What would a GCC FTA mean for you?
With Australia’s Minister for Trade and Investment, The Hon Andrew Robb AO, MP making three trips to the Gulf states (Saudi Arabia, UAE, Yemen, Oman, Qatar, Kuwait and Bahrain) in the last 12 months it seems clear the region is a key priority for Australia’s future trade and investment links. The last few visits to the region have given Mr Robb a platform to urge the resumption of the Gulf Cooperation Council-Australia Free Trade Agreement (GCC FTA) talks, which have been stalled since 2009.
With the Federal Government’s recent focus on securing free trade agreements with China and India, let’s have a closer look at what a free trade agreement means for the Australian economy and why we should be looking towards the Gulf States.
So, what is a free trade agreement?
Free trade is international trade not confined by tariffs, quotas or other restrictive measures, where each nation who participates does so under the assumption that it is mutually beneficial for all parties involved. This idea is founded primarily on David Ricardo’s theory of comparative advantage; where each nation should produce those items in which it has a relative cost advantage and trade with other nations on this basis.
From this theory came the policy initiative of free trade agreements (FTA). A free-trade area is the region encompassing a trade bloc whose member countries have signed a FTA. Such agreements involve cooperation between at least two countries to cut trade barriers—import quotas and tariffs— and to increase economic prosperity through trade of goods and services with each other.
What are the benefits?
The main policy aim of a FTA is to maximize the economic benefits flowing between the partner countries. It also fosters freer trade flows and builds strong ties with our trading partners. With China securing the top spot for Australia’s import and export markets is it time to start diversifying our trade partners? The effects of the recent devaluation of the Yuan on the Australian economy would suggest so.
Other benefits include:
- FTAs can increase Australia’s productivity and growth by allowing domestic businesses access to cheaper inputs, introducing new technologies, and developing competition and innovation
- FTAs promote regional economic integration and build shared approaches to trade and investment
- FTAs can enhance the competitiveness of Australian exports in the partner market, and add to the attractiveness of Australia as an investment destination
What does the GCC have to offer?
“An FTA with the Gulf states would improve Australian business and investment opportunities in a part of the world that is rapidly emerging as a significant economic and trading hub.” Andrew Robb, Minister for Trade and Investment
The Gulf States are oil and gas producing, relatively stable and wealthy, and enjoy the highest standards of living in the Middle East and North Africa region. The market’s population is largely English-speaking, educated and skilled population that is hungry for luxury goods and services. The decision by the GCC to embark on a path of economic integration and introduce a common market in 2008 has led to regional reform in regulatory frameworks, infrastructure and tax regimes. This makes the GCC an untapped and attractive marketplace, which has a lot to offer to Australian businesses in the food and agriculture, resources and energy, and major infrastructure sectors.
In April 2015 Mr Robb led a senior business delegation to the GCC to promote Australia as a reliable investment destination as well as encouraging greater collaboration between our countries. With the dynamic region set only to keep growing over the next decade and a FTA in the works is the GCC the region that could take your business global?
To find out more visit Dearin & Associates blog for Cynthia Dearin’s article ‘Travelling with the Minister: A quick trip to the UAE, Kuwait and Saudi Arabia’ and other articles on international trade and developing markets.
For more on the Middle East and North Africa region, check out Cynthia Dearin’s new book, Camels, Sheikhs and Billionaires: Your Guide to Business Culture in the Middle East and North Africa.