Bilateral and regional trade agreements

• Jill Irvine
• Productivity Commission

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19 July 2010In the last decade, Australia has entered into a number of bilateral and regional trade agreements, and is currently negotiating several more. While trade agreements can provide modest benefits for Australia, larger gains are possible, according to a Draft Research Report by the Productivity Commission.

The Commission found that Australia’s trade agreements to date have resulted in bilateral tariff reductions for goods trade and this is likely to have encouraged trade in goods between partner countries. However, there is limited evidence thus far in relation to the effect on trade in services and investment. The Commission is seeking further evidence from businesses regarding the effects of Australia’s trade agreements on their operations

In relation to existing agreements, Commissioner Patricia Scott commented that: ‘Great emphasis has been placed on the potential benefits of preferential agreements in advance of negotiating them. The Commission has found that expectations of the benefits have been optimistic.’

While there is the potential for some gains from preferential agreements, unilateral and non-discriminatory trade liberalisation offer larger benefits.

Nonetheless, there can be a role for bilateral and regional agreements where they focus on building frameworks for trade and investment between nations. This includes negotiations directed at improving the transparency of regulatory frameworks, trade facilitation measures and the mutual recognition of standards and accreditation for goods and services. Effective cooperation on such ‘behind-the-border’ barriers is particularly important to services trade.

This draft report was released on 16 July 2010. You are invited to examine this draft and provide written comments to the Productivity Commission. Written comments should reach the Commission by Friday 10 September 2010.

Image: antwelm / flickr