AUSFTA

February 25, 2004

AUSFTA: A big deal

By Esme Friesen

After months of development, Trade Minister Mark Vaile has agreed on the text for the Australia-United States Free Trade Agreement (AUSFTA) with his US counterpart, Trade Representative Bob Zoellick.

This agreement represents a landmark in improving Australia's trade relationship with the world's most dynamic and richest economy that represents a third of the world's GDP and the world's largest merchandise and services exporter and importer.

It is intended that AUSFTA will increase Australia's attractiveness as a destination for the US investment that is important to maintaining Australia at the leading edge of growth and competitiveness in the international marketplace.

Set to come into force after both countries have completed their domestic approval processes and have amended, or passed, any necessary legislation, required, AUSFTA, like all free trade agreements, will not only have a significant impact the success of the Australian economy, but for all other economies competing for a share of the US market.

In light of this big deal, we are providing our readers with a listing of some of AUSFTAs key benefits.

For manufacturers

Virtually all non-agricultural exports to the United States, worth $6.48 billion last year, will be duty free.

The 25 per cent tariff on light commercial vehicles that previously kept Australia out of the US market will be removed.

The US auto market, worth $538 million for passenger motor vehicles for Australian exporters in 2002, is now set to grow further.

Our auto parts industry exports to the United States, worth $495 million in 2003, will be boosted by the immediate elimination of tariffs.

The 50 percent tariff on merchant ship repairs and maintenance, part of the maritime protection known as the Jones Act, will be removed.

For farmers and food processors

About 66 per cent of agriculture tariffs will go to zero immediately (i.e. when the agreement enters into force), with a further 9 per cent going to zero after four years.

Beef quota, currently 378,000 tonnes, will be substantially increased - growing by 18.5 per cent over 18 years, then effectively becoming free trade.

Lamb and sheep meat producers will have most tariffs reduced to zero immediately, and the rest within four years.

Exports of quota constrained dairy to the US - currently worth around $40.5 million - will likely increase by around $55 million in the first year.

Australia will get immediate zero tariff treatment for horticulture products such as oranges, mangoes, mandarins, strawberries, tomatoes, cut flowers, and fresh macadamias.

For the first time, avocados from Australia will have access to the US market, up to 4000 tonnes (subject to SPS restrictions).

Cereals will get immediate zero tariffs for wheat and cereal flour mixes.

Processed foods will get zero tariffs within four years for a range of fruit juices and baby foods.

The wool industry, an industry priority of zero tariff for greasy wool, a premier Australian export industry, will be achieved within four years, and for other wool items after 10 years.

Wine producers will have the benefit, in what is already an almost billion dollar market, of all tariffs reducing to zero over 11 years.

The peanut industry, which currently has no access to the US market, will get a quota of 500 tonnes in year one, expanding over time.

Australian seafood exports, currently worth around $140 million, will enter the market duty free immediately.

Immediate removal of a 35 per cent tariff on canned tuna will provide duty free access to the $650 million US market .

For service providers

Australian services exports to the United States, worth over $5 billion a year, will have enhanced legal protections that guarantee market access and non-discriminatory treatment.

There will be important commitments ensuring non-discrimination against Australian service suppliers in a market of almost 300 million people - a valuable improvement on previous commitments from the United States in the WTO.

There will be a robust framework that should promote the mutual recognition of qualifications in professional services. Problems with recognition of qualifications can be a major hindrance for the export of professional services.

Education will particularly benefit from the greater recognition of Australian degrees and other aspects of the Agreement promoting more liberal services trade. Australia is a net exporter of education services to the United States, which benefits not only our universities, but all businesses that provide services to US students when they live in Australia.

There will be a framework for cooperation in financial services, linking Australia into the largest financial services market in the world.

There is agreement on the value of pursuing more liberal air services arrangements.

In telecommunications, we have commitments on market access and a solid framework for pro-competitive regulation, as well as a mechanism for continuing engagement.

For the creative industries

Closer harmonisation of Australian and US intellectual property laws will benefit Australian exporters, by creating a more familiar and certain legal environment, and Australian innovators, and by helping them to attract US investment.

Australian copyright industries (including publishing, filmmaking and music) will benefit from an extended term of copyright protection, an expeditious process that allows for copyright owners, Internet Service Providers and subscribers to deal with allegedly infringing copyright material on the Internet, and agreed criminal standards for copyright infringement.

