The Australia–United States Free Trade Agreement (AUSFTA) is a preferential trade agreement between Australia and the United States modelled on the North American Free Trade Agreement (NAFTA). The AUSFTA was signed on 18 May 2004 and came into effect on 1 January 2005.
History of the FTA
The U.S. first proposed a free trade agreement with Australia as far back as 1945. In more recent times, the prospect of an Australia-U.S. FTA was raised in the 1980s by the Hawke Government. In 1991 U.S. president George H. W. Bush offered to begin FTA negotiation with Australia and New Zealand, but was turned down by Australian Labor Party prime minister Paul Keating.
It was not until early 2001, after the election of George W. Bush in the U.S. and with John Howard in power in Australia, that an Australia-U.S. FTA finally began to take shape. In April 2001, President Bush signalled his interest in pursuing an FTA with Australia provided "everything is on the table". Following this, in 2004, the Australian Department of Foreign Affairs and Trade commissioned a private consultancy – the Centre for International Economics (CIE) – to model the economic impacts of such an agreement. Negotiations for the FTA began in March 2003 and after six rounds of negotiations held in Canberra, Hawaii and Washington, D.C., the text was finally agreed to in February 2004, and signed off on by Australian Trade Minister Mark Vaile and U.S. Trade Representative Robert Zoellick in Washington in May 2004.
The FTA was ratified by the United States Congress with the passage of the United States-Australia Free Trade Agreement Implementation Act. It was passed by the House of Representatives on 14 July 2004 by a vote of 314–109 and by the Senate on 15 July 2004 by a vote of 80–16, and signed into law by President George W. Bush on 3 August 2004.
In Australia, the agreement's implementing legislation, the US Free Trade Agreement Implementation Act 2004, was passed, with amendments, by the Senate on 13 August 2004. After some delay, the U.S. Administration accepted the amended Australian legislation as being consistent with implementation of the agreement.
The agreement came into force in both countries on 1 January 2005.
Provisions of the FTA
The text of the Free Trade Agreement is divided into twenty-three sections, listed and summarized as follows:
Establishment of the free trade area and definitions This chapter lays the framework for the FTA. It states that the provisions are consistent with the relevant sections of the General Agreement on Tariffs and Trade (GATT) 1994 and the General Agreement on Trade in Services (GATS). Both GATT and GATS are documents created by World Trade Organization (WTO) agreements and they lay the boundaries for subsequent bilateral agreements such as the Australian-U.S. FTA.
The chapter also sets definitions to be used throughout the agreement in order to assure uniformity.
National treatment and market access for goods Chapter two of the FTA lays out conditions for what types of goods are subject to non-discriminatory treatment. Certain types of goods are fully applicable to the agreement immediately and some are phased in over a period of years or temporarily applicable.
The chapter also reminds the two countries that they must abide by the WTO rules applying what is called national treatment. "National treatment" means that each country will provide the same treatment to imported goods from the other country as if they were domestically produced goods.
Finally, the chapter established a Committee on Trade in Goods with the purpose of providing arbitration for each country to "raise issues of concern in relation to tariffs, non-tariff measures, rules of origin and customs administration."
Agriculture The agriculture section of the agreement outlines the system for eliminating most tariffs for agriculture products being traded between the two countries. It also agrees to eliminate export subsidies when the good in question is being exported to one of the two party countries.
Special tariff-rate quotas are part of the agreement. These quotas allow Australian producers to export increasing amounts of these products free of duty to the United States during the tariff elimination period. The following agricultural products are designated:
Beef Dairy Tobacco Cotton Peanuts Avocados
The quota systems vary for the different products and are outlined, in detail, in this section.
The section also sets up a Committee on Agriculture with the purpose of providing "a formal opportunity for Australia and the United States to discuss a wide range of agricultural issues relevant to the Agreement, including trade promotion activities; barriers to trade; and consultation on the range of export competition issues."
Finally, the two countries have committed to working with the WTO on a multilateral scale to eliminate export subsidies to other WTO member countries.
Textiles and apparel Chapter four deals with the trade of textiles and apparel between the two party countries. The bulk of this section outlines the rules of origin provisions with regard to textile goods and safeguarding the domestic markets of the two countries. The agreement provides a mechanism to institute emergency action should the sudden increase in imports due to the reduction of tariffs lead to detrimental effects on the domestic industry of the importing country.
