It's five years since our free trade agreement with the US entered into force and the results are in: Australia has won.
In the lead-up to January 1, 2005, public debate correctly highlighted the fact that the agreement wasn't perfect.
Australia did not secure an end to US restrictions on imported Australian sugar and immediate liberalisation of trade restrictions on other agricultural commodities.
And Australia secured equivalent trade-offs by maintaining television local-content restrictions that were outdated and heavy-handed regulations on the pharmaceutical industry.
Since the FTA commenced, critics have continued attacking the agreement because our trade deficit with the US has widened.
Yet an average $1.2 billion increase in our annual merchandise trade deficit between the 2005-06 and 2008-09 financial years is insignificant in comparison with the US investment windfall the FTA delivered.
A key provision of the agreement was the relaxation of the threshold requirements for US investors to seek Foreign Investment Review Board approval before investing in Australia.
The results are clear.
According to the latest Australian Bureau of Statistics data, total US investment in 2005 was just shy of $334bn and has increased by an average of $20bn a year, reaching $418bn by the end of 2008.
And attacking a marginal trade deficit increase ignores that free trade is not a zero-sum game and that imports deliver benefits as well.
To be internationally competitive, Australian businesses need technologies that help improve productivity, competitive inputs into domestically produced manufactures and service imports to support industry growth.
Necessary imports added with the significant size of US investment have helped Australian industries grow, create jobs and ride out the global economic crisis.
Increased US investment has also helped foster industries of the future.
According to a Department of Foreign Affairs and Trade analysis, US investment is "increasingly more diversified, particularly with increased activity in the services trade".
US investment is underwriting a boom for our services exports, with the ratio of Australia's goods to services exports to the US roughly two to one.
By comparison, our ratio of goods to services exports to our other top five trading partners is nearly 23 to one for Japan, eight for China, 10 for South Korea and five for India.
Our service exporters are also supported through the FTA's commitment to encourage professional associations and governments to recognise qualifications for people from both countries. The responsible bi-national working party has already secured greater qualification recognition and, consequently, work opportunities in the US for accountants, engineers and legal professionals.
Not surprisingly, these particular industries now make up some of Australia's largest exports to the US.
And our service industry interests were also advanced through the establishment of the two-year, indefinitely renewable E-3 working visas in the US.
In 2008 the visa was used by 15,000 people and now gives Australians one of the most preferential work visas to the US.
Under the visa, Australia may lose skilled workers to the US in the short term, but the vast majority will return home with knowledge and experience to help Australian industries grow.
It is these dynamic, unpredictable outcomes that demonstrate the benefits of free trade as businesses find new markets, increase imports, increase competition, and cut the price of business inputs and consumer goods that improve standards of living.
But while Australia has won from its US FTA, we shouldn't sit on our free trade laurels.
Although the Rudd government is making all the right public noises on free trade agreements, concurrent regulations and industry support programs are unwinding the dividends of trade liberalisation.
Federal Industry Minister Kim Carr regularly introduces protectionist measures, from increased automotive industry subsidies to offset tariff reductions, to regulations that haze contractors tendering for government projects into using local suppliers.
The NSW and Victorian state Labor governments have introduced protectionist local-content thresholds for government contracts that reduce value-for-tax dollar for state budgets already in deficit.
The Rudd government also bowed to vested interests such as the campaign to keep import restrictions on copyrighted books that protect the profits of multinational publishing houses and marginal electorate-based printing companies that are then passed on to consumers.
Instead of introducing protectionism the Rudd government should be negotiating more FTAs such as the joint Australia-New Zealand FTA with ASEAN countries, which came into force on the fifth anniversary of the US agreement's.
Why?
Because in five years the economic benefits of the US and ASEAN FTAs will be clear, but they won't be for newly introduced protectionism.
ADVERTISEMENT
No comments:
Post a Comment