Question: "A bilateral free trade agreement between the USA and Australia is likely to be of only marginal benefit to Australian businesses." Evaluate this statement.

Essay by vashtiCollege, UndergraduateA-, May 2004

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A Free Trade Agreement (FTA) between Australia and the United States of America (USA) appears to present a unique opportunity to advance the interests of Australian business. However, to what extent would free trade benefit Australia? An FTA superficially seems to offer significant benefits to Australia in terms of employment and the expansion of Australian business internationally. However, major market access barriers face Australian exporters, particularly in the agricultural sector. A free trade agreement would aim to correct any obstacles. Areas of Australian business would be pursued freely in the US market - services, manufacturing, investment, electronic commerce, telecommunications, intellectual property rights, and the movement of people. It is through these sectors that a bilateral free trade agreement presents positive and negative implications to Australian business.

Australian businesses have had difficulties competing in the international marketplace. This can be linked to lack of diversification, domestic ineptness, expensive labour, deficient output and inferior management.

The Business Council of Australia recognises that there are barriers to the competitiveness of large Australian firms due to the centralised, inflexible system of Industrial relations (Frenkel, Peetz, 1990). A study undertaken by the APEC Study Centre showed that an FTA could play an important role in attracting US investment into Australian businesses. An FTA would flow easily from layered security ties and would add, "A stronger economic dimension to the security and other links we share," (Howard, 2002) providing significant benefits in earnings.

The emphasis on exporting unprocessed goods has lowered technology bases, discouraging technological innovation (Hamilton, 1989, p.27). However, increased access to US markets through an FTA could boost trade - enhancing Australian business opportunities. An FTA would encourage additional foreign investment between the United States and Australia, adding employment to the investment flows between the two countries. Bilateral trade treaties can increase international industry...