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 their average level has fallen.

How many free trade agreements does Australia have?

Australia has six FTAs currently in force (covering 29 percent of Australia's trade) and nine more (for a further 36 per cent of Australia's trade) under negotiation.

What guides Australia's FTA policy?

The Government’s FTA policy aims primarily at maximising the economic benefits flowing to Australia from the negotiation of these agreements. The Gillard Government Trade Policy Statement provides a framework for all trade negotiations, including FTAs. This incorporates principles, disciplines and objectives which provide explicit guidance to negotiators and policy-makers. The Trade Policy Statement makes clear that Australia’s FTAs must, for example:

• pass a net benefit test; and demonstrably be in the national interest;
• be comprehensive, high-quality, truly liberalising trade deals which eliminate or substantially reduce barriers to trade;
• support global trade liberalisation, and;
• be negotiated in a way that keeps the public well informed and that provides opportunities for public input.

The Gillard Government’s Trade Policy Statement makes clear that the right of Australian governments to make laws in relation to public policy will be preserved. Our FTAs contain the same general exceptions as in the core WTO agreements, so that Australian governments are able to take reasonable trade restrictions if this is required to:

• enact strict quarantine measures;
• protect human health;
• preserve the environment;
• set food safety standards to reflect community values, and;
• defend our security interests.

What are the benefits of free trade 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.