3. The bilateral and regional policy framework
Australia's bilateral and regional trade initiatives complement and reinforce our multilateral trade policy. Through two avenues - free trade agreements (FTA) and broad-ranging trade and economic agreements, and participation in APEC and other regional forums - Australia can make market access gains and break new ground that supports global trade liberalization.
2002 was a busy and productive year for Australia's bilateral and regional trade policy.
US Free Trade Agreement
On 14 November 2002, Australia and the United States announced they would begin negotiations to conclude an Australia-United States Free Trade Agreement. For Australia, an FTA with the United States presents a unique opportunity to advance the interests of exporters and offers significant benefits to the nation in terms of economic growth and employment.
Australia's overall objective is an FTA that:
- covers elimination of tariffs, quotas and other barriers across all sectors of both economies
- high priority will be given to securing substantial market access for Australian exports - such as agricultural and food products - which currently face highly restrictive barriers to the US market
- reduces restrictions on the ability of the two countries to do business with each other
- complies with World Trade Organization (WTO) rules and complements our objectives in the Doha Round of WTO negotiations and in APEC forums
- sets a high standard for other FTAs in the region
- does not impair Australia's ability to meet fundamental policy objectives in health care, education, consumer protection, cultural policy, quarantine and environmental policy.
The Government announced its specific objectives for the FTA on 3 March 2003. The objectives are wide-ranging and comprehensive. They cover:
- Trade in industrial goods and agriculture
- Rules of origin
- Quarantine/Sanitary and Phytosanitary (SPS) measures
- Trade remedies
- Customs cooperation
- Trade in services
- Investment
- Intellectual property rights
- Telecommunications and electronic commerce
- Government procurement
- Competition policy
- State-to-State dispute settlement
- Environmental issues
Detail on the Government's specific objectives for the FTA under each of these subject areas is available on the Department of Foreign Affairs and Trade's website.
The Government confirmed its objectives after intensive consultations. Dialogue with business organisations and state and territory governments was supplemented by public submissions from some 200 industry bodies, companies, non-government organizations (NGOs), unions and individuals - an unusually high level of response for such a process. Nearly 60 of these submissions came from peak industry and business organisations, representing the full range of agriculture, services and manufacturing industry sectors.
The Government is prepared to discuss all issues the United States wishes to raise, without prejudice to its final position. But it has made it clear that it will not agree to FTA outcomes that would undermine Australian sovereignty, culture or identity, or the Government's capacity to deliver important national policies.
The first round of negotiations was held in Canberra in March 2003. Although largely an initial exchange of views, the negotiations covered the full range of issues likely to be part of an agreement. Several more negotiating rounds are envisaged.
An FTA with the world's most dynamic economy - an historic opportunity for Australia
A free trade agreement (FTA) with the United States offers Australia an historic opportunity to remove or reduce market access barriers and other regulatory restrictions that affect Australia's goods and services exports and investment in the world's largest and most dynamic economy.
Economic modelling suggests that removal of barriers to trade under an FTA could boost the Australian economy by around $4 billion by the year 2010 (0.4 per cent of GDP). An FTA would also help Australia attract US investment. Examples of potential indirect benefits include better business linkages and promotion of best practice in such areas as management and the use of e-commerce.
An FTA can minimise any competitive disadvantage Australian exporters to the US might face as a result of the United States' FTA negotiations with other countries, such as the Free Trade Area of the Americas process. And the intense level of engagement with US trade officials will enhance Australia's participation in the Doha Round, where close cooperation with the US will be vital on a range of issues.
For Economic modelling (USFTA):
Singapore-Australia Free Trade Agreement (SAFTA)
The Singapore-Australia Free Trade Agreement (SAFTA) is a landmark achievement. Singapore is already Australia's seventh largest trading partner (Australia's merchandise exports to Singapore in 2002 were valued at $4.9 billion) and SAFTA - Australia's first bilateral free trade agreement since the conclusion of the CER agreement with New Zealand twenty years ago - offers exciting opportunities in the goods and services sectors to a wide range of Australian exporters.
Those opportunities will not be limited to the Singaporean market: a growing number of Australian companies view Singapore as an ideal base for their operations in the wider South-East Asian region.
