Free trade agreements: What is an FTA and what are the benefits?
By Matthew Grimson Updated Вт 8 апр 2014, 8:36 AM AEST
Trade Minister Andrew Robb and his South Korean counterpart Yoon Sang-jick shake on an FTA in December.
Andrew Robb - Twitter
After seven years of negotiations Australia has signed a free trade agreement (FTA) with Japan, but what exactly is an FTA?
Essentially, FTAs are designed to reduce the barriers to trade between two or more countries, which are in place to help protect local markets and industries.
Trade barriers typically come in the form of tariffs and trade quotas. One such example is Japan's tariff on Australian beef, which under the new deal will be cut from 38.5 per cent to 19.5 per cent over 18 years.
FTAs also cover areas such as government procurement, intellectual property rights, and competition policy.
Lowering trade barriers helps industries access new markets, boosting their reach and the number of people they can sell their products to.
FTAs are also ultimately designed to benefit consumers. In theory, increased competition means more products on the shelves and lower prices.
Japanese exporters will see Australian tariffs lowered on electronics, whitegoods and cars, and Australian consumers will see prices lowered as a result.
Australian car buyers will be paying about $1,500 less for Japanese vehicles.
Prime Minister Tony Abbott said in January that Australia's year-long G20 presidency, which culminates with the November summit in Brisbane, would make "freer trade" one of its priorities.
Are there downsides to free trade agreements?
One of the downsides of FTAs are the ability of powerful economies to impose their will over smaller, developing economies.
Why Abbott should reconsider FTAs
Most often, this comes in the form of a smaller economy making more concessions than are beneficial in the long term, while the larger economy keeps its trade restrictions in place.
Accusations have also been made in the past that FTAs have been enacted for foreign policy purposes, rather than bilateral economic benefit.
Critics also argue that FTAs do not encourage trade liberalisation as effectively as multilateral agreements.
Furthermore, critics argue that FTAs simply promote large, competitive trading blocs that could create economic instability.
Legal nuances a factor in negotiations
Agreements are notoriously difficult to negotiate, and often call for laws in two different jurisdictions to align.
Investor-state dispute settlement (ISDS) provisions give investors the ability to take governments to an international tribunal if they think there has been a breach in an FTA.
Australia has ISDS provisions in four of its FTAs,
and 21 of its investment protection and promotion agreements (IPPAs).
Critics argue that such provisions may allow multinational corporations to sue Australian governments for compensation if they introduce laws or take actions that negatively affect the company’s profitability.
Areas of particular concern to FTA critics include environmental and health regulations.
However, these ISDS provisions have so far only been used once against Australia.
In 2011 tobacco company Philip Morris used the ISDS provisions in the IPPA with Hong Kong in an attempt to overturn Australia's plain packaging laws. The case is still ongoing.
The Department of Foreign Affairs and Trade (DFAT) says the Government considers ISDS provisions on a "case-by-case basis".
"The Australian Government, however, is opposed to signing up to international agreements that would restrict Australia's capacity to govern in the public interest - including in areas such as public health, the environment or any other area of the economy," DFAT says on its website.
The Pharmaceutical Benefits Scheme (PBS), which gives Australians cheaper access to pharmaceuticals, is one area the Government says it is determined to protect.
Australia's FTAs: Who do we trade with and what's in the works?
Australia has a total of seven FTAs in place, with New Zealand, the US, Chile, Thailand, Malaysia, Singapore, and the Association of South East Asian Nations (ASEAN).
An FTA with South Korea was agreed to in December, but it is yet to come into force, while the FTA with Japan was just agreed to.
Australia is currently negotiating seven FTAs, three that are bilateral - with China, India, and Indonesia - and four that are plurilateral.
The proposed Trans-Pacific Partnership, currently being negotiated between 12 countries - including Australia - would become the largest FTA in the world if it were signed, opening up an estimated $US28 trillion in trade.
DFAT says that FTAs currently account for 28 per cent of Australia's trade.
Currently, the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico is the world's largest free-trade area, producing $US17 trillion worth of goods and services.
Posted Пн 7 апр 2014, 12:00 PM AEST
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