Thinking of expanding into Asia or already there? Five things you need to know about free trade agreements across Asia
Key points in this article
- Looking to Asia for export opportunities
- Being competitive in a foreign market
- Finding out about Australia’s FTAs
One of Australia’s biggest export destinations
ANZ’s Opportunity Asia Report* found that the failure of small businesses to understand Australia’s FTAs is costing them valuable export dollars.
With Korea, China and Japan making up 20 per cent of global GDP, Asia is one of Australia’s largest export destinations and a key driver of long-term economic prosperity.
FTAs help businesses expand into overseas markets by supporting them to overcome practical barriers to trade with initiatives such as preferential treatment above competitors from other countries that have not secured an agreement.
The well-publicised China-Australia FTA is enhancing opportunities across the region and is following similar FTAs with Japan and Korea.
The potential for business opportunities in Asia can’t be underestimated
The role of the small business sector
According to the report, the small business sector plays a big role in the export of Australia’s goods and services to Asia.
However, it highlighted that
- just one in two (52 per cent) businesses surveyed were aware of the China FTA
- 36 per cent were aware of the Japan FTA
- 20 per cent knew about the South Korea FTA, and
- just 18 and 12 per cent were aware of the Singapore and Indonesia FTAs respectively.
The report found that although we were exporting strongly in Asia, Australian businesses could be doing more with only 19 per cent taking advantage of the benefits.
What your business needs to know
To help overcome the FTA knowledge gap, we have listed five things small business needs to know about how FTAs work:
- They offer businesses lower tariffs on selected exported goods and access to cheaper and potentially better quality imports
- They provide clarity around standard regulations, customs administration, qualifications and competition policies
- They increase exposure of Australian businesses to potential investment by offshore investors
- Quotas on certain imported goods may be removed or made more lenient as a result of an FTA
- For businesses trading in the service industry, FTAs can reduce regulatory barriers and provide greater access to local markets.
Research has shown that 75 per cent of those businesses that did embed FTAs within their business strategy experienced increased export growth.
Knowledge about Australia’s FTAs is power – it could help your business create a competitive advantage in an export market
The importance of understanding FTAs
Not understanding FTAs puts businesses at risk of not being able to reach full growth potential and increased pressure from competitors. And with 40 per cent of surveyed small businesses indicating that they plan to focus on Asian export markets within the next 12 months, it’s vital they understand in detail how FTAs can benefit their plans.
It’s important to take a close look at Australia’s FTAs to see how they might benefit your business
Before you embark on your expansion into Asia and to ensure your business is taking full advantage of the competitive edge Australia’s FTAs with Asian markets provide, we have listed some reliable sources of information below.
For an individual breakdown of FTAs according to country, industry and product and for information on FTAs in general or doing business overseas, take a look at the website we developed with the Export Council of Australia:
*More than 1,000 Australian businesses ranging from small to large enterprises were surveyed on their views about conducting business in Asia as part of the report.
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