Australia to lose $14bn trade revenue through untapped FTAs: act now to access Asia

While ten FTAs are currently available to Australian companies their underutilisation by Australian merchandise exporters could result in the loss of $14 billion of potential export trade revenue over the next five years. And this admittedly conservative figure would rise dramatically if trade in services was added.

Successfully negotiating Free Trade Agreements is tough going for governments and appears to be equally tough for businesses to access them but the benefits from the ‘Asian Trifecta of FTA’s’, China, Japan and Korea, could generate a cumulative GDP increase of more than $24 billion in present value terms between 2016 and 2035.

So why are FTAs underutilised?

Australia’s FTAs are normally underpinned by years of very detailed negotiations on product-specific rules of origin which lead to confusion by both importers and exporters. Clearly when governments have difficulty negotiating and summarising the minute detail of FTAs, it’s no surprise that companies have great difficulty in understanding and then implementing the processes.

But an FTA is just one part of the international trade puzzle and Australian companies need to revisit their strategy for Asian market export growth, supply chain solutions and outbound investment.

The complexity and lack of understanding of the benefits of FTAs appears to be the number one obstacle, followed by widespread confusion around the technical understanding of FTAs, both in Australia and foreign markets.

Other barriers were opaque trade regulations in Asian markets, IT infrastructure challenges; market access difficulties and non-tariff barriers, multi-jurisdicational supply chain challenges, internal capability limitations, especially for SMEs, increasing services (rather than product) export to Asia, and lack of comprehensive, affordable FTA advisory services.

Embarking on any trade with ASEAN countries requires a rethink of the way many companies trade with other overseas businesses. It takes insight, expertise and a disciplined approach.

How can Australian companies succeed in Asia?

There is no one-stop-shop for FTA trade facilitation but these six critical elements re distilled from interviews with senior executives with Asian trade expertise.

  • View Asian countries as comprising a number of unique markets within each country – and not as an amorphous whole.
  • Be ready to interact with ‘new consumers’ as they emerge in these dynamic and fast-paced environments.
  • Think about successful ‘marriage’ and ‘exit’ options upfront, not just about the honeymoon.
  • Finding and incentivising the right trading partners is critical.
  • Understanding non-trade barriers (local customs and tastes)
  • Have a thorough stakeholder communication strategy.

Asian consumers are savvy, experienced online shoppers with ecommerce rapidly growing across ASEAN countries with the smartphone the most commonly used device for daily retail visits across Chinese luxury online shoppers. Competition is tough and you are competing on a world stage but Australia has many desirable consumer products and ‘made in Australia’ is a powerful brand. But it must be competitive and meet the desires, and exacting standard of the Asian consumer.

With an estimated $14 billion of revenue up for grabs, and ten FTAs to assist export, there is every reason to learn more about successfully doing business in Asia.

Doug Ferguson

To learn more, read our just released Access Asia Report.

Media Release


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