Australia and the United States will work to further reduce differences in laws and practices relating to patents, trademarks and designs, to further assist our right holders to protect their intellectual property in the US market.

Australia retains the flexibility to implement the Agreement in a way that meets its domestic circumstances, for example, providing a mechanism to introduce public interest exceptions in relation to technological protection measures.

For miners and metal producers

All metals and minerals will be immediately duty free - particularly valuable for the Australian aluminium industry, currently exporting $134 million to the United States.

For all exporters

Australia will now gain the benefit of preferred status as an FTA partner with regard to any future global safeguard actions - that is, we will be exempted from safeguard restrictions almost automatically, just as Canada was for steel and lamb.

The US will waive the Merchandise Processing Fee levied on all imports, a saving to Australian industry of about US$10 million a year.

Government procurement

The A$200 billion market in US federal purchases of goods and services will now be open to Australia.

Australia will have a waiver from US programs favouring US firms and products.

All US federal government contracts over US$58,550 (and in construction over US$6,725,000) will be open to Australian firms.

Australian preferences for small businesses and indigenous people will remain.

Intellectual property

Australia's IP laws will be substantially harmonised with the largest intellectual property market and a global leader in innovation and creative products.

Australia's international reputation as one of the world's leading countries in protecting and enforcing intellectual property rights has been reinforced.

Standards of intellectual property protection will be beyond those provided by multilateral agreements such as the WTO TRIPS agreement and WIPO Treaties.

Investment

Australia has secured an agreement that should provide a strong framework for continuing to promote high levels of two-way investment between Australia and the US.

There is no investor-state dispute settlement provision in the Agreement.

The Agreement preserves Australia's foreign investment policy, but with a range of changes that maintain our ability to screen all investment of major significance.

Health

Access by Australians to affordable medicines under the PBS will be maintained under the AUSFTA.

The Agreement reinforces Australia's existing framework for intellectual property protection of pharmaceuticals.

Audio-visual

The Government has protected our right to ensure local content on Australian media, and retains the capacity to regulate new and emerging media, including digital and interactive TV.

The agreement ensures that there can be Australian voices and stories on audiovisual and broadcasting services, now and in the future.

Automotive

Australia and the United States have agreed to eliminate customs duties on almost all automotive products from the day the agreement enters into force, including the 25 per cent US customs duty on utes ("pick-up trucks").

Australian duties on passenger motor vehicles will be phased out, to zero in 2010.

Business

Australia and the United States will cooperate on competition law and policy.

Businesses and individuals will be treated fairly in enforcing competition law.

Consumer protection agencies will work together in combating illegal activity.

Consumers and investors defrauded or deceived will have greater redress.

Telecommunications

Pro-competitive regulatory frameworks for Australian and US companies.

High standards of transparency and WTO-plus rules on major suppliers.

New avenue for consultations with the US on market access issues.

Embraces market-based regulatory approach where markets function. effectively.

E-commerce

There will be no barriers to trade conducted electronically.

Australia will still be able to regulate for public policy purposes.

Trade and investment is encouraged by further facilitating electronic commerce.

Rules of origin

Simple and objective tests apply to "rules of origin" for manufactured products, which must be "substantially transformed" in either Australia or the United States before they can benefit from the Agreement.

Sanitary and Phyto-sanitary measures

The integrity of Australia's quarantine regime and our right to protect animal, plant, and human health and life are preserved.

Decisions about market access on quarantine or food safety grounds will continue to be made on the basis of science.

A framework for discussions on specific products has been established.

Technical Regulations and Standards

Australian exporters have greater opportunities to understand and meet US requirements dealing with technical regulations and standards.

Requirements for food and manufactured goods, such as labelling, packaging, testing and certification that products conform to regulations, are covered.

A framework for exporters to work with government in tackling barriers has been established.

Environment & labour

The Parties have agreed not to fail to enforce their own environmental and labour laws in a manner affecting trade between the Parties.

Both Parties retain the right to establish their own domestic environmental and labour standards, and to adapt or modify their own laws.

If you have any questions, or would like to us to publish world statistical data on a particular topic, please email the editor at: editor@galtglobalreview.com.

Source: Austrade

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