A New Outlook in Business with the Signing of the
ASEAN Australia New Zealand FTA (AANZFTA)
By Peter Kane, Senior Trade Commissioner, Austrade
In an era when there are literally hundreds of bilateral Free Trade Agreements (FTAs) under negotiation around the world, governments in our own backyard have agreed a comprehensive multi-country FTA. The ASEAN Australia New Zealand (AANZFTA) agreement involves 12 governments, many thousands of tariff items and a host of other details around freeing up trade and investment.
Prior to AANZFTA, Australia had just two FTAs in the ASEAN area – with Singapore and Thailand. Negotiation of a bilateral FTA between Australia and Malaysia (MAFTA) was begun in 2005, but has been on hold since late 2006 pending the completion of AANZFTA. The Australian and Malaysian Trade Ministers agreed in October 2008 to resume negotiations. MAFTA is expected to build on what has been achieved in AANZFTA.
The signing of the AANZFTA agreement was always going to be important – but the more so now as it has been concluded in the midst of the toughest global trading conditions seen in many decades. Historically, governments ran for cover and erected more trade barriers when the chill winds of recession blew. By wrapping up the AANZFTA agreement now, governments are signalling a different approach.
As Australia’s Trade Minister Simon Crean said, “The agreement will help drive regional economic integration and sends a positive signal to the rest of the world of the region’s commitment to maintain and further open trade flows in these difficult times. The agreement also sends an important practical signal to those nations supporting progress in the World Trade Organisation Doha Round negotiations.”
AANZFTA covers an area with a combined population of 600 million and a GDP estimated at RM 7.7 trillion. It is the largest FTA that Australia has signed and the most comprehensive FTA that ASEAN has ever concluded.
The FTA covers goods, services, investment, intellectual property, e-commerce, temporary movement of business people and economic cooperation. To give some perspective to the depth of change brought about by AANZFTA, over time tariffs will be eliminated on between 90% and 100% of tariff lines in most countries, covering 96% of Australia’s exports to ASEAN.
There are now significant new opportunities for Australian exporters to both lock in current market access and to develop new business in Malaysia. Some of these opportunities include cars and car components, manufactured aluminium and copper products, food (dairy products including milk and yoghurt, stone fruits, vegetables, nuts, jams and sausages), fashion goods, pulp and paper and chemicals.
Equity limits have been raised for some Australian service providers in Malaysia in sectors such as accounting, telecommunications, financial planning and higher education.
Across the ASEAN region, AANZFTA will promote greater certainty and transparency for Australian service suppliers and investors. This has been achieved through a range of “WTO plus” commitments in fields such as professional services, education, financial and telecommunications; enhanced disciplines on domestic regulatory measures; and guarantees of legal protection for investments.
And it is not all one way! Under AANZFTA, Australia has made significant concessions to Malaysia and the other members of ASEAN. With 86% of Australia’s tariffs currently between 0% and 5%, Australia is already a relatively open market for Malaysian (and ASEAN) exports. But from 2010, tariffs will be eliminated on 96% of our tariff lines, and remaining tariffs will be progressively reduced until full elimination is achieved no later than in 2020. Items which will be of interest to Malaysia include: some clothing and textiles items, a wide range of manufactured products including office equipment, automotive vehicles and components, furniture, and a range of agricultural products and processed foodstuffs.
An important benefit from AANZFTA is the fact that not only will tariff rates be bound against increase, but the regional rules of origin of the Agreement will provide greater flexibility for exports from Malaysia and other ASEAN Parties to qualify for this tariff treatment.
AANZFTA will enter into force after Australia, New Zealand and at least four ASEAN members have notified each other of completion of their national ratification processes. We expect that to occur in the second half of 2009 but no later than 1 January 2010.
The Australian High Commission will work alongside MABC to ensure that the Council’s members and the wider Australia-Malaysia business community appreciate the full package of benefits available from this mega trade agreement.
A new era of doing business in this part of the world will begin.
