Let’s Get Down to Business in Asia!

A new market of 600 million people with an estimated GDP of around US$ 2.7 trillion – an opportunity few businesses can afford to miss out on. Can you?

After coming into effect on January 10^th 2010, the Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA) is the largest FTA Australia has ever concluded. With six out of ten ASEAN markets expected to grow at rates at least double the forecast OECD average in 2010, Asia is leading the global recovery after the economic downturn and there is great potential for Australian businesses to get a piece of the pie.

Why care? If your business is exporting or importing any product (or part of a product) from Brunei, Burma, Malaysia, the Philippines, Singapore or Vietnam, for instance, then you should care. The AANZFTA is the first such agreement covering all sectors, including intellectual property rights, investment, goods and services, ASEAN has ever negotiated.

Among tariff reductions, the AANZFTA includes new safeguard measures for investors, a decrease in restrictions to business travel within the region, as well as greater stability and certainty in the regulatory and legal environment of ASEAN.

Still not sure why this affects you? Let’s say you want to go on a business trip to Manila, maybe to explore future market entry opportunities, but you don’t have an established professional relationship with a local business yet. AANZFTA includes commitments on temporary business entry of natural persons such as service suppliers, goods sellers and investors that make it easier for you to get in and around the country without having to justify every step you are taking.

42 per cent of our total exporter base – around 18,500 Australian businesses – already trade with ASEAN. Make sure you don’t miss out.

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

Stefanie Mueller – International Communications Strategist

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett@australianbusiness.com.au.

 

Don’t Wait For Asia to Pass you By

Now why do we need yet another Free Trade Agreement (FTA) if we already have bilateral arrangements with pretty much every country in the region? For those who haven’t heard about it yet: Australia has just signed the long-in-the-making Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA), which introduced comprehensive new tariff commitments and regulations on products, services, investment and intellectual property.

Most people are probably familiar with the problem of the “spaghetti bowl” effect of ever more free or preferential trade agreements between pretty much every country on the planet with every other country in one way or another. These numerous treaties organise trade relations between two or more parties beyond the general WTO rules. Not sure what I’m talking about? Imagine a map of the world with a link between every country in the world with two or more other countries. What you get is a “spaghetti bowl” of links that spread all over the globe and make it almost impossible to distinguish who is associated with whom. 

Why does this matter? The AANZFTA does not do away with the spaghetti issue. But it is complimentary and possibly a little more complete than bilateral agreements. It covers all areas in the one document, including services, goods, investment and intellectual property. Members can choose whether they wish to export a product under the existing FTA’s with specific countries or under the AANZFTA rules. Even though bilateralism often offers even greater tariff reductions and even less barriers, AANZFTA provides exciting new opportunities especially for manufacturing industries that are involved in rather complex supply chains.

An easy example of this is the automobile industry. An “Australian made car” is hardly Australian made. Its intestines and the technology to put it all together would come from a wide range of countries all over the globe. Through AANZFTA’s regional rules of origin Australia is able to profit from tariff reductions according to the origins of its imported inputs. This not only creates a greater market access for Australia, but it also provides incentives for regional members within ASEAN to use inputs from Australia.

If you’re still not convinced about AANZFTA, here is another argument: in the shadow of an economic downturn the greatest danger is for countries to engage in protectionist measures. The AANZFTA opens borders to counteract this trend. ASEAN as a whole is bigger than the EU and can gain some significant influence as a trading bloc in the region. It would be rather foolish for Australian businesses to be hesitant to jump on board this Asian giant. Others won’t be…

Stefanie Mueller – International Communications Strategist

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett.@australianbusiness.com.au

 

To Invest or Not Invest – the AANZFTA may hold the Answer

 It is a common belief that the global trading system can be boiled down to one enormous alphabet soup. In your first spoonful you’re likely to find the WTO, GATT, TRIPs, E.U, NAFTA, ASEAN, and APEC. If you’re game for another mouthful, you may find ANZCERTA, TAFTA, SAFTA, ROO and FDI, just to name a few! If you haven’t already got indigestion you could go on forever! We have barely scraped the surface.

