Media release from the Australian Department of Foreign Affairs and Trade

D6 - Friday, 30 April 2004

CIE Study Confirms Gains from an Australia-US Free Trade Agreement

A Centre for International Economics study, commissioned by the Department of Foreign Affairs and Trade, on the impact of the Australia-United States Free Trade Agreement has confirmed it will deliver substantial benefits to Australia.

According to the CIE's modelling, Australia's annual GDP could be up by around $6 billion (about 0.7 per cent of GDP) as a result of the AUSFTA a decade after the Agreement's entry into force. Total GDP increase over 20 years is expected to amount to almost $60 billion in today's dollars.

Much of this growth will be generated by the dynamic gains expected from the deeper links the Agreement establishes between Australia and the US, with the CIE finding investment liberalisation the biggest contributor to the projected increase in Australia's GDP. But even if these benefits and other “dynamic” effects of trade liberalisation are excluded, liberalisation of trade in goods and services alone would contribute about $1 billion to real GDP.

The study expects the AUSFTA to bring about strong growth in two-way trade. Australia's exports to the US are predicted to increase by more than $3 billion annually. Beef and dairy exports are expected to expand as a result of the access gains negotiated, and big increases in exports of automobiles and parts are predicted.

The CIE study shows all major sectors of the economy and all States and Territories gaining. Parts of rural and regional Australia - for example, dairy producing and processing areas in Victoria, Tasmania and other states - will benefit strongly.

The industry case studies in the report show the FTA could also yield significant benefits not captured fully by modelling. These include frameworks for regulatory harmonisation in financial services and the removal of tariff peaks for light metals such as magnesium and titanium.

Less quantifiable benefits include greater certainty for Australian investors and service providers in the US, possible further integration in standards and mutual recognitions, and protecting Australia's competitive position as other countries negotiate FTAs with the US.

The CIE was commissioned to undertake the study by DFAT in March 2004 to provide an independent assessment of the impact of the AUSFTA on Australia and to assist public discussion and the work of the Parliament's Joint Standing Committee on Treaties.

The CIE study is a detailed economic analysis, which uses two highly sophisticated models to attempt to measure the complex and comprehensive outcomes of the AUSFTA. While modelling has its limitations and as the CIE itself acknowledges some of the sectoral results, in particular, should be regarded with caution, the overwhelming outcome of the modelling work is that the AUSFTA delivers significant gains to Australia and will lift economic growth and welfare.

The text of the report is available on the DFAT website.

Media enquiries:  Nicole Guihot, DFAT Media Liaison Section, (02) 6261 1555