3.3: Features and Roles of Free Trade Agreements

Question 1

What is the definition of a Free Trade Agreement (FTA)?

Answer 1

A FTA is defined as a treaty between two or more countries that facilitates freer trade by removing barriers for international trade, leading to the development and growth of a country’s economy.

Question 2

What are three Roles of FTAs?

Answer 2

• facilitates the removal and reduction of trade barriers
• increases economic growth, dynamic business climate, foreign direct investment and transfer of technology and expertise
• reduce government spending by eliminating subsidies

Question 3

What are some Benefits to Australian-owned Businesses as a result of FTAs?

Answer 3

• allows countries to specialise in producing goods and services in which are most efficient for them to produce
• encourages innovation, spread of technology and production processes globally
• increased profits due to more products by exporting internationally, with fewer restrictions
• greater market share and access to overseas markets

Question 4

What are some Challenges to Australian-owned Businesses as result of FTAs?

Answer 4

• greater difficulties may be experienced in establishing new businesses if they are not protected from large multinational firms
• leads to more competition in Australia by foreign-owned businesses
• market share in domestic market could be reduced due to multinational competitors

Question 5

What is the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA)?

(don’t need to memorise - just for context)

Answer 5

The AANZFTA is a free trade agreement that came into force on January 1, 2010, with Australia and eight other signatory countries. The agreement sought to cover goods, services, investments and intellectual property by liberalising (relaxing) and facilitating trade among the signatory countries.

Question 6

What are the Key Features of the AANZFTA?

Answer 6

• provides a platform for ongoing economic engagement between the three parties through a range of agendas, economic cooperation projects and business
  outreach activities
• promotes greater certainty for Australian and New Zealand service suppliers and investors, including certain legal protection for investment in ASEAN territories
• provides new opportunities for Australian and New Zealand exporters to tap intointernational supply chains in the ASEAN region
• reduces or eliminates certain forms of tariffs between the three parties.

Question 7

What is the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA)?

(don’t need to memorise - just for context)

Answer 7

The ANZCERTA is a bilateral free trade agreement signed in 1983 and was one of the first models of an FTA for the world that is considered one of the most expansive. Covering all trans-Tasman trade goods, such as agricultural products it was the first to include free trade in services.

The central provision of this agreement was to create a World Trade Organisation (WTO) - a consistent Free Trade Area between the two countries to create a free single economic market with reduced trade barriers.

Question 8

What are the Key Features of the ANZCERTA?

Answer 8

• prohibits all tariffs and quantitative import or export restrictions on trade in goods originating in the Free Trade Area under ANZCERTA
• minimises market distortions in trade in goods, including through domestic industry assistance and export subsidies and incentives
• harmonises Trans-Tasman food standards through the Australia New Zealand Food Authority (ANZFA) Agreement of 1995, which means lower compliance costs for industry, fewer regulatory barriers, and more consumer choice
• provides for the mutual recognition of goods and occupations, removing technical barriers to trade and impediments to the movement of skilled personnel between jurisdictions, without the need for complete harmonisation of standards and professional qualifications