292 Payneham Road, Payneham SA 5070

(08) 8362 0060

(08) 8362 0061


International trade barriers come tumbling down

International trade barriers come tumbling down

Australia has recently signed a number of free trade agreements (FTAs) and has another in the pipeline with India. The landmark deal with China and the largest free trade agreement, the Trans-Pacific Partnership (TPP) between 12 Asia-Pacific nations, including the United States will have a significant impact on all Australians.

As tariff barriers fall like dominoes, we can all profit from a greater understanding of the potential benefits, and pitfalls, for local businesses, consumers and investors.

The potential upsides

An FTA is an international treaty which removes barriers to trade. They can link two economies or cover entire regions with multiple participants.

Under the Australia-China FTA, for example, 95 per cent of Australian goods exported will be tariff free when the agreement is fully implemented. In Japan, high tariffs on Australian beef exports have been cut. Many of our agricultural exports can now enter Japan duty free, including prawns, lobsters, asparagus, cherries, grapes, macadamia nuts and almonds.

And it’s not just all about food and minerals. In a world where service industries are increasingly central, free trade agreements often cover areas such as government procurement, intellectual property rights and competition policy.

The potential downsides

Australian governments have been enthusiastic about FTAs, having agreed to nine since 1990. But a recent Productivity Commission report was less enthusiastic, arguing that preferential trade agreements add to the complexity and cost of international trade for businesses, grant legal rights to foreign investors not available to Australians and expose Governments to potentially large legal costs in disputes with foreign corporations and other investors.i

Other potential pitfalls are the ability of powerful countries to tilt the economic playing field in their favour and the risk that large trading blocs will create global economic instability.

Organisations such as consumer advocacy group Choice worry that the TPP may benefit foreign businesses at the expense of Australian consumers. In particular, there’s concern the agreement may allow the Australian government to be sued by companies for making laws in the public interest.ii

There are also fears the TPP may lock in laws that result in Australians paying higher prices than people elsewhere in the world for a wide range of goods from cars to computers and cosmetics.

Unprecedented opportunity

While the TPP will be significant, all FTAs that have been signed, sealed and delivered will be affecting Australian business people and consumers in the immediate future.

The government argues the completed FTAs will help to increase Australia’s productivity and contribute to higher economic growth. They will achieve this by allowing businesses access to cheaper inputs, introducing new technologies, and fostering competition and innovation.

For consumers, increased competition should translate into a wider range of products and services at cheaper prices.

So what should I be investing in?

The new FTA with China will benefit Australian agribusiness, particularly dairy and meat producers. Australian service businesses, such as educational institutions, are also expected to do well out of increased access to Chinese markets.

Conversely, lower tariffs on Chinese imports – of which 94 per cent are manufactured goodsiii – will benefit Australian consumers in the form of lower prices for products such as clothes, but they won’t do our manufacturing sector any favours.

The FTA with Japan provides access to their markets for a range of Australian service suppliers, including financial, legal, education and telecommunications services. It also benefits consumers, with cheaper import prices on goods such as cars, white goods and electronics.

Australia’s tighter embrace of the global economy will have winners and losers, with the biggest winners likely to be local businesses in a position to boost exports and crack new international markets.

If you would like to discuss how Australia’s FTAs could impact on your investment portfolio, please give us a call.

i http://www.macrobusiness.com.au/2015/06/productivity-commission-slams-tpp-trade-deal/

ii http://www.abc.net.au/news/2015-03-18/tpp-could-force-government-to-spend-millions-subsiding-medicines/6328132 

iii http://dfat.gov.au/trade/agreements/Pages/benefits-of-ftas.aspx

Financial Advisor Adelaide

We are an award winning practice that has been providing financial advice to South Australians since 1969. We really enjoy getting to know our clients and building a relationship with them that lasts over many years. We have a diverse range of clients from mum and dad to AFL players to ASX CEOs. All of which have a diverse range of financial advice needs and very different relationships to maintain. Our clients describe a 'breath of fresh air', personable, expert and people with high integrity. Clients have also mentioned that they are not treated as a number and the advice is specific to them. Working with clients for clients.

Financial Planner Adelaide

The one most rewarding thing about being a financial planner in Adelaide is when you have been working collaboratively with a client in developing and building their goals and objectives and the come to fruition. This give both the clients and myself a real sense of achievement and to use the famous quote 'are we there yet?' and together we can say YES! There has never been a better time to look towards what you want to achieve and start a financial plan so you can get there too.

Financial Planning Adelaide

A person's financial story is like a jigsaw puzzle... "lots of pieces needing to be put into their correct places". A financial adviser can assist a client to put the pieces in the right places by having a series of simple conversations about where a they are currently situated, where they want to be and what strategies can assist them. Every client has a different financial story and goals. Each jigsaw puzzle will always be different. A good financial adviser is experienced at putting together a wide range of jigsaw puzzles. Helping a client put their own puzzle together and seeing their satisfaction is a wonderful feeling.

Barry Phillis, Chris Scriva and Owl Financial Management Pty Ltd are Authorised Representatives of GWM Adviser Services Limited Australian Financial Services Licensee Registered Office at 105-153 Miller Street North Sydney NSW 2060 and a member of the National Australia group of companies.

GENERAL ADVICE WARNING: The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. View Terms & Conditions >