SAFTA will be fully consistent with WTO rules governing free trade agreements, both in terms of its comprehensive scope and the depth of liberalisation it delivers. As strong supporters of the WTO rules, this was an important objective for both countries. SAFTA's ambitious outcomes will support the active roles played by Australia and Singapore in the Doha Development Round of trade negotiations.
SAFTA - the key features
- All tariffs applying to trade in goods between the parties will be eliminated immediately. Rules of Origin are incorporated in the agreement to ensure that only those goods substantially produced in the territory of the parties qualify for the tariff exemption.
- A more open and predictable business environment will be established across a range of areas, including telecommunications regulation, competition policy, government procurement, technical standards, intellectual property, electronic commerce, customs procedures and business travel.
- Review provisions allow for additional commitments to be negotiated and additional areas to be covered as bilateral trade and investment develop over time.
Singapore will recognise an additional four Australian undergraduate law degrees when SAFTA comes into force. Already recognising law degrees from the University of Melbourne, Monash University, the University of New South Wales and the University of Sydney, Singapore will now recognise degrees from the Australian National University, the University of Western Australia, the University of Queensland and Flinders University. The Government considers that all Australia's 28 law schools merit recognition by Singapore and will pursue this objective in the scheduled reviews provided for under the FTA.
Singapore-Australia Free Trade Agreement: Summary of key outcomes for Australia
| All tariffs eliminated from entry into force, including on Australian beer and stout | Annexes under negotiation on food standards and horticultural products |
| Cooperation on investigation and prevention of infringements of customs law | Comprehensive and transparent 'negative listing' of services commitments |
| Restrictions on the number of wholesale banking licences to be eased over time | Banks allowed to transfer information, including electronic data, to Australia |
| Conditions eased for joint ventures involving Australian law firms | Number of Australian law degrees recognised in Singapore doubled from 4 to 8 |
| Removal/easing of residency requirements for Australian professionals | National treatment and market access commitments for education providers |
| Singapore government overseas scholarships tenable at Australian universities | The environmental services sector to be largely open to Australian businesses |
| Open market access and national treatment for a range of other service sectors | Transparency of investment restrictions in government-linked companies |
| Investors protected against, compensated for, expropriation | Telecom interconnection on non-discriminatory, timely, cost-oriented terms |
| Telecoms regulatory principles on transparency, rights of appeal, sanctions & consultation | Short term entry for Australian business people extended from 1 month to 3 |
| Rights to work for spouses of business people | Commitment to address anti-competitive business practices |
| Consultation upon request on anti-competitive practices of particular concern | Competitive neutrality disciplines for government-owned businesses |
| Australia firms get national treatment in procurement by 47 Singapore agencies | Protection of intellectual property supplied in government tender processes |
| Cooperation on eliminating trade in goods infringing intellectual property rights | Measures to prevent the export of goods infringing copyright or trade marks |
| No customs duties on bilateral electronic transmissions | Agreement to facilitate paperless trading to reduce business transaction costs |
| Promotion of confidence in bilateral e-commerce, eg in electronic signatures |
For
more detailed information on SAFTA
Thailand: Closer Economic Relations Free Trade Agreement
The Government has begun free trade negotiations with Thailand. In launching the Closer Economic Relations Free Trade Agreement (CER-FTA) in May 2002, the Australian and Thai prime ministers said the agreement should be comprehensive and go beyond traditional goods and services market access issues to cover trade and investment facilitation and other cooperation.
For Australia, the main expected value of the CER-FTA would be in substantially reducing Thailand's relatively high tariffs (which average 18 per cent) and tariff rate quotas on several commodities.
In addition to the early harvest' agreement, the two countries have reached agreement on negotiating objectives and principles. Negotiations on tariff and non-tariff issues began in earnest in early 2003.
Progress
In November 2002, the Trade Minister, Mark Vaile, and his Thai counterpart, Commerce Minister Adisai, announced that an early harvest' would be sought from negotiations on an Australia-Thailand Closer Economic Relations-Free Trade Agreement (CER-FTA), in the form of accelerated negotiations on investment protection and promotion and on a range of capacity-building areas.
In addition to the early harvest' agreement, the two countries have reached agreement on negotiating objectives and principles. Negotiations on tariff and non-tariff issues began in earnest in early 2003.
