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Australia-United States Free Trade Agreement - Guide to the Agreement

Legal and Institutional Framework (incorporating Chapters 1, 22 and 23)

1. Structure of the Agreement

The Australia-US Free Trade Agreement (the Agreement) consists of 23 Chapters,
several Annexes and a range of side-letters (exchanges of letters).

A common cross-referencing system applies. Individual Articles are
referred to as Article (Chapter Number).(Article Number). For example,
Article 22.3 is actually Article 3 of Chapter 22. The same system
applies to paragraphs and subparagraphs of Articles. For example,
Article 22.3.1 refers to paragraph 1 of Article 3 of Chapter 22. Annexes
are referred to as Annex (Chapter Number)-(Letter). For example, Annex
2-A is the first Annex of Chapter 2.

2. How is the Free Trade Agreement legally binding?

The Agreement will only become part of Australian domestic law to the extent
that the Australian Parliament amends or adopts legislation implementing
the Agreement. Only a small number of legislative changes are likely
to be needed.

However, once it enters into force, the Agreement will be binding on the
Australian Government in international law.

3. What parts of the Free Trade Agreement are legally binding?

The Annexes and any interpretative footnotes in the Chapters or Annexes
are part of the text of the Agreement and are legally binding.

The various side-letters may represent stand-alone, legally binding, treaty-level
agreements; constitute part of the Agreement; or have no legal standing;
depending on the language included in each individual letter. Side-letters
are used in the Agreement in three main ways:

  • To provide additional clarification on how a particular provision of
    the Agreement will apply to either the United States or Australia;
  • Where either the United States or Australia wishes to make additional
    commitments that apply only to that country, as part of the overall deal;
  • Where either the United States or Australia wishes to confirm to the
    other country how its current policies or systems operate.

In general, the first two categories of side-letter would be agreed as "constituting
an integral part of the Agreement". This means they are a legally
binding part of the Agreement.

The final category of side-letter does not normally become an "integral
part of the Agreement" and is not legally binding. However, if
there were a dispute between the Parties, these side-letters could be used
to explain the context of the dispute.

4. Coverage of the Agreement

Unless specified otherwise, the Agreement covers both citizens and permanent
residents of Australia and the United States (Article 1.2.15). The
term "person" when used in the Agreement, refers both to a natural
person or to an enterprise (Article 1.2.17).

The Agreement covers activity throughout the entire territory of Australia,
except for the Australian Antarctic Territory. For the United States,
it covers activity in the 50 states, the District of Columbia and Puerto
Rico (Annex 1-A). It does not cover activity in the US possessions
or leased territories in the Pacific, for example, the territory of Guam.

5. When does the Agreement commence operation?

The Agreement only commences operation (or 'enters into force') after it
is signed and all domestic requirements are fulfilled. Before the
Agreement enters into force, any necessary implementing legislation or regulations
must be passed by the Australian Parliament and, if required, by State and
Territory legislatures. The US Congress will also have to approve
the Agreement and pass necessary legislation. Once the required domestic
processes have been completed in both countries, the two governments can
agree on a date for entry into force which would occur 60 days after an exchange
of diplomatic notes (Article 23.4).

The earliest date under consideration for entry into force is 1 January

6. Can the Agreement be terminated?

Yes. Either country can terminate the Agreement simply by writing
to the other country giving six months notice of the termination (Article

7. Can the Agreement be reviewed and amended?

The Agreement can be amended at any time by agreement between Australia
and the United States. Amendment of a treaty requires the repeat of
domestic processes, such as tabling of the amendment before the Australian
Parliament's Joint Standing Committee on Treaties (Article 23.3.1).

The United States and Australia have specifically agreed to consider amending
the Agreement if there is progress in the Doha Round of negotiations in the
World Trade Organisation (Article 23.3.2).

The Agreement does not require that it should be completely reviewed at
any specific time. Instead, a Joint Committee is established to continuously
review the operation of the Agreement (Article 21.1). The Joint Committee
will meet every year at Ministerial level to discuss the operation of the
Agreement (Article 21.1.3) and both the United States and Australia will
continue to consult closely with the public on how best to implement the
Agreement (Article 21.1.6).

8. How does the Agreement protect the Government's ability
to pursue key policy objectives on security, public morals, health and conservation?

The Agreement adopts the same general exceptions as have been adopted by
the World Trade Organization in the General Agreement on Tariffs and Trade
(GATT 1994) and General Agreement on Trade in Services (GATS), (Article 22.1).

This means that both the Australian and United States governments are free
to enact laws, regulations or policies they consider are necessary to, for

  • protect public morals or maintain public order;
  • protect human, animal or plant life or health;
  • protect national treasures of artistic, historic or archaeological value;
  • conserve exhaustible natural resources.

The Agreement also provides both the Australian and United States governments
flexibility to protect their security interests (Article 22.2).

9. How does the Agreement apply to taxes?

The Agreement prohibits export taxes on goods and replicates WTO protection
against discriminatory taxes on goods. Beyond this the Agreement does
not apply to any existing taxes (Article 22.3.4(d)), but does place limits
on the ability of both Australian and United States federal and state governments
to implement discriminatory taxes in the future.

Article 22.3 sets out how the National Treatment, Most-favoured Nation Treatment
and Expropriation and Compensation obligations apply to taxes. In
particular, it clarifies that the Double Taxation Convention between the
United States and Australia should apply where there are inconsistencies
between the Double Taxation Convention and the Agreement.

Page updated March 7, 2004

Australia - US Free Trade Agreement home page

Last Updated: 31 December 2012
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