Mar 24, 2015 - 9:00am

U.S.-Australia Trade Pact Impresses after First Decade


Executive Director, Southeast Asia

Members of Congress, Australian diplomats and the U.S. business community will gather Tuesday on Capitol Hill to commemorate the 10th anniversary of the U.S.-Australia Free Trade Agreement (FTA). Since its entry into force on January 1, 2005, the FTA has eliminated tariffs and other trade barriers to clear a path for mutually beneficial trade and investment between Australia and the United States. The agreement’s strong track record also shows the value of Trade Promotion Authority (TPA) — the essential tool for the United States to conclude new trade agreements that is now under discussion in Washington.

Even before the FTA, the U.S. and Australian markets were relatively open to one another’s goods and services. However, the agreement’s high standards and broad reach are notable — duties were eliminated for well over 99% of all tariff lines — and it ushered in a period of welcome growth in two-way trade:

 U.S. Exports

U.S. exports to Australia have more than doubled (increased by 117%) in the past decade. Since the FTA entered into force, U.S. exports to Australia of transportation equipment rose 136% to reach $6.2 billion in 2014, representing nearly a quarter of U.S. merchandise exports to Australia. Also in the 2004-2014 period, U.S. exports to Australia rose 51% for machinery (reaching $4.4 billion), 44% for chemicals ($3 billion), and 50% for ICT products ($3 billion). U.S. exports to Australia of services, for which data are only available through 2013, nearly tripled to reach $19 billion.

U.S. small businesses have been among the top beneficiaries of the FTA. More than 31,000 U.S. small and medium-size companies exported their goods to Australia in 2012 (latest data available). In fact, more U.S. small businesses export to Australia than to any other country, except Canada and Mexico.

Australian Exports

While most of Australia’s minerals, energy, and agricultural exports are bound for China and other Asian markets, the United States is a significant market for Australia’s value-added exports, which are associated with innovative industries and high-paying jobs. Australian exports of food manufactures — think of a Hunter Valley Syrah or even Vegemite — rose 97% to reach $3.2 billion in 2014 and today account for nearly one-third of Australian goods exports to the United States.

U.S. imports of manufactured goods from Australia generally rose by 49%, with sectors such as primary metals manufacturing and transportation equipment representing roughly another third of Australian merchandise exports to the United States.

 
  

Investment

Since the FTA entered into force, the stock of U.S. foreign direct investment in Australia has doubled, rising from $75.7 billion in 2005 (oldest aggregate data available) to $159 billion in 2013, according to the U.S. Department of Commerce. The FTA simplified Australia’s process under which the government screens U.S. investments. Not only did U.S. investment in Australia increase as a result, the benefits of Australia’s reform have been extended to investors from other countries as well in the intervening years.

While a fair share of U.S. direct investment is focused on Australia’s remarkable natural resource base, U.S. companies also have focused on high-tech and services industries. These high-value added industries tend to support coveted jobs in growing sectors of the economy. In the 2004-2013 period, U.S. companies’ direct investments in Australia in:

  • Finance (not including depository institutions) and insurance more than tripled to reach $16.7 billion.
  • Professional, scientific and technical services quadrupled to reach $8.3 billion.
  • Machinery manufacturing nearly tripled to reach $1.6 billion.
  • Computers and electronic products nearly tripled to reach $1.1 billion.
  • Australian investments in the United States also rose by $4.6 billion in the 2004-2013 period, according to the U.S. Department of Commerce.

The ties between Australia and the United States are strong. We share democratic values and a commitment to free enterprise. We are both nations of immigrants, and our entrepreneurs and business leaders have helped strengthen these ties. Our citizens and leaders have built on the foundation of an alliance tested in world war — one that has stood the test of time.

The FTA didn’t create this relationship, but the ties of mutually beneficial commerce have certainly strengthened it. In short, whether you prefer a Napa Valley Cabernet or a Hunter Valley Syrah, the U.S.-Australia FTA is worth a toast on this anniversary.

About the Author

About the Author

Executive Director, Southeast Asia