Further
reading on free trade agreements
Other trade and economic agreements
Japan
Australia and Japan are exploring options for deepening their trade and economic relationship. Australia's objective - announced when the Prime Minister, Mr Howard, met with his Japanese counterpart, Mr Koizumi, in May 2002 - is the negotiation of a comprehensive trade and economic agreement. The agreement will strengthen Australia's overall economic relationship with the world's second largest economy and Australia's largest export market.
Officials from the two countries are developing practical initiatives for promoting trade and investment linkages, and two rounds of formal consultations were held in 2002. Consultations will continue through the first half of 2003 before officials report to prime ministers on the next steps.
There are a number of possible options for achieving a balanced package of measures. It could, for example, contain a comprehensive joint action program focused on trade and investment facilitation. Areas covered could include food safety, quarantine clearances, mutual recognition of conformity assessment, competition policy, and sector-specific linkages in areas such as information and communications technology and education.
Proposed
Trade and Economic Agreement with Japan
China
Building a stronger partnership with China is an important objective for Australia. The economic and trade framework agreement - announced jointly in May 2002 by the Prime Minister, Mr Howard, and Chinese Premier Zhu - will help to maximise the benefits flowing from the commitments made by China as part of its WTO accession.
The framework is expected to include measures to promote business cooperation in sectors of standout potential such as energy and resources, agriculture, and financial and social services. And it will provide the umbrella for bilateral economic dialogue on regional and multilateral trade issues.
Officials have reached agreement on objectives and process. A joint study is now being undertaken with negotiations expected to begin during 2003.
Regional trade diplomacy
Asia Pacific Economic Cooperation (APEC)
The Asia Pacific Economic Cooperation forum (APEC) remains the pre-eminent forum for regional trade and economic cooperation in the Pacific Ocean. It includes the United States, China, Japan, the Republic of Korea, Russia and Indonesia and continues to be an integral element of Australia's engagement with the region. Achievement of the Bogor goal' of free and open trade and investment in the region by 2010 for developed countries and 2020 for developing countries remains the key objective for APEC. In recent times, APEC's agenda has broadened to address the threats posed by terrorism to the region's economic growth and prosperity.
Mexico hosted APEC in 2002 with key outcomes being strong political support for the Doha Development Round of trade negotiations, including a call for the abolition of all forms of agricultural export subsidies, agreement by economies to implement broad ranging counter-terrorism measures (known as the Secure Trade in the APEC Region (STAR) initiative), and endorsement of trade facilitation measures to reduce the costs of doing business in the region, such as the introduction of an electronic quarantine and health certificate system.
APEC ministers condemned terrorism in the strongest terms as a threat to regional peace and security and as a direct challenge to APEC's vision of free, open and prosperous economies. They agreed on measures to combat terrorist financing, improve cyber-security, strengthen energy security, and provide capacity building for developing APEC economies to help deal with terrorism effectively.
In 2003, Australia will work closely with host nation Thailand to implement the counter-terrorism STAR initiative and lead APEC's work to improve the functioning of markets via structural reform, strengthened economic legal infrastructure and corporate governance initiatives.
Asia
Pacific Economic Cooperation (APEC) and Australia
The Economic Costs of Terrorism
In addition to its human impact, terrorism imposes significant economic costs. These costs are being felt across the Asia Pacific region. As part of its contribution to APEC's counter-terrorism work, Australia presented a paper to the APEC officials meeting at Chiang Rai, Thailand, in February 2003 which outlines terrorism's economic impact on Australia's region. The main points of the paper - prepared by the Economic Analytical Unit (EAU) of the Department of Foreign Affairs and Trade - are:
- The increased risk and prevalence of global terrorism is not only a major security concern but also looms as a threat to regional economic prosperity. Terrorist acts already impose significant costs on all economies.
- In the short term the costs include loss of life, destruction of property and depression of short term economic activity. In the medium term, unchecked, terrorism raises the cost of many international transactions and creates uncertainty, reducing confidence and increasing risk perceptions and premiums, reducing trade flows, investment and economic growth.
