19 August 2014

Australian companies under-utilising Free Trade Agreements, HSBC research

Australian companies who embed Free Trade Agreements (FTA) within their business strategy experience a boost to exports and a competitive edge – but are far and few between, according to HSBC research.

Australian businesses under-utilising FTAs due to complexity

HSBC's research finds that Australian exporters have been slow to take advantage of the business benefits of FTAs. On average each FTA signed by Australia is used only by 19% of Australian exporters, compared to an average of 26% among Asian exporters using their respective markets' FTAs.

The research also found half of the Australian respondents had limited or no understanding of one or more of Australia's FTAs, citing complexity of trade terms, a lack of understanding of benefits, and deals with non-strategic markets being the key factors behind the subdued uptake.

James Hogan, Head of Commercial Banking for HSBC in Australia, said: "Trade is a driving force of Australia's economic prosperity and the FTAs are negotiated in order to enable greater trade flows."

"Australia is an active participant in trade agreements, with nine FTAs in force* and seven under negotiation, including a milestone agreement expected with China later this year; however, all the effort in negotiating these agreements will be in vain if businesses are not using them."

"Clearly, there is a knowledge gap amongst Australian businesses on how to make the FTAs work for their business."

FTA use boosting exports and business growth

Despite the low take-up amongst Australian businesses, those who do utilise FTAs are being rewarded.

Amongst the Australian companies who use an FTA as part of their business strategy, 75% have experienced export growth with the main competitive advantages being access to new markets (nominated by 40%), access to a wider client base (39%) and the creation of new business opportunities (37%).

Hogan concluded: "Australian exporters that invest the time and resources to understand FTAs and imbed them within their business strategy are seeing clear business benefits. However, greater focus in making FTAs more accessible to Australian businesses - particularly amongst smaller and resource-constrained businesses - is also key."


Australia's FTAs with Japan and Korea are signed and will shortly take effect

About the survey

HSBC commissioned the Economist Intelligence Unit to understand internationally-oriented companies' perceptions and use of Free Trade Agreements. HSBC surveyed 800 companies in the first quarter of 2014 across Asia with annual revenues between US$50m-US$10bn including: Australia, China, Hong Kong, India, Indonesia, Malaysia, Singapore and Vietnam (100 from each country). 80% of surveyed businesses have annual revenues between US$50m-US$150m; while 20% have revenues in excess of US$150m. Surveyed businesses operate in a rage of sectors including IT and telecoms, consumer goods and retail, financial services, manufacturing among others.

About the Economist Intelligence Unit

The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com  or follow us on www.twitter.com/theeiu 

The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

HSBC Bank Australia

In Australia, the HSBC Group offers an extensive range of financial services through a network of 37 branches and offices. These services include retail and commercial banking, financial planning, trade finance, treasury and financial markets, payments and cash management and securities custody. Principal HSBC Group members operating in Australia include HSBC Bank Australia Limited (ABN 48 006 434 162 and AFSL/Australian Credit Licence 232595) and The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970 and AFSL 301737).