Australia Says Free-Trade Pact Requires Reciprocity

The Australian auto industry endorses a Trans-Pacific Partnership free-trade zone, but only if it gives auto makers genuine reciprocal market access through bilateral and multilateral trade agreements.

The Federal Chamber of Automotive Industries says while it welcomes Australia’s involvement in the TPP, its support is conditional upon the Australian government gaining access to overseas markets equivalent to what now exists for foreign auto makers in the domestic market.

The leaders of the nine Trans-Pacific Partnership countries – Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the U.S. – this month announced the achievement of the broad outlines of an ambitious agreement that will enhance trade and investment among the TPP partner countries, promote innovation, economic growth and development, and support the creation and retention of jobs.

Australian Trade Minister Craig Emerson and U.S. Trade Representative Ron Kirk met during the recent APEC meeting in Indonesia and reiterated their commitment to successfully concluding the TPP negotiations as soon as possible.

The U.S. and Australia are the two largest economies of the nine countries negotiating the TPP agreement.

Emerson and Kirk say the U.S.-Australian economic relationship is a strong example of the kind of open, transparent, and fair trade and investment ties that the two countries hope to expand throughout the Asia/Pacific region with other TPP partners.

But the FCAI says the TPP should be a comprehensive free-trade agreement that must include not only reciprocal reductions in tariffs, but also address non-tariff barriers (NTBs) to trade.

“The Australian government should ensure that all participants in these negotiations are willing and able to demonstrate action to remove NTBs before Australia engages in negotiations,” FCAI CEO Ian Chalmers says in a statement.

The FCAI says Australia’s automotive industry is one of the most open and competitive in the world, with an automotive tariff rate of about 3.5% that is lower than for most agricultural products. Imported cars represent about 85% of new vehicles sold in Australia.

“Australian vehicle manufacturing jobs are dependent on achieving a level playing field,” Chalmers says. “All trade agreements, including the TPP, must ensure Australian-made cars have equivalent reciprocal access to overseas markets.

“Previous FTAs negotiated by Australia have not resulted in equivalent market access for automotive products. Non-tariff barriers in particular have been used to restrict or prevent the import of motor vehicles from Australia.”

Chalmers says examples of non-tariff barriers that countries use to protect their auto industries include discriminatory tax structures; frequent introduction of new technical barriers; customs-valuation methodologies that are contrary to World Trade Organization standards; and currency manipulation.

Other direct and indirect actions that reinforce bias against imported cars include subsidized interest rates on purchases of domestically produced vehicles, he says.

Exports of Australian-made vehicles grew from 35,000 units in 1996 to a record 162,000 in 2008, generating A$5 billion ($4.9 billion) in income for Australia.

The FCAI says exports have been essential in sustaining local manufacturing production volumes and could continue to grow if the Australian government can gain access to overseas markets for automotive exporters.

Exports of Australian-made vehicles already are under pressure due the strength of the Australian dollar, high costs and intense competition from other automotive manufacturing countries to attract investment in the next generation of low-emissions vehicle technology and production.

“It is essential that any future trade agreements do not result in competitive disadvantage for Australian manufacturers,” Chalmers says.