Australia’s Preferential Trade Agreements: a quick guide

16 Dec 2014

This Quick Guide provides a brief background to Australia’s preferential trade agreements (PTAs; often referred to as free trade agreements), in particular what they are, what they cover and commentary on whether they have been effective in increasing Australia’s wider economic welfare.

What are Preferential Trade Agreements?

A PTA is essentially a contract between two or more countries. Once ratified, a PTA is a legally binding treaty to liberalise access to the parties’ markets for goods, services and investment.

At first glance, PTAs appear to go against a key principle of the multilateral trading system, the Most-Favoured Nation (MFN) principle. In brief, the MFN principle stipulates that a country cannot ordinarily discriminate between its trading partners. However, a closer look reveals that PTAs can be accommodated within the multilateral trading system, if they comply with the rules.

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