In addition, this section details the cooperation of Customs authorities for ensuring that the rules of the agreement are carried out and outlines possible actions which can be taken if the exporting country appears to be acting in bad faith.
Rules of origin The rules of origin section outlines the rules for determining the origin of the goods being traded in order to establish eligibility and also the method to determine the value of the goods traded.
For the purposes of the FTA, this section defines an originating good as those that:
are wholly obtained or produced entirely in the country, such as minerals extracted there, vegetable goods harvested there, and live animals born and raised there; are produced in the country wholly from originating materials; or are produced in the country partly from non-originating materials.
The section also outlines supporting documentation and verifications that the goods being traded are, indeed, originating in the exporting country, as defined by the agreement. The responsibility for verification of the applicable conditions is given to the importer. Denial of preferential treatment and penalties may apply if proper verification is not provided by the importer upon request made by the importing country.
Customs administration This section outlines the requirements of the customs authorities to:
promptly publish law, regulations, guidelines and administrative rulings, administer customs laws in a uniform, impartial and reasonable manner, provide advance rulings on tariff classifications and rules of origin within a given period of time, provide some sort of administrative body to review customs determinations, cooperate with each other on all reasonable matters, especially those involving suspicion of illegal activity, protect the confidentiality of information provided in cooperation with other customs authorities, impose their respective penalties for violations of customs laws and regulations, promptly release goods consistent with ensuring compliance with customs laws, apply risk management systems to concentrate on high-risk areas and facilitate low-risk areas, and, maintain expedited procedures with respect to express shipments.
Sanitary and phytosanitary measures In conjunction with the existing WTO Sanitary and Phytosanitary (SPS) Agreement, this section sets up two committees to ensure that the SPS agreement provisions are followed.
Committee on Sanitary and Phytosanitary Matters (provided with a mandate for "increasing the mutual understanding of the SPS measures and regulatory processes of each Party as well as continuing the cooperative efforts of the Parties internationally") Standing Working Group on Animal and Plant Health (to help with the resolution of specific animal and plant health matters with the goal of resolving the problems with the least adverse effect on trade as possible)
Technical barriers to trade This section acknowledges the rights and obligations of Australia and the United States to each other with respect to combating barriers to trade. These rights and obligations were laid out by the WTO Agreement on Technical Barriers to Trade, which deals with standards, regulations, and conformity assessments, among other things.
Most of the section is language from both countries agreeing to share information on several levels of government regulation. They agree to attempt to accept each other's regulations and publish such rules and regulations in a timely manner in order to ensure transparency.
Safeguards The goal of the safeguards section of the agreement is to lay out an agreed upon structure to guard against severe adverse effects to each countries domestic industries during the transition period after lifting tariffs. The countries also agree to consider the exclusion from the application of global WTO safeguards imports from the other country where those imports are not a substantial cause of the injury to the domestic industry.
Cross-border trade in services Section 10 of the FTA gives clear meaning to the phrase "cross-border trade in services" and provides suppliers with an open environment in which to conduct their business. It requires that each country give the other's service suppliers national treatment or most-favored-nation treatment and prohibits many restrictions to market access and transfers.
Investment The investment chapter of the FTA provides clear definitions as to what investments are covered and gives cross-border investors assurances in order to make it as safe as if they were investing in their own country. Among other things, the section prohibits each country from imposing or enforcing any of the following requirements in relation to an investment in its territory:
to export a given level or percentage of goods or services; to achieve a given level or percentage of domestic content; to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory; to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with an investment; to restrict sales of goods or services in its territory that an investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings; to transfer a particular technology, a production process, or other proprietary knowledge to a person in its territory; or to supply exclusively from its territory the goods that an investment produces or the services it supplies to a specific regional market or to the world market.
Telecommunications This section details agreed upon terms by both countries to assure fair trade between the telecommunications industries in each country. The rules specifically exclude measures relating to broadcast or cable distribution of radio or television programming.
Among other provisions, the agreement lays out rules for settling disputes among the members of the telecommunications industries in one country with the members in the other. It entitles enterprises to:
seek timely review by a regulator or court to resolve disputes; seek review of disputes regarding appropriate terms, conditions, and rates for interconnection; and to obtain judicial review of a determination by a regulatory body.
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