 I mention the soup because on 27^th February 2009 Australia, New Zealand and ASEAN added to the pot. They signed the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) which came into effect on 1^st January 2010. It was the first agreement signed since the onset of the global financial crisis, or GFC if you will.

 The statistics are promising. Australia already conducts more trade with ASEAN than with any other single country, including the US, China or Japan. By 2020, with a few minor exceptions, Australia will have unrestricted access to a market of 570 million people, a population 27 times the size of our own.

 However, beside so many sweet statistics the figures for foreign direct investment (FDI) look decidedly lack lustre. FDI simply involves a company setting up shop in a foreign country or merging with or acquiring a company that is already there. It is really the pinnacle of economic integration because ‘on the ground’ operations involve such detailed know-how of the domestic market and its pitfalls.

 ASEAN is a prime candidate for FDI because it is a developing region whose large population that will demand progressively sophisticated products as their income grows.  And so it seems strange that ASEAN attracted only 5% of Australia’s foreign direct investment in 2007, about half of which was invested in Singapore. One would think that the geographical proximity of ASEAN alone would attract investors when looking to set up ‘on the ground’ operations.

 Two obstacles do stand out – common place corruption and an unpredictable regulatory environment. Both are capable of causing sudden spikes in cost and contribute to the risk of investing in ASEAN destinations. Corruption can affect procedures, and set-up costs such as licenses, whereas arbitrary regulatory changes can lead to loss of ownership or inability to operate. Let’s face it – each scenario sounds extremely risky and expensive!

 The AANZFTA may just be the missing ingredient. It should reduce the opportunities for corruption as funds must be able to flow freely and without delay to their investments. It offers protection and security for investments (according to international standards), compensation for government expropriations and equitable treatment for foreign firms in the event of losses. Put simply, it reduces the ‘unknown’ variables in undertaking FDI in ASEAN and puts Aussie investors in good steed to realise the strong potential of South East Asia.

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

Amy Doyle – International Market Analyst

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett@australianbusiness.com.au.

 

What’s So Special About Chile Anyway?

 The answer is simple.  If you want to do business with any Latin American country you cannot pass Chile. It is essentially the entry gate to the regional market. And Australia’s recently signed Australia-Chile Free Trade Agreement (ACI-FTA) has just brought us a little bit closer to this gate.

 Chile is Australia’s third largest trading partner in South America, with two-way trade valued at over AU$ 1 billion in 2008. Australia is the fourth-largest foreign investor in Chile, with around 50 locally-registered Australian companies providing AU$ 3.4 billion of direct investment. But those are just numerical attributes. They are not the only reasons why we love Chile.

 With a population of 16.6 million and a GDP of AU$ 190 billion in 2008, Chile is Latin America’s most stable and transparent commercial environment. There is widespread political consensus in favour of economic liberalisation, with reforms – including privatisation and deregulation – remaining a government priority even during Chile’s past 20 years of leftist rule. This continued liberalisation has led to increased competitiveness and substantial growth in Chile’s traditional export sectors, including mining, fishing, fruit and vegetables, aquaculture, forestry, wine, and services.

 What else is there to know about Chile’s economic environment that makes people want to get involved? Located in one of the world’s politically rather unstable regions, Chile has scored 78.3 on The Wall Street Journal’s Index of Economic Freedom in 2009. That makes it the 11^th freest economy in the world, in regards to investment freedom, property rights, and freedom from corruption. Only last month the OECD has asked Chile to join them. Even throughout political turmoil in surrounding countries, stable macroeconomic policies have proven Chile to be a mature democracy with clear incentives for foreign investment.

 Would you like some more rankings? They speak for themselves, don’t they? Barclay Capital ranks Chile second most advanced emerging market in the world, behind Singapore and ahead of China, India, and Brazil. The World Bank’s Voice and Accountability Governance Indicator gave Chile the rank 76.9 in 2008. High literacy rates (around 95% of males and females) as well as a poverty rate that plunged from 39% in 1990 to only 14% in 2006 really prove Chile to be an insider tip. You better be quick, it won’t be waiting for you.

