have greatly benefited from trade agreements, such as NAFTA, but
continue to face high tariffs around the world. While a global
effort to reduce trade barriers through the World Trade
Organization is the ideal path, this process has been slow. In the
meantime, bilateral and regional free trade agreements are a means
to advance trade liberalization. On May 18th, the United
States will sign a free trade agreement with Australia. While it is
tempting to delay a vote on trade in an election year, delaying
action on the agreement would needlessly punish American producers
and investors, who stand to greatly benefit from increased trade
access to Australia.
to Australia's market for American manufacturers.
U.S.-Australia Free Trade Agreement (FTA) will eliminate tariffs on
99 percent of U.S. manufactured exports to Australia. Key
manufacturing sectors such as construction equipment, furniture,
medical equipment, and autos will benefit from this agreement. For
instance, under the FTA, Australia will reduce its average tariff
on motor vehicles immediately and will eliminate all such tariffs
barriers to American farmers. Key agricultural products that
will benefit from immediate tariff elimination include fruit
juices, soybeans, almonds, sweet corn, potatoes, and tomatoes.
Australia has recently announced that processed U.S. pork and
frozen, unprocessed U.S. pork exported to Australia for further
processing will be given access. U.S. producers continue to seek
access for fresh pork, apples, citrus, and stone fruit, and the FTA
creates a forum to accomplish these goals.
U.S. investment in Australia.
Investment provisions in this
agreement will exempt the majority of U.S. investment from being
screened by Australia's Foreign Investment Promotion Board by
increasing the investment size above which regulators must be
notified. Currently, investments over $50 million must be screened.
According to the Center for International Economics, "The increase
in the notification threshold to $800 million will eliminate
the costs associated with complying with notification requirements
for the majority of direct investment proposals in Australia. In
the three years to the end of 2002, around 89 per cent of
US proposals (or 174 proposals) for investment were under
Sealing the Deal
Despite the many
benefits negotiated in this agreement, nothing will happen until
Congress takes action. As wrote Rep. Cal Dooley, Rep. Ellen
Tauscher, and Rep. Jim Davis in a March letter to Speaker Hastert,
"It would be irresponsible to consider delaying an agreement that
is commercially significant to so many sectors of the U.S.
agreement will reinforce America's strong trading relationship with
Australia. Australia is a like-minded partner in trade and has been
an ally in the World Trade Organization. Like
the United States, Australia has low trade barriers, strong
property rights protection, a low level of regulation, and openness
to foreign investment, according to the 2004 Index of Economic
Despite these similarities, there are still
barriers between the countries. Only through trade negotiations
will markets be liberalized and contentious trade issues
resolved. America has much to gain from this agreement;
Congress should not delay making these gains a reality.
Fitzgerald is a policy analyst in the Center for International
Trade and Economics at The Heritage Foundation.