The Age, Melbourne

No easy ride in the land of the FTA

By Tim Colebatch

Economics Editor, Canberra

20 August 2005

IT WAS meant to be the big breakthrough for Australian exporters - but official statistics show Australia’s exports to the US have fallen by 3 per cent since the start of the US free trade agreement.

In contrast, the first six months of our FTA with Thailand saw Australian exports surge 63 per cent.

With record commodity prices lifting Australia’s export earnings by 16 per cent this year, and an agreement that was meant to let us "dock into the world’s most dynamic economy", why have exports to the US gone backwards?

It is not the first FTA that has failed to deliver. In the two years of Australia’s agreement with Singapore, exports there have slumped by 28 per cent.

Yet Singapore’s exports to Australia have shot up 67 per cent in that time. A trade surplus of $289 million in 2002-03 turned into a deficit of almost $4 billion in 2004-05.

The figures made for uncomfortable questioning yesterday at a parliamentary committee hearing, particularly when Austrade and the Department of Foreign Affairs and Trade sent along senior managers rather than trade analysts to explain them.

Labor members of the Joint Committee on Foreign Affairs, Defence and Trade zeroed in on the failure so far of the Singapore and US deals, while officials tried to spin out of trouble with a wealth of hypotheses.

Officials said it was "still early days" with the US free trade agreement, which took effect on January 1, and we should not expect results yet.

"Our exports to the US have been in gentle decline since 2001," said Jeannie Henderson, director of the US/Canada desk. (They have fallen by 22 per cent, or $2.75 billion.)

She blamed the slump largely on the rise of the Aussie dollar, and said the Government was "very confident" that, over time, the FTA would help reverse the trend.

"The United States market is extremely large and complex," she said. "It takes a while to work our way in."

But the official study last year of the Australia-US deal predicted it would lift exports this year by $1 billion, implying a rise of 10 per cent. US exports to Australia have risen 7.4 per cent so far this year, roughly in line with the study’s estimate.

Surging gold and oil exports dominated export growth to Thailand, along with aluminium (up 53 per cent), cars and parts (27 per cent) and pharmaceuticals (19 per cent).