ASEAN Australia New Zealand Free Trade Agreement (AANZFTA)

Entering into force on 1 January 2010 for most parties, the ASEAN–Australia–New Zealand Free Trade Agreement (also known as AANZFTA) is a major agreement between Australia, New Zealand and the ten members of the Association of South East Asian Nations (ASEAN). AANZFTA represents a somewhat new course for Australia, which through this accord is moving towards agreements with multiple parties in addition to its more traditional bilateral trade agreements. The agreement is expected to foster reduced (or eliminated) tariffs, provide new markets for Australian exports, facilitate Australian investment in ASEAN and enhance Australia's economic presence in southeast Asia. Australia already benefits greatly from its bilateral relationships with ASEAN, which, collectively, represents a larger Australian trading partner than any other single nation, save China. Australian-ASEAN trade was worth over $183 billion in 2023. The agreement was upgraded in August 2023 to increase supply chain resilience for essential goods and simplify rules of origin. Proponents of this multinational trade agreement argue that AANZFTA will only build on and improve these benefits.

Background

On 8 August 1967, the leaders of Thailand, Indonesia, Malaysia, the Philippines and Singapore entered into a landmark regional cooperative known as the Association of South East Asian Nations (ASEAN). Over the decades that followed, the founding nations of ASEAN were joined by five more: Brunei, Vietnam, Laos, Myanmar and Cambodia. The purpose of ASEAN was clear and comprehensive: to promote economic, political and social cooperation among these nations. Among the accomplishments ASEAN realised was the establishment in the 2000s of a Free Trade Area (FTA) in which tariffs and trade restrictions between the ASEAN nations would be significantly reduced.

In November 1993, Melbourne hosted the National Trade and Investment Outlook conference. During this meeting, then Thai Deputy Prime Minister Supachai Panitchpakdi suggested to participants that Australia look into the notion of linking together the ASEAN FTA and the Australia–New Zealand Closer Economic Relations Trade Agreement (ANZCERTA, or CER). CER is the bilateral free trade agreement signed on 28 March 1983, which strengthened a trade relationship between the two nations dating back to 1922.

By the time the ASEAN FTA was introduced, Australia still remained committed to the notion of bilateral trade agreements. Several of these trade agreements were with the individual partner states of ASEAN, such as Malaysia, Thailand and Singapore. These individual agreements were highly lucrative for the Australian economy; in 2008 Australia's two-way trade with ASEAN and New Zealand accounted for 20 per cent of its total trade.

The promise of a multinational free trade agreement between collective nations of ASEAN and the CER was highly evident. Only Australian-Chinese trade amounted to a greater sum. An Australia-New Zealand-ASEAN agreement would represent a departure from Australia's bilateral approach to trade. However, negotiators saw a strong potential return on such a change in policy.

Brief History

The combination of the CER and ASEAN was not immediately embraced, despite the fact that the potential returns on such a relationship were strong; the mutual benefits seemingly outweighed the risk despite the fact that they were weighed against the 1997–98 East Asian financial crisis. In 2002, instead of a full investment in a comprehensive free trade agreement, Australian trade ministers and their counterparts from New Zealand and the ASEAN countries negotiated an economic partnership agreement that did not address tariffs or trade restrictions. Instead, the agreement focused on trade facilitation between the states involved.

In April 2004, however, ASEAN and ANZAC leaders agreed to hold an ASEAN-CER summit. Later that year, the summit produced a series of principles on which a free trade agreement would be built. Challenging issues such as tariffs, investments, imports and exports were all carefully negotiated. By December 2008, AANZFTA was finalised and handed over to national leaders for signature. The agreement was formally signed by all twelve participant nations by 27 February 2009. Over the course of several months, the treaty's intricacies, such as those focusing on rules and tariffs, were addressed legislatively in Canberra before Australia formally ratified AANZFTA on 21 October 2009. The agreement took effect for Australia, New Zealand, Brunei, Malaysia, Myanmar, the Philippines, Singapore and Vietnam on 1 January 2010, and took effect for Thailand on 12 March 2010. Laos and Cambodia entered the agreement in January 2011 and Indonesia formally joined the agreement in 2012.

AANZFTA Today

AANZFTA represents the first time Australia and New Zealand have ever jointly negotiated a free trade agreement with a third party. However, the implications for the successful implementation of AANZFTA are significant: combined, there are more than 600 million people living within AANZFTA's sphere, all of whom generated a collective gross domestic product of US$4 trillion in 2016. In some areas, implementation of AANZFTA has not proven difficult, as Australia and New Zealand's pre-existing trade agreements with individual ASEAN states have already answered some latent issues. However, the collective nature of this comprehensive agreement has created some challenges.

For example, one of the more prevalent issues raised by AANZFTA are the regional rules of origin. From where a product comes is important, as different regulations, rules and tax policies are applied during exchange. Having regional rules of origin in places creates opportunities for businesses to take advantage of regional supply chains. A concern expressed by many negotiators and ministers has been that businesspeople presumably conducting trade under AANZFTA may be in fact subjected to tariffs and restrictions that should have been eliminated by this agreement. On 20 August 2014, AANZFTA ministers signed the First Protocol to Amend AANZFTA to address issues concerning certificates of origin and rules of origin.

Another key area warranting ongoing work has been that of investments. Ministers have, since the 2010 initiation of AANZFTA, been working to ensure that pre-existing restrictions and regulations are being lessened and even eliminated in order to ensure that each member's markets are open for financial investment and that outdated regulations are not unduly imposed on enterprises. To address these and other issues, each participant nation takes part in working groups that seek common ground and accord among Australia, ASEAN and New Zealand so that all AANZFTA members are given equitable treatment.

Bibliography

"ASEAN-Australia-New Zealand Free Trade Agreement." Australian Government, Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/in-force/aanzfta/asean-australia-new-zealand-free-trade-agreement. Accessed 11 June 2024.

"ASEAN – Australia – New Zealand Free Trade Area (AANZFTA)." Enterprise Singapore, 23 Aug. 2023, www.enterprisesg.gov.sg/grow-your-business/go-global/international-agreements/free-trade-agreements/find-an-fta/aanzfta. Accessed 11 June 2024.

"Background to the ASEAN-Australia-New Zealand Free Trade Agreement." Australian Government, Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/in-force/aanzfta/background-to-the-asean-australia-new-zealand-free-trade-area. Accessed 11 June 2024.

Lester, Simon, Bryan Mercurio, and Lorand Bartels, editors. Bilateral and Regional Trade Agreements, 2 vols., Cambridge UP, 2016.

Why ASEAN and Why Now? Australian Government, Department of Foreign Affairs and Trade/Austrade, 14 Aug. 2015. Australian Government, Department of Foreign Affairs and Trade, dfat.gov.au/about-us/publications/Documents/why-asean-and-why-now.pdf. Accessed 11 June 2024.