Click here to visit the Australia Latin America Business Council website.

Stefanie Mueller – International Communications Strategist 

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Robert at robert.trzebski@australianbusiness.com.au.

 

Australia’s New Free Trade Agreement is a Big One for Exporters

 Australia just grew a little bit closer to yet another interesting trading partner.  The Australia-Chile Free Trade Agreement (ACI-FTA) came into effect on 6 March 2009. The agreement immediately abolishes 92% of tariff lines on 97% of Australian goods currently traded. All other tariffs will be eliminated by 2015. This will offer Australian exporters significant new opportunities in Chile as well as other countries in the region, particularly in the services and investment areas.

Chile has long been considered to be the entry ticket to the Latin American market. It is by far the most advanced economy in the region and with the recent election of the first centre-right government in 20 years the trend towards economic liberalisation seems to be continuing.

Australian exports most likely to benefit include coal, paints, varnishes, plastics, chemicals, heavy equipment, meat, dairy, wine and other agricultural products. The winners in the service sector will be the providers of mining and energy technology, engineering and consulting, franchising, education and training, information technology, tourism, and infrastructure. The Agreement also eliminates Chile’s long-time fixed sugar tariff, although a variable component will remain in place, dependent on continuing reform pressure.

The FTA will guarantee immediate non-discriminatory market access for Australian businesses as well as parity with suppliers from other countries with which Chile has trading agreements, such as Canada, China, EFTA, MERCOSUR, South Korea and the US. Due to the Rules of Origin chapter Australian exporters can benefit from Chile’s links to other trading partners by eliminating cross-border import duties on parts from these countries.

 Other areas covered by the agreement include comprehensive intellectual property rights as well as a liberalised regulation of the entry of business people engaged in bilateral trade and investment.

Click here to visit the Australia Latin America Business Council website.

Stefanie Mueller – International Communications Strategist

 For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Robert at robert.trzebski@australianbusiness.com.au.

 

Love Thy ASEAN Neighbour: Your Invitation to Free Trade

Come January 1, 2010 Australia’s closest neighbours are opening their doors to free trade with us Aussies. If you’d like to take advantage of the opportunities that come with this, you’ll need a sound trade strategy and the right documentation. Australian Business International Trade Services can assist with both.

What’s the story?

The expected ratification of the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA) on January 1, 2010 will provide a progressive reduction, or in most cases, elimination of tariffs on Australian good exports, and an elimination of ALL Australian tariffs on imports from AANZFTA parties.

The agreement covers goods, services, investment, intellectual property, e-commerce, temporary movement of business people as well as economic cooperation. It also contains measures relating to customs procedures and cooperation, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures and competition policy.

What does this mean for you?

Australian goods and services will now be more competitive in the 11 countries [Brunei, Burma, (Myanmar), Cambodia, Indonesia, Laos, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam] participating in the agreement. It also means that imports from these countries will become cheaper, it will be easier for Australian service providers to do business with these countries and Australian investors in ASEAN will achieve a greater level of transparency and certainty.  

What you need to know

1. You require the right documentation
   To take advantage of the tariff reductions and greater market access, Australian merchandise exporters will need to obtain an AANZFTA Certificate of Origin for each order; verifying the origin of your product. Australian importers will also need to ensure their suppliers understand the AANZFTA protocol and include the appropriate documentation with their shipments.
2. Varying timelines for tariff reductions means a blanket approach won’t work
   The tariff reductions and eliminations timeframe varies according to product and country in question. It therefore pays to do your homework on the specific timeframes for each country and then develop a strategy based on which market you should enter first or when and where you should switch suppliers.
3. If you don’t use this head start, you will lose it
   The AANZFTA provides Australian businesses with a clear advantage over countries that are have yet to sign FTAs with ASEAN. However, with China, Korea, Japan and India having already established FTAs with ASEAN, as well as a number of countries having bi-lateral FTAs with individual ASEAN countries, and more FTAs in the pipeline, if you don’t take advantage of this opportunity now or in the near future, you will lose it.
4. You can choose which FTA you’d like to use
   The bilateral FTAs Australia has with New Zealand, Singapore and Thailand will not be affected by AANZFTA, providing you meet the Rules of Origin (ROO) under the relevant FTA. In fact, you can choose which FTA you wish to trade under depending on what is most advantageous. The AANZFTA will, however, mean that Australian businesses already trading with Singapore, Thailand and New Zealand can make use of the AANZFTAs regional ROO under the agreement’s tariff commitments, making it easier to do business in and with the ASEAN region as a whole. The variables that come into play in switching between FTAs does mean greater complexity in developing a coherent export strategy into the region, making added caution essential.

