Businesses don't understand FTAs, so how will they deal with the TPP?

The government is keen to negotiate free trade agreements to bolster economic activity, but new research shows it has its work cut out to educate the market on their various benefits.

Australian entrepreneur Dean Flintoff runs a clothing business with his wife Madeline out of Adelaide. It’s a roaring success of a small business; it provides clothing to nine fashion labels and distributes to over 20 countries.

To keep his costs down, Dean produces his goods in China and then ships them around the world. He has a stake in the rise of globalisation and in the government's ongoing efforts to broker new free trade agreements -- especially with China.

But there’s a hitch: Dean is perplexed by Australia’s existing FTAs. All 10 of them. 

"I was reading a few last night and I thought 'wow'," Flintoff said. He piled through agreements in anticipation of a media briefing on the matter.

"It’s the non-tariff things that gets very complicated and that’s more of a benefit to us," he added.

Most traders understand the basics of FTAs: They offer certain goods exemption from trade-related taxes and allow for cheaper and more (hopefully) profitable trade. But that’s just the surface of these rather labyrinthine documents.

The problem is that Australia’s ignorance of FTAs extends far beyond Dean’s fashion outfit. Recent HSBC research has established that the majority of businesses fail to harness these agreements in their dealings, simply because they don’t understand them. Australia ranked below the APAC average, and second last to Malaysia in HSBC’s study.

The research highlighted a crucial weakness in the trade treaty process. The government may be keen to negotiate FTAs as a means of bolstering economic activity, but HSBC's findings hint that it may be failing to educate the market on their various benefits. Director of the export council of Australia Andrew Hudson says we need to find ways to make our current FTAs more “user-friendly”; be it through short courses, or FTA tutorial apps.

But there’s another problem on the horizon -- one that wasn’t bridged by HSBC’s research.

Trade agreements are growing in complexity, and they are beginning to cover more countries and more than just tariffs. Case in point: the looming Trans-Pacific Partnership agreement, which is aimed at tackling a raft of legally complex issues such as copyright law and intellectual property.

All trade agreements are drafted in secrecy; so we are yet to fully see just how intricate the TPP will be. However, sections of the draft version have been leaked by Wikileaks.

"What has been leaked thus far has been incredibly complex," says Australian research council future fellow and IP law specialist Dr Matthew Rimmer. He’s concerned that if the current drafts are indicative of the end agreement, a lack of understanding of the TPP may hamstring businesses. That is, unless they are able to afford a small army of lawyers to pour through it.  

“The TPP is very regulation intensive,” Rimmer explains.

“In certain areas, trade agreements are not cutting red tape; they are creating swathes and swathes of it. And also locking countries in sometimes into very restrictive positions,” he says.

“In his state of the union address, Obama tried to argue that the TPP would be good for small-to-medium businesses, but from my perspective, the agreement is so detailed, complex and voluminous that really you need to be a major company to make good use of it.”

The future of the TPP is up for debate. The Obama administration has been pushing to finalise the agreement since January, but a lack of support from US congress and the increasing complexity of the document may lead to a stalemate between the negotiating countries.

But the TPP is just one example of a new breed of documents that are attempting to mandate the state of play for our increasingly globalised world. And as it stands, Australian businesses can’t even decipher the rulebook. 

Got a question? Let us know in the comments below or contact the reporter @HarrisonPolites on Twitter.

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