Australia's new trade agreements

Thursday, 17 November 2005

The South Australian Centre for Economic Studies today released a comprehensive Economic Issues Paper on "Australia's New Trade Agreements: Beneficial Liberalisation or Harmful Policy?".

The Centre, led by Director Mr Michael O'Neil, is a joint research initiative of the University of Adelaide and Flinders University.

"The paper cautions that while bilateral and regional trade deals are the 'flavour of the month', State Governments need to play a greater role in trade negotiations as regional trade agreements go deeper than domestic tariff reduction and market opening," Mr O'Neil says.

"In fact they cover government procurement, investment, competition policy, standards, intellectual property, services trade and even recognition of overseas qualifications."

Mr O'Neil says evidence to date on the Australia-USA Free Trade Agreement is mixed. Goods imported from the USA to Australia rose by 7.9% in the period July 2004-2005, higher than the increase of goods imported of 3.2%, while goods exported to the US in fact fell by 6.1%, although this was offset by the mineral export boom, largely to China.

"Australia is now considering an FTA with China, but this most certainly would require access to agricultural markets in China for Australian exports of mining commodities and agricultural products to show immediate benefits. And yet, it is agricultural subsidies that have been the sticking point in the WTO's DOHA Round of trade liberalisation negotiations. The DOHA Round continues in Hong Kong in December with farm tariffs in the EU a major sticking point," Mr O'Neil says.

"In the case of agriculture and the Australia-USA free trade agreement, the State's citrus industry, seafood producers and the wine industry should benefit, as well as beef, lamb and dairy producers. It is not clear whether the agreement will benefit or harm the automotive sector, although the automotive components parts sector in Victoria had suffered job losses due to imports from China and re-negotiation of contracts.

"Trade is playing a much more important role in the South Australian economy, with the highest average growth rate of all States for goods exports in the five years to 2003-04 (South Australia: 8.2%; Australia 5.0%). Reducing agricultural subsidies throughout the world will assist developing nations; with exports of wine, wheat, meat, fish, wool and vegetables and fruit, all in the top 10 of South Australia's exports, we stand to gain as well. Add to that, predicted growth in mining exports, South Australia has a strong and vested interest in the outcomes of World Trade Organisation trade negotiations in Hong Kong in December.

"The South Australian Government should endeavour to play a greater role in fashioning trade negotiations and agreements and request independent assessment, such as by the Productivity Commission, to determine what economic impact regional free trade agreements might have on the State and national economy."


Contact Details

Associate Professor Michael O'Neil
SA Centre for Economic Studies
University of Adelaide
Business: +61 8 8313 4545
Mobile: +61 (0)408 812 032