The trade relations of the United States are complex, each nation with its own rules for commerce regulation to and fro. Every agreement or sanction with another nation changes the flow of goods internationally with great impact both domestically and abroad. Of the myriad agreements, one of interest is the Australia Free Trade Agreement.
The Australia FTA entered affect on January 1, 2005. The USTR had found that the United States-Australia FTA has made, “more than 99 percent of U.S. exports of manufactured goods …duty-free”. Another provision of Autrialia Free Trade Agreement is that it will eliminate tariffs on textiles by 2015. For a full listing of the FTA, one can visit the USTR site. The same agreement can be found on the Australian government site.
Benefits of the Australia FTA
There are both pros and cons to the adoption of the Australian FTA. CATO found that the projection a year before entering the agreement foresaw “…free trade between the two countries …boost U.S. exports by $1.9 billion and U.S. GDP by $2.1 billion.” The United States is also a destination for “…a full 50 percent of Australia’s foreign investment–more than $23 billion.” Even before the free trade agreement “…Two-way trade between Australia and the United States is …$28 billion per year.”
Concerns for the Australia Free Trade Agreement
Not all of the impacts of the trade agreement are positive. The negative impact of this agreement comes from what it leaves out. While free trade is supposed to remove trade barriers, politics and alternative interests sometimes interfere. In the case of US-Australia relations, the major part left out of the agreement is sugar. Sugar markets within the US are unnaturally high, with prices in domestic sugar costs soaring, while the same sugar world prices were less than 1/4 the cost. This price, over three times the international norm is an extra cost on all businesses that use sugar in their products. CATO stated that the American stance to not open up to cheaper imports of a product is a blatant display of “American hypocrisy on trade.” To gain this protection from sugar, the United States also allowed Australia to preserve protective politics on several markets, including wheat, broadcasting and audio visual services. Cato believes that this can possibly lead to “…a terrible precedent that emboldens other import-competing producers to demand similar favors.”
While not all positive, such free trade agreements are a step in the correct direction. The removal of trade barriers allows freer competition with global market. This is true for our goods abroad as well as better prices for American consumers who have alternatives thanks to the foreign companies entry into the market on a fair basis.
By – Domenic Gabriella for Trade.org
Related posts:
- Pending International Import Export Free Trade Agreements
- The TPP Trans Pacific Partnership for Asia Pacific Trade