Business seeks better returns from Free Trade Agreements

Five years on from the implementation of the Australia-US Free Trade Agreement (AUSFTA), Australian exporters are still finding it tough to do business in the United States.

The Australian Industry Group (Ai Group) late last year surveyed exporting companies of various sizes across industries including manufacturing, construction, and food and beverage on the effectiveness of Free Trade Agreements (FTAs), with a particular focus on the US.

It showed that less than half of those exporting to the United States are seeing any direct benefits from AUSFTA. Also, 87 per cent believe the arrangement hasn't 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 in other countries including Chile, Singapore and Thailand and the Closer Economic Agreement (CER) with New Zealand.

"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 said.

"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.

"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. Australia is going to increasingly rely on exports to help steer us through the global economic downturn.

"However, our survey results suggest the potential benefits of FTAs are not being fully realised by Australian exporters due to excessive red tape, complex compliance regimes and subtle protectionism. 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. It is how the government can assist companies to better access these opportunities which we want to explore further," Mrs Ridout said.

The survey will contribute to Ai Group's submission to the recently announced Productivity Commission study into the effectiveness of bilateral and regional FTAs.

Reported benefits of the free trade agreements in assisting companies' export activities: