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FTA's Benefits Not Yet Clear

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Tuesday 17 February 2004

EDWARD MANDLA

The risk-averse purchasing practices of government departments could get in the way of the agreement

The dust may have settled after the initial flurry of excitement over the signing of a Free Trade Agreement with the US, but we’re yet to learn exactly what has been promised in this landmark deal.

The Federal Government is expected to release details of the agreement over the next few weeks as part of a process of industry briefing and consultation, but it will be several months before any agreement becomes a reality.

The ACS has been generally welcoming of the FTA, recognising the potential benefits of greater access to the $76 billion market for US government ICT business. Under the agreement, officials say Australian technology suppliers will compete on a level playing field with their American competitors.

Most Australians would be surprised to learn that US Federal practice has been to only give government contracts to American firms. Coupled with commitments ensuring non-discrimination against Australia service suppliers, this will open up access for our ICT firms to this very strategic and lucrative market.

Of course, the companies in the best position to capitalise on such opportunities will be those who can already point to successful government contracts back home. This is where the risk-averse purchasing practices of Australian government departments who traditionally overlook Australian companies could hinder the potential benefits of this new access.

I was particularly pleased to see mention of mutual recognition of professional qualifications, which should make it easier for Australian ICT professionals to work in the US once the FTA takes effect. The agreement should also ease the way for Australian companies wanting to establish offices in the US, particularly if they want to employ Australians among their US staff.

However, some observers have already raised the apparent omission of more liberalised visa arrangements between Australia and the US to help facilitate more movement of professionals and this is one area that still needs to be addressed.

Education has also been a significant winner in the FTA process. The decision to promote mutual recognition of qualifications in professional services will open up new markets for Australian universities, which will be able to offer full-fee professional education at a price well below many American universities charge.

The removal of tariffs on the vast majority of manufactured goods will see prices fall on computer hardware and other IT products, helping to make these technologies more affordable and accessible. This could help to reduce the digital divide and ultimately raise the standard of ICT literacy across the community.

However, it is important that any increase in imports of US products and services be balanced by a comparable increase in exports of Australian ICT goods and services or we risk seeing the ICT Trade Deficit, already at $14.4 billion, balloon further out of control.

One potential benefit of the FTA could be a significant rise in the availability of US investment funds for Australian firms, since it increases to $800 million the level of investment requiring approval by the Foreign Investment Review Board.

While local investment for ICT start-ups has been thin on the ground of late and the future of the Commonwealth BITS program remains up in the air, US investors have shown themselves to be more open to supporting hi-tech companies. Their greater affinity with ICT investments could result in a much-needed financial boost for strategic Australian ICT SMEs.

This relaxation does not apply to media or telecommunications investments (as well as defence, transport and urban land), which remain restricted by foreign ownership laws, but could pose a tremendous boon to companies operating in other technology disciplines.

But we are still months away from seeing the FTA become a reality, with both nations required to complete a lengthy and complex approval process.

In Australia, the Commonwealth’s Joint Standing Committee on Treaties (JSCOT) will examine the FTA and may hold public hearings before reporting to Parliament.

Cabinet must also approve the final terms of the agreement before it is tabled it in both houses of Parliament and the Government must pass implementing legislation, the success of which is already under threat from the Federal Opposition.

The US has similar hurdles to overcome before the two nations can set a date for the FTA to come into force.

Industry analysts suggest that despite the involved approval process, the impending Federal elections in both countries will create pressure for the FTA to be enacted before either government goes to the polls.

As more detail becomes available, the ACS will seek to engage other industry stakeholders on this issue to discuss the implications for our sector and gain a clearer understanding of how Australian ICT professionals can gain maximum benefit from free trade with the US.

We will also seek discussions with the Government to ensure that the elimination of industry development measures and a greater openness to US suppliers does not come at the expense of local ICT companies.

Edward Mandla is national president of the Australian Computer Society.

To contact the ACS, call (02) 9299 3666, email: info@acs.org.au or visit the ACS Web site