Why are Free Trade Agreements important?
A Free Trade Agreement (FTA) is a legal treaty between two or more countries that aims to enhance trade and therefore economic growth.
The legal treaty involves a reduction or elimination of the import and export tax, known as tariffs, which facilitates stronger trade which ultimately enhances the relationship between the countries involved.
For Australia, Free Trade Agreements are important because they enable economic growth and boost employment rates.
Australian consumers and small and large businesses greatly benefit from increased access to a variety of competitively priced products and services.
For example, the China-Australia Free Trade Agreement has been in force since 2015 and continues to deliver Australia enormous benefits.
Key Fair Trade Agreements Under Negotiation in 2021
As of January 2021, Australia has 15 FTAs with 26 countries.
Australia is also in the process of negotiating several Free Trade Agreements including:
- Australia – European Union Free Trade Agreement
- Australia – Gulf Cooperation Council (GCC) FTA
- Australia – India Comprehensive Economic Cooperation Agreement
- Australia – United Kingdom Free Trade Agreement
- Environmental Goods Agreement
- Pacific Alliance Free Trade Agreement
- Trade in Services Agreement
Two key FTA negotiations underway are:
1. Australia – European Union Free Trade Agreement
Negotiations with the European Union have been underway since June 2018 and would stand to deliver Australia a great deal of value.
A Free Trade Agreement between Australia and the EU has the potential to open the Australian market up to 450 million consumers with a GDP of over US$15 trillion.
If and when this deal closes, Australia would gain a significant competitive advantage with access to a larger export market in the European Union as well as enjoy greater access to goods and services at lower prices.
2. Australia and the Pacific Alliance FTA (Chile, Colombia, Mexico and Peru)
The Pacific Alliance has shown major growth in recent years and Australia has taken notice.
The Pacific Alliance is comprised of Chile, Colombia, Mexico and Peru and recorded a GDP of US$1.8 trillion between 2015 and 2016 which continues to increase rapidly.
If Australia were to secure a Free Trade Agreement with the Pacific Alliance, it would facilitate a stronger relationship with Latin America and provide Australian businesses with the opportunity to diversify our import and export markets.
You can find more information on current Free Trade Agreements under negotiation on the Australian Government Department of Foreign Affairs and Trade website.
Upcoming changes in 2021
Despite the challenges of COVID-19, Australia is committed to open trade and investment.
During the pandemic, Australia closed one of the world’s largest Free Trade Agreements with the Regional Comprehensive Economic Partnership (RCEP) comprised of 14 Indo-Pacific countries.
As we continue our pursuit for a COVID-free country, Australia also recognises our reliance on trade for a prosperous future.
Already in 2021, we have seen tariff cuts in Canada, Korea and Indonesia for Australian Agricultural products which will hugely benefit Australian farmers and businesses.
Australia is also in the process of working towards ratification of the RCEP Agreement in 2021.
Want to find out more about Free Trade Agreements in Australia?
Our team at Stockwell International has a wealth of knowledge when it comes to trade and Free Trade Agreements.
For more information on Free Trade Agreements relevant to you and your business, get in touch.
We’re more than happy to answer any of your questions.
If you liked this article, you might also like to read up on the Australia – Indonesia Free Trade Agreement article.