings, teleconferences and regular visits by the AANZFTA negotiators to state and territory capitals. 
  • Regular consultations were also held with other stakeholders, including industry, unions and public interest groups to ensure that their views informed the development of the Australian Government’s negotiating strategy.

7. Overview of goods outcomes

  • AANZFTA is most substantial in the goods area, reflecting the fact that ASEAN has done more internal integration on goods than in the non-goods areas.
  • AANZFTA immediately binds existing applied rates of tariff that could otherwise, under WTO provisions, be increased significantly above those applied rates
    • this is particularly valuable in the case of binding low ASEAN tariffs where a lot of Australia’s trade takes place.
  • AANZFTA also delivers over time tariff elimination commitments from the more developed ASEAN countries and Vietnam on between 90 and 100 per cent of tariff lines
    • these cover 96 per cent of current Australian exports to the region
    • exclusions of tariffs have been kept to a minimum, and generally do not exceed 1% of a country’s national tariff lines.
  • The FTA also contains Regional Rules of Origin (ROO) which enhances Australia’s ability to tap into global supply chains.
    • this is particularly important for the manufacturing sector and the development of more efficient and competitive industries.
  • What is important here is not just Australia’s direct trade with each ASEAN member country but also their trade with each other
    • for example, an Indonesian car exported to Malaysia can now count Australian components and inputs towards meeting the AANZFTA ROO
  • Importantly, AANZFTA sets a high-quality benchmark for a WTO-consistent FTA involving developing countries.
    • the AANZFTA outcomes stand as an example of what developing countries can deliver in terms of tariff elimination.
    • it also creates a starting point for tariff negotiations in future bilateral trade negotiations.

8. Services outcomes

  • AANZFTA’s outcomes in non-goods areas are more modest than goods, reflecting in large part the limited extent of intra-ASEAN economic integration in these areas.
  • Nevertheless, AANZFTA provides a strong framework to strengthen services and investment outcomes over time.
  • AANZFTA will promote greater certainty and transparency for Australian service suppliers doing business in the region.
  • This is achieved through a range of commitments by ASEAN countries that:
    • bind existing levels of market openness in various service sectors;
    • discipline domestic regulatory measures;
    • guarantee certain legal protections for investment in their territories.
  • ASEAN countries have made substantial, commercially meaningful improvements on existing WTO commitments in a range of sectors
    • many of these AANZFTA commitments go beyond the offers made by ASEAN countries in the WTO Doha Round
    • a built-in review provision will ensure that further improvements can be negotiated over time as ASEAN countries progressively liberalise their services sectors.
  • The Australian Government drew on extensive consultations with the Australian services sector to determine a range of country specific commitments which are reflected in detailed schedules for each country.
  • Full schedules of country-specific services commitments can be found on the DFAT website.
  • In addition, Australian services exporters will benefit from “WTO plus” regulatory disciplines in AANZTA
    • these include sector-specific disciplines contained in annexes on financial and telecommunications services.
    • for example, Australian financial institutions will benefit from disciplines to promote greater transparency and timely processing of license applications in ASEAN countries
    • Australian telecommunications providers will benefit from disciplines that aim to ensure a level playing field with major domestic suppliers in ASEAN countries, which may own or control essential network facilities

9. Other AANZFTA outcomes

  • AANZFTA will also enhance transparency and certainty for Australian investors in the region through a regime of post-establishment investment protections
    • this includes an investor-state dispute resolution mechanism which provides a right to international arbitration (investor-state dispute settlement) to resolve disputes about alleged breaches of these obligations.
  • The investment protections in AANZFTA apply to investment in services and non-services sectors of the economy.
  • AANZFTA provides a framework for countries to make commitments on temporary business entry of natural persons that go beyond services suppliers, to include goods sellers and investors
    • most ASEAN countries have made commitments that improve on their WTO commitments on entry of service suppliers
  • AANZFTA also contains regulatory disciplines on temporary entry, including obligations on parties to:
    • process completed applications for temporary entry and stay promptly;
    • notify applicants, on request, about the status or outcome of the application; and
    • ensure that fees for visas and entry permits are reasonable.
  • The Chapter on Intellectual Property reinforces the Parties’ existing rights and obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and builds on them in a number of areas.
  • The Chapter on Competition establishes a framework for cooperation in the promotion of competition, economic efficiency, consumer welfare and the curtailment of anti-competitive practices. 
  • AANZFTA is Australia’s first FTA to establish a framework for trade and investment-related cooperation.
    • an Economic Cooperation Work Program will be implemented over five years after entry into force of AANZFTA at an estimated cost of up to $25 million
    • this allows for the provision of technical assistance and capacity building to developing ASEAN countries to assist in implementation of the FTA
    • it builds on a number of capacity building activities provided to ASEAN counterparts throughout the AANZFTA negotiations. 
  • This component of the agreement is very important as it supports Australia’s interests in seeing AANZFTA effectively implemented.

10. Securing Australia’s regional interests

  • AANZFTA provides for a work program to develop market access schedules, covering pre-establishment issues such as foreign equity limits, within five years of entry into force of the Agreement, subject to agreement of the Parties.
  • AANZFTA is a forward-looking FTA with substantial built-in agendas and review mechanisms in areas such as non-tariff measures, rules of origin, services and investment
    • these are aimed at having AANZFTA’s commitments expand and deepen over time in line with the development of the ASEAN Economic Community.
  • AANZFTA is also a platform for Australia’s (and New Zealand’s) ongoing economic engagement with other countries at three different levels:
    1. at the bilateral level with individual ASEAN countries through bilateral FTAs realising ‘AANZFTA-plus’ outcomes
    2. at the regional level with ASEAN to support establishment of the ASEAN Economic Community; and
    3. at the broader regional level, for further regional engagement with other East Asia Summit (EAS) countries through the ASEAN+6 (China, Japan, Korea, India, Australia and New Zealand) process.

11. The way forward

  • In the margins of the East Asia Summit on 25 October 2009, leaders of AANZFTA Parties issued a joint statement announcing AANZFTA will enter into force on 1 January 2010.
  • All AANZFTA Parties committed to completing their domestic processes expeditiously and are working towards ratification by 1 January 2010. 
  • It is important to note that AANZFTA Parties will not be bound by the Agreement until they have provided formal notification of completion of their domestic processes
    • this means that AANZFTA may, at first, be in force between Australia, New Zealand and only some ASEAN countries
    • it will enter into force for remaining countries following completion of their domestic processes.
  • Australia will support the effective implementation of the Agreement through:
    • ongoing engagement with the ASEAN Secretariat and individual governments
    • actively supporting AANZFTA’s built in agendas and work program
    • the economic cooperation agenda mentioned earlier
    • ongoing outreach and advocacy to ensure industry can take full advantage of the benefits of AANZFTA.
  • The Government is focused on effective implementation to ensure the FTA delivers real benefits from day one
    • but there may be some teething problems
    • business is encouraged to provide early feedback to the Department to enable such issues to be addressed expeditiously
    • emails should be sent to asean.fta@dfat.gov.au.
Last Updated: 5 February 2013