Want to know more?

Australian Business International Trade Services can provide all your AANZFTA export documentation and market development requirements. We will be offering a range of workshops in 2010 covering topics including export documentation, strategies for developing ASEAN export markets, importing under the AANZFTA, and identifying the right ASEAN supplier. For more information, download our ASEAN brochure.

To find out more and ensure you maximise your competitive advantage, register your interest now.

Click here for a list of “ASEAN Made Easy” workshops throughout Sydney, the ACT and the Central Coast.

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett@australianbusiness.com.au.

 

Time has Come to Cash in on Regionalism

On January 10th 2010 the Australia-ASEAN-New Zealand Free Trade Agreement (AANZFTA) came into effect. It is a Free Trade Agreement between Australia, ASEAN and New Zealand that will create a common market by eliminating between 90-100% of tariff barriers within the region. It covers the substantial reduction or elimination of tariffs on Australian products including livestock, produce, resources, pharmaceuticals, clothing and footwear, machinery and some services and the movement of people. 

The reductions are gradual and will be completed by 2020. At that time both Australia and New Zealand would have eliminated 100% of tariffs in the region. The region’s growing importance to Australia cannot be overstated. At present the ASEAN market covers 20% of Australia’s two-way trade, a figure that is growing 10% annually. 

Australia’s ambitions in the region have not been a secret. Kevin Rudd has long been an advocate for the Asia Pacific Community, in contrast to the U.S-centred Howard years. The AANZFTA finally gives teeth to Rudd’s continued rhetoric and will lead to the integration so desired. If all goes to plan, the fundamental way in which it will do so is through the rules of origin (ROO) requirements impact on the supply chain. 

The ROO outlines the amount of the final product that has to originate from the exporting country in order to fall under the agreement. In a bilateral agreement this simply means that the majority of components (or X%) must come from the exporting country. The beauty of a regional agreement is that the majority of components (or X%) can come from any one of the countries party to the agreement. It therefore acts as an incentive for businesses to seek inputs regionally furthering integration and potentially reducing transportation costs. 

Sound complicated? It may be, but it pales in comparison to the ‘Noodle Bowl’ of bilateral agreements that has now taken hold in Asia. While the AANZFTA makes flexibility of the ROO a clear priority it is operating on a backdrop of 167 separate bilateral agreements in the wider Asian region. The motivation for such agreements is clear: while many multilateral negotiations have collapsed, Asia is the backbone of global economic growth and stands to gain enormously from intra-Asian trade. But is this motivation misguided? Each agreement requires time, money, bureaucracy and paperwork to get off the ground. Multiply this by 167 and is trade easier or more liable to distortion? The most likely outcome is that businesses just won’t bother. 

But this doesn’t concern us – or does it? The message is clear. Australian businesses are in prime position to gain from regionalism. By engaging with ASEAN as a region Australia bypasses the ‘Noodle Bowl’ scenario for now. As far as Australia’s other trading partners go – let’s just say that noodles are not off the menu entirely. 

Amy Doyle – International Market Analyst 

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Want more information on ASEAN? download our ASEAN brochure  

Amy Doyle – International Market Analyst

For more information or assistance, please contact Australian Business International Trade Services on 1800 505 529 or email Ian at ian.bennett@australianbusiness.com.au.