From The Australian today comes a stunning rebuke of Australia’s free trade agreements (FTAs) by the Australian Chamber of Commerce and Industry (ACCI), which claims that many FTAs are so poorly drafted and complex that they are next to useless in a commercial sense:
[ACCI] said that some FTAs were so poorly drafted that most Australian firms selling goods to those countries did not even claim preferences to which they were entitled, because of the cost and delays involved. He said the Korean FTA was the worst…
…unless technical elements of the Korean deal are redrafted before it is formally ratified, it will become “unworkable in a commercial sense”, as will the Japanese deal if its compliance clauses are not drafted in a business-friendly way…
In a recent survey, most Australian exporters told the ACCI the technicalities precluded them from understanding Australia’s FTAs to date…
In a different survey of companies Asia-wide cited by the chamber, fewer than 30 per cent of the firms responding used the concessions available to them under FTAs.
The ACCI’s concerns are similar to those raised by me last year, when I argued that complex ‘rules of origin’ (ROO) attached to FTAs raise administrative costs for businesses (including complying with paperwork requirements) and custom services in administering and auditing the ROO, undermining the benefits from the FTA. I also argued that the costs associated with ROOs will be greatest where there is a large number of FTAs each with different requirements, resulting in a ‘spaghetti bowl effect’ of increasing complexity.
When viewed alongside the fact that most of Australia’s FTAs contain big carve-outs of agriculture, it’s hard not to view the Coalition’s current trade negotiations as politically motivated rather than based on economic considerations.