- For example, a recent study found new anti-terrorism trade security measures required post-September 11 cost from 1 to 3 per cent of the value of North American trade flows - a US$60 billion to US$180 billion impost on all world trade flows. Analysts estimate the impact on US investment of increased uncertainty post-September 11 has cut US GDP by 0.2 per cent; the International Monetary Fund estimates the United States' total loss of output from all terrorism-related costs could be as high as 0.75 per cent of its GDP.
- The economic costs of terrorism are transmitted far beyond the country of immediate impact. Regional and international economic linkages mean terrorist events in one economy have flow-on effects, imposing significant costs on other regional economies. Hence all economies have an interest in cooperating to reduce terrorism.
- Unchecked terrorism may impose higher costs on developing economies relative to their GDP - because of their greater reliance on trade and capital inflows. One major study found developing economies could boost their economic growth by up to 1.25 percentage points per year by improving their economic security to international best practice levels.
- Any economy which fails to combat terrorism and prevent its financing therefore could incur significant costs in terms of lost investment and trade opportunities and may be marginalised from many international transactions.
- For APEC, efforts to facilitate trade and implement security initiatives are mutually reinforcing. As well as reducing exposure to terrorist attack, technological advances to increase security are likely, for instance, to increase the efficiency of cargo handling and people movement, leading to lower trade costs and more efficient trade flows.
- The positive economic impact from implementing measures to guard against terrorism and negative spillovers from inaction make a collective international approach the most efficient response to terrorism. APEC has established a suite of measures to secure the movement of goods and people, halt terrorist financing and promote cyber-security.
The Costs of Terrorism
and the Benefits of Cooperating to Combat Terrorism
Other
Economic Analytical Unit publications
ASEAN and Australia and New Zealand:
Closer Economic Partnership
A Ministerial Declaration on an AFTA-CER Closer Economic Partnership (CEP) was signed on 14 September 2002. The AFTA-CER CEP builds on seven years of work on trade facilitation and economic cooperation between Australia and New Zealand and the 10 ASEAN countries. Its aim is to remove and reduce impediments to trade and investment and to lower business costs.
ASEAN and CER ministers agreed to an Australian proposal to target the doubling of ASEAN-CER trade and investment by 2010 - to nearly $66 billion in the case of merchandise trade and $99 billion in the case of investment.
The CEP work program is being developed with the business community. It currently covers areas such as technical barriers to trade, non-tariff barriers, customs cooperation, trade and investment promotion and facilitation, capacity building, standards and conformity assessment, electronic commerce, and small and medium enterprises. Ministers and officials are being informed by work programs and priorities identified by the AFTA-CER business advisory council, which met for the first time during the year. Australia's representatives on the council are Peter Hanenberger, Chairman and Managing Director, Holden Ltd, and Robert Gerard, Chairman and Managing Director, Gerard Industries Pty Ltd.
Australia is taking a keen interest in emerging regional economic and trade architecture including ASEAN+3 (Korea, Japan and China), whose governments are studying the possibility of the gradual formation of an East Asian FTA. This is very much a long-term goal.
It is natural that countries in the region should discuss issues of common interest and Australia supports moves to enhance dialogue and strengthen cooperation in the region. For its part, Australia is promoting closer economic integration with key regional trading partners, as evidenced by the AFTA-CER CEP arrangements, our recently signed FTA with Singapore, the CER-FTA with Thailand, and our trade and economic negotiations with China and Japan.
The
Indian Ocean Rim Association for Regional Cooperation
Diamonds Trade Forever
Australia's $600 million rough diamond export trade is benefiting from a new secure trading regime involving over 50 countries. Introduced on 1 January 2003, the Kimberley Process Certification Scheme involves the world's major producers, distributors and polishers of rough diamonds.
The Scheme is an essential step towards preventing the illegal trade in rough diamonds (known as conflict' diamonds) from financing war and civil conflict in Africa. Trade in rough diamonds is banned with non-participants, and rough diamond import and export shipments from participants need to be accompanied by a certificate declaring that the shipment has been handled in accordance with the Scheme's requirements.
The introduction of the Kimberley Process Certification Scheme in Australia is the culmination of two years of combined effort involving the Department of Foreign Affairs and Trade, the Department of the Prime Minister and Cabinet, the Department of Industry, Tourism and Resources, the Australian Customs Service, state governments and the Australian rough diamond industry.