The results of a survey by the Australian Industry Group (Ai Group) suggest that the potential benefits of free trade agreements (FTAs) are not being fully realized by Australian exporters, due to excessive red tape, complex compliance regimes and subtle protectionism.
Ai Group late last year surveyed exporting companies of various sizes across industries, including manufacturing, construction, and food and beverages, on the effectiveness of FTAs, with a particular focus on the US.
Five years on from the implementation of the Australia-US free trade agreement (AUSFTA), it found that Australian exporters are still finding it tough to do business in the US. It showed that less than half of those exporting to the US are seeing any direct benefits from AUSFTA.
Furthermore, 87% believe the arrangement has not improved their access to US government contracts, and three-quarters of exporters reported that AUSFTA isn't effective in creating new export opportunities.
Companies are experiencing similar problems with FTAs with other countries, including Chile, Singapore and Thailand and the Closer Economic Agreement with New Zealand, according to the report.
"If we consider the amount of government time and effort invested in negotiating FTAs compared with the benefits that Australian companies are gaining from these arrangements, the results are concerning," Ai Group Chief Executive, Heather Ridout suggested, continuing: "The survey shows that FTAs alone do not motivate companies to seek new export opportunities but do provide some advantages to those already exporting to that market.”
In each of the five FTAs surveyed, the majority of companies reported no benefits in assisting their export activities. The FTA with Chile showed the worst results, with 71% reporting no benefits, while the FTA with Thailand was the best, with 56%.
"This demonstrates that in an increasingly competitive global market where Australian exporters are carrying the burden of a relatively high Australian dollar, government support programs such as the Export Market Development Grants Scheme are crucial to assisting companies explore the potential of entering new markets,” Ridout added.
“Ai Group supports the principles of expanding free trade and recognises the many potential benefits for companies including the reduction of import duties, improved market opportunities, and under AUSFTA, increased labour mobility,” she confirmed.
“It is how the government can assist companies to better access these opportunities which we want to explore further."
The survey will constitute part of Ai Group's submission to the Productivity Commission’s study into the effectiveness of bilateral and regional FTAs, which was announced late last year by the government.
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