AUSTRALIA / NEW ZEALAND TRADE - Differences of opinion in trade down under

By: | at 07:00 PM | Channel(s): International Trade  

First-year results of US-Australia FTA yields varying reactionsBy Peter A. Buxbaum, AJOTHas the Australia-United States Free Trade Agreement been good for Australia? It depends on whom you ask.Numbers released by the Australian Bureau of Statistics, a government agency, on the first anniversary of the agreement showed that Australia’s trade deficit with the US grew by over $1 billion. This has prompted critics of the treaty to suggest that Australia ought to pull out of the agreement.
Supporters of the agreement, most notably Australian acting Prime Minister and Minister for Trade Mark Vaille, see things differently. While he can’t contradict the statistics, Vaille does point out two other things: The FTA will benefit Australia in the long run and, as proof of that proposition, more Australian companies are making export deals and are poised to enter the US market than ever before.
Still, the Australia- US FTA is likely to spark continued controversy as issues of generic drugs and access to US markets by Australian sugar exporters remain to be hashed out between the two countries.
The Australia- US Free Trade Agreement was signed in May 2004 and went into effect in October of that year. At the time of the singing the Minister for Trade touted the accord as, “The most important bilateral economic agreement ever undertaken by Australia [that] will deliver real benefits to all sectors across all states and territories.” He pointed out that the two-way trade relationship between the two countries already amounted to $40.9 billion in 2003.
The economic benefits promised by the Minster for Trade were based on studies conducted by the Center for International Economics. The CIE estimated that, over a decade, the FTA would increase Australia’s annual gross domestic product by $6 billion, and that it would boost employment by 0.3% by 2012, delivering an additional 30,000 jobs.
Critics of the agreement point to figures from the Australian Bureau of Statistics which show that Australia’s trade deficit with the US increased from $10.4 billion in October 2004 to $11.8 billion in October 2005, for an increase of some $1.4 billion.
”We expected there to be poor terms of trade, but we didn’t expect them to be as dramatic as this in the first year,” said Dr. Patricia Ranald, principal policy officer of the Public Interest Advocacy Centre in Sydney, a group which opposed the FTA from its beginnings.
”Australia is not even getting ordinary economic benefits from this agreement,” she added. “The US has got far more access to our markets under the agreement than we have to theirs.”
But Vaille put a different spin on the benefits of the trade pact in a written statement released by Australia’s trade ministry. “Australian businesses are benefiting from expanded opportunities and increased market access under Australia’s free trade agreements with the United States,” Vaile said. “One year on, our FTA with the United States is delivering clear gains to local businesses, with further benefits to flow over the years ahead.”
The progress Vaille sees in Australian trade with the United States is measured, not so much by current trade statistics but by, “a marked increase in Australian companies looking to break into the US.” The number of export deals assisted by the Australian government trade commission, known as Austrade, grew by more than 60% in the first ten months of 2005, as compared to the same period in 2004, according to Vaille.
The minister also pointed to specific wins for Australian businesses. “Bega Cheeses, for example, recently sent its first shipment of 150 metric tons of cheeses, worth around half a million dollars, to the United States,” he said. “Before the Australia-US Free Trade Agreement, Bega hadn’t considered exporting to the US, due to high tariffs and quota restrictions. These trade barriers have been substantially reduced under the FTA.”
Vaille expects further gains for Australian exporters in 2006 now that additional tariff cuts and quota

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.