Free trade agreements being negotiated around the world promise to open up all sort of markets to entrepreneurs with the right products. By JOHN COOK.
By John Cook
Exporting is tough for small business, but there are plenty of successful ventures that sell their products throughout the world. New free trade agreements under negotiation with China, Malaysia, Chile and Japan promise to open up more opportunities for growing SMEs.
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Australia has recently signed FTA deals with the United States, Singapore and Thailand. The first incarnation of an FTA with New Zealand was established in 1966. But there are plenty of more moves afoot, and therefore lots of opportunities for small business to export.
The Federal Government is negotiating an agreement with China, as well as being at various stages of discussions regarding FTAs with four other countries: China, Malaysia, Chile and Japan, and the Gulf Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates).
It is also conducting a joint study with South Korea regarding the feasibility of a similar agreement. Australia and New Zealand are also negotiating an FTA with ASEAN (Association of South-East Asian Countries). It is conceivable that Australia could one day have FTAs with almost every country in Asia.
FTAs are thought to remove or lower common barriers to trade, such as tariffs. But the ability to quickly enter new markets because of the FTAs is also a big plus for small businesses as is the removal of licensing requirements and even a reduction in paperwork.
Though there are many benefits, one problem for small business is that the FTAs can take a long time to negotiate. “We need to be fast moving as a small business,” says Bruce Sambell, the owner of Queensland aquaculture company Ausyfish. “We want to get into new markets quickly, but often it is difficult to move because of all the restrictions on trade.”
Ausyfish exports fish larvae to several Asian countries, such as China, Malaysia and Vietnam. Sambell would welcome less red tape and endless amounts of forms he has to fill in, if that is what an FTA would bring.
Such an agreement could help export into China, which has been affected by onerous Chinese health and biological regulations. At the moment Sambell sends the larvae to Hong Kong, for transport into China. He would welcome an FTA if it brought closer cooperation and understanding between Australian and Chinese food authorities.
Another exporter, Denis Tricks of Victorian company Longford Flowers, would also welcome less paperwork. His business exports flowers to Japan. Tricks says tariffs on flowers sent to Japan are not onerous (he is more concerned at the moment about the high value of the Australian dollar against the Japanese yen and high transportation costs) but tariffs are high in other countries. Tricks says he would consider exporting to other Asian markets if those tariffs were reduced.
Here are the free trade agreements the Australian Government is negotiating:
CHINA: The attraction for small business is obvious as China is growing at a rapid pace. In fact, Australian exports to China have grown at an average rate of almost 20% over the past five years.
Austrade claims the industries that would benefit from the FTA with China include agriculture, manufacturing, minerals and energy and services. Economic modelling estimates show that Australia’s real gross domestic product would be boosted by almost $25 billion over the period 2006-15 if an FTA were in place. The Chinese and Australian governments first announced plans for FTA negotiations in April 2005. The seventh round of negotiations took place in December last year.
JAPAN: FTA negotiations with Japan were only announced in December last year, even though Japan has been a strong market for Australian exporters for 40 years. The first round of negotiations will take place in Canberra on 23-24 April. A feasibility study released last year found that the value of Australian gross domestic product would increase by almost $40 billion over 20 years under an FTA.
A free trade agreement would be important to exporters in the food sector as it would seek to lower export duties levied by Japan, as well as lowering restrictions on certain agricultural imports.
MALAYSIA: Negotiations with Malaysia started in April 2005. Much of the discussion is about eliminating tariffs and tariff quota restrictions. Dairy products and some horticultural products, processed meat and some seafoods face tariffs of 5–30%, as do some tropical fruits and wine.
Malaysia aims to become a regional hub for halal food. Getting sufficient halal accreditation to satisfy Malaysian authorities has been a challenge for Australian food exporters. Small business would benefit if those types of non-tariff measures were dealt with in FTA negotiations.
CHILE: The closest country in South America is a relatively small trading partner compared with Asian countries. Two-way trade in goods and services with Chile was worth about $423 million in 2005, while Australian companies have about $3 billion worth of investments in the country.
Discussions are at an early stage. The governments have an in-principle agreement to commence negotiations, which would initially comprise bilateral meetings later this year.
GULF COOPERATION COUNCIL: Australia needs an FTA with the Gulf states as soon as possible, because the council is negotiating with many other countries, including China, Japan, India and the European Union. Without a similar FTA to those countries, Australia would face higher entry barriers than its international competitors to what is becoming an important market.
For example, the region has become the largest market for the export of Australian passenger motor vehicles. It is also an important market for meat and livestock exports (accounting for 33% of Australian exports) and cheese and curd exports (20%). The Australian Government announced in June 2006 it would commence FTA negotiations. Submissions from groups relevant to the FTA, including business, closed in March.
ASEAN: This could be the most problematic of Australia’s possible FTAs, which was first announced for discussion in November 2004. The latest update, the 12th so far, released in March, said ASEAN was yet to engage on intellectual property, government procurement and competition policy.
Government procurement, potentially a lucrative opportunity for Australian services companies, has been a problematic topic. Tariffs are also an issue, with ASEAN concerned that any lowering would adversely affect smaller countries.
For further export advice and information, see SmartCompany’s Growth Resources section on exporting by clicking here.