A Backdrop of Friendship
USA and Australia have been close since World War II. Their similar cultures and historical backdrop, along with democratic ideology and governance has drawn the two nations even closer. These relations strengthened with the weakening of the British hold in Asia and the surrounding regions.
Australia had realized the potential that trade relations with US had at stake, and did not limit themselves to the Commonwealth of Nations. Since then, the US and Australia have shared a common platform in many a war and world trade subjects. This can be exemplified by the recent signing of the Kyoto Protocol by the present Australian Prime Minister Kevin Rudd on December 3, 2007. It marked a long standing refusal to sign it from both the countries as they thought that it would hamper their economic growth and international trade success. In the Iraq War, in 2003, Australia was a major ally of US, other than Britain, fighting against terrorism. Moreover, both nations have been very close in respect to their stand and work in the WTO and APEC forum is concerned. This cordial friendship and mutual understanding between the two countries reflect vividly on their trade relations.
Major Exports and Imports
Australia imports more than what they export to the USA. Among the goods market major Australian exports include machinery and transport equipment, food and livestock, and wine and beverages. Major US goods exports to the largest nation in Australasia include food and livestock, beverages and natural resources. Services that are most exported to the US by Australia are transportation, travel and communication services and are the same for imports from the US as well.
With 48 of the 50 US states having Australia among the top 25 export destinations, and Australia being the 9th largest trade partner of USA, trade relations between the two countries was bound to improve in the coming years.
The Situation Today
Today, USA along with Japan is the main individual nation that is the biggest trade partner of Australia. Both Japan and USA have been responsible for trade worth $40.9 billion with Australia, as recorded in 2003. From tourism to import and exports, the two-way trade revenue between US and Australia had summed up to about $19 billion in the year 1998 itself. In 2006, this trade revenue increased greatly when Australian imports from the US rose to around $17.8 billion and exports to USA was $8.2 billion. This was a 26.7% increase in business for Australian exporters from 2002. Australia importers had seen a whopping 36% rise in business than what was in the year 2002. In all, USAís trade surplus with Australia was almost $9.6 billion in 2006, a rise of about 45% than what was recorded in 2002.
But donít mistake this exponential rise in trade and mutual trade benefits from simple cordial relations alone. This free rise of profits from mutual business relations had its roots in the Free Trade Agreement (FTA). The FTA was signed between the US and Australia on 18th May, 2004 and the Free Trade Agreement Implementation Act became a law on 3rd August, 2004. The Free Trade Agreement was officially put into force from January 1, 2005. Suddenly, the trade revenue and simultaneously the trading groups swelled. These included Australian exporters and Australian importers who were interested in doing business with the United States. As obvious, in the USA, there were American manufacturers and American exporters who were keen to expand their business proposition with a foray into foreign trade. Their prime focus, though, was on doing business with Australia, which had a huge potential once the Free Trade Agreement had come into force.
The Australia-United States Free Trade Agreement (AUSFTA)
The Australia-United States Free Trade Agreement (AUSFTA) began to take concrete shape with George W. Bush in power in USA and his counterpart John Howard being responsible as the Prime Minister of Australia in 2001. After being debated and ratified in the US Congress and later by the Australian Senate in 2004, it was signed by US representative of Trade, Robert B. Zoellick and his Australian counterpart, Mark Vaile. It was formally passed and enforced on January 1, 2005.
The FTA would cut trade tariffs on manufactured and transient goods by almost 99% and open up the services and agrarian economy base between the two countries. It was passed to deepen existent economic relations and strengthen trade and business prospects of both the nations.
Some of the provisions that were showcased as focal points of trade betterment encompassed a diverse economic business arena.
A short synopsis of the benefits and provisions, as from the point of view of the pro-FTA people has been presented below:
Notes of Discord
- Agrarian Department - The US could access a greater portion of the beef and dairy industry of Australia. Australia being the biggest exporter of beef in the world, the tariff rates would automatically drop on these products, and hence ease of trade resulting in better foreign liaisons. But the safety and quarantine measures have been kept stringent still.
- Manufactured Goods - The duty tariffs on almost 99% of manufactured goods have been lifted and the technological and other non-agricultural industry in the US has become more transparent for the Australia exporters and Australia manufacturers.
- Automobiles - Customs duties have been lifted off all automobile products and sports utility vehicles, with an aim to lift Australia customs duties for passenger vehicles as well.
- Services - Australian service providers and professionals have been given a liberal access to almost all requirements of the US industry, including business, education and technological demands. The US, which is the largest financial market in the world, has also allowed access for Australian financial services and encouraged investments to build strong financial relationships between the two nations.
- Government Procurement - A feature that was earlier unavailable to the Australian firms and Australian contractors was opened up with the new FTA deal. This has opened the US federal government contracts to be made available to the Australian firms, which are worth around A$200 billion, and this sum is expected to increase as trade ties get stronger and busier.
- Health Concerns - The Pharmaceuticals Benefits Scheme (PBS), and its affordable medicines and other health-concerned benefits are allowed to be retained by Australia. This is expected to help Australian medical firms to access subsidies for prescription medicines much faster than before.
- Other Benefits - barriers and glitches in e-commerce, telecommunication ties, law enforcement and policy issues and protecting intellectual property rights are to be erased by the FTA and help build an exemplary trade relation that will be the highlight of international business scenario in the near future.
After the Free Trade Agreement was passed, trade between the two countries was tilted in favor of the US. This had been suspected by financial experts in Australia and they came out in vocal opposition against the Agreement.
There are a few points where a major chunk of the Australian business populace are not happy with the FTA,
and opine that it has helped gift the upper hand in this supposedly mutually benefiting business deal.
The huge trade deficit that Australia has with USA that has crossed $12 billion is said to be propelled by the FTA. And according to Australian exporters, major exporters get a negligible concession and access to the actual US market, contrary to the advantage gained by US exporters. Prime exports Australia (such as beef, wine and technology solutions) have been given less liberalized access than their US counterparts.
- The Quarantine procedures and safety issues have been given a miss by US exporters due to the FTA, and the Australian importers suspect this will affect the quality and safety of agricultural and other products.
- Manipulation of the PBS (responsible for keeping cost and quality of prescription medicines of Australia in check) by the American manufacturers and firms of medicine.
- Intellectual Property rights and Government procurement programs of Australia will be compromised to benefit the US investors and trade partners by the FTA.
What Lies in the Future
With the whole scenario gradually improving with the FTA, the Australian authorities are keen to keep the trade ties with the US even stronger and binding. As both countries support liberalization of global trade and mutual transparency in trade ties, the future of the US-Australia trade friendship looks good.
Many US firms and universities conduct studies and research activities in Australia, because of the geographical features and the advanced technology and technological solutions that are prevalent in this country. NASA maintains the largest out-of-state program in Australia that is vital to space research and aeronautical science.
With such deep roots of friendship, economic ties have strengthened, albeit amid controversy and debate, between the two nations. And Australia will never mind becoming the monopolist trade partner with one of the established superpowers of the world!