Free trade agreements that spark competitiveness

Australia is an open economy that is deeply integrated in global trade. A network of 15 free trade agreements grants Australian exporters preferential access to markets across Asia, and in North and South America.

In 2020, Australia joined the world’s largest free trade agreement (FTA), the Regional Comprehensive Economic Partnership (RCEP). The RCEP encompasses 2.3 billion people and 30% of global GDP.

In June 2021, Australia and the UK reached agreement in principle on core elements of a free trade deal. The historic deal will strengthen Australia's diversification and export-led COVID-19 recovery. Australia is negotiating further trade agreements with the European Union (EU) and India.

Around three-quarters of Australia’s two-way trade occurs within the Asia-Pacific region. Market diversification is underway to build a resilient trading network.

Australia also maintains strong trading links with traditional partners. The EU and the UK together account for 13.2% of Australian trade and the US another 9.3%.

Despite bushfires, drought and lockdowns, foreign investment grew 2.5% in 2020. The total stock of foreign direct investment in Australia has grown, on average, 7% per year. The US, Japan, the UK, the EU, the Netherlands and Canada are still our biggest investors.

Shipping containers

Asian markets power export success

Close integration with dynamic economies in Asia drives wealth creation in Australia. Twelve of Australia’s top 15 export markets are in the Asian region, generating total exports worth A$326 billion in 2020 (three-quarters of Australia's total exports of goods and services). China receives about 36%. More than 30% collectively go to Japan, Korea, the US, the UK and India. ASEAN is also a significant market, accounting for 11% of Australia's total exports.

Austrade-BM-australias-top-15-export-markets-2020

Notes: The Asian region is defined as Asia and Oceania.
Sources: Department of Foreign Affairs and Trade, 2021, Trade statistics, Australia's trade in goods and services: 2020 financial year; Austrade

Strong trade links across the Asian region

Australia is a highly globalised economy, with trade accounting for over 40% of nominal GDP. Twelve of Australia’s 15 largest trading partners are in the Asia region.5 These partners accounted for two-thirds of Australia’s total exports. This reflects Australia’s geographical good fortune and our free trade agreements with key Asian economies. China remained Australia’s largest trading partner in 2020, accounting for around 31% of total two-way trade. Japan and Korea continue to be important trade partners, representing around 13% of total trade. Many exporters have also diversified their markets. For example, the ASEAN region now accounts for almost 13% of total trade. Australia also maintains strong trading links with traditional partners. The EU and the UK account for 13% of trade. The US accounts for another 9%.

Australia’s exports and imports of goods and services

Current prices (A$ billion)

Rank Selected economies 2017 2018 2019 2020 Share (%)
of GDP in
2020
Share (%) of
trade in
2020
% Growth
 2019 to 2020 5-year CAGR 
1 China 183.5 214.8 251.3 244.8 12.4 30.7 -2.6 10.1 
2 US 68.3 74.0 81.0 72.9 3.7 9.1 -10.0 0.4 
3 Japan 72.0 85.7 86.7 66.5 3.4 8.3 -23.3 0.4 
4 Korea 55.3 41.0 41.3 34.8 1.8 4.4 -15.8 -0.9
5 UK 27.4 27.2 38.6 31.8 1.6 4.0 -17.7 5.3
6 Singapore 25.3 32.0 33.2 27.0 1.4 3.4 -18.8 0.7
7 India 27.6 30.4 29.2 24.4 1.2 3.1 -16.4 3.6
8 New Zealand 27.6 29.3 31.1 23.7 1.2 3.0 -23.7 -1.0
9 Germany 21.0 23.2 22.9 21.2 1.1 2.7 -7.5 2.3
10 Thailand 23.0 25.7 23.1 19.6 1.0 2.5 -15.1 -1.7
11 Malaysia  20.8 24.1 24.0 19.4 1.0 2.4 -19.2 -0.1
12 Taiwan 15.1 17.6 20.2 16.1 0.8 2.0 -20.2 4.9
13 Vietnam  12.9 14.6 15.5 14.6 0.7 1.8 -5.6 6.9
14 Indonesia 16.4 17.6 17.7 12.9 0.7 1.6 -27.3 -4.1
15 Hong Kong SAR 18.9 17.8 15.0 12.7 0.6 1.6 -14.9 -4.4
  Other economies 149.7 179.2 187.3 154.6 7.8 19.4 -17.4 0.7
  Total all economies1 764.8 854.5 918.0 796.9 40.4 100.0 -13.2 3.1
  By regions and groups                
  APEC² 564.1 621.5 670.9 590.2 29.9 74.1 -12.0 3.6
  RCEP³ 443.0 491.6 532.4 470.9 23.9 59.1 -11.6 4.6
        ASEAN⁴ 104.6 120.7 122.0 101.1 5.1 12.7 -17.1 0.5
  EU plus UK 101.3 110.0 123.3 105.7  5.4 13.3 -14.3 2.6

Notes: 1. Totals may not always add up exactly due to rounding. Refer to the DFAT website (www.dfat.gov.au/trade/Pages/trade-and-investment) for more information. 2. Asia Pacific Economic Cooperation. 3. Regional Comprehensive Economic Partnership. 4. The Association of Southeast Asian Nations. 5. The Asian region is defined as Asia and Oceania.

CAGR = compound annual growth rate. SAR = Special administrative region of China.
Sources: Department of Foreign Affairs and Trade, 2021, Trade statistics, Australia's goods and services by top 15 partners 2021; Australian Bureau of Statistics, 2021, Australian National Accounts: National Income, Expenditure and Product, Table 3; Austrade

Diverse exports provide resilience in a difficult year

The value of Australia’s exports of goods and services reached A$436 billion in 2020, about a 12% decline in challenging times. Primary products accounted for 65% of total exports. Iron ore exports increased by 21% while coal exports fell by 32%. Beef exports also dropped as better seasonal conditions in some cattle regions prompted farmers to rebuild their herds. Falling beef prices in some export markets also contributed to the result. Overall, services exports declined by 30%. This is because Australia’s services exports – including IT, telecoms, and personal cultural & recreational services – didn’t quite compensate for the fall (77%) in international travel.

Australia’s trade in goods and services, 2020

Total two-way trade in 2020: A$798 billion

Australia’s trade by level of processing¹ A$ billion % Change
Exports of goods & services 2019 2020  
Primary products² 305.9 282.4 -7.7
Unprocessed food 13.9 14.4 3.6
Processed food 30.4 28.0 -8.1
Minerals 126.9 144.9 14.2
     Fuels² 126.3 89.6 -29.0
     Other primary 8.4 5.5 -34.2
Manufactured products 54.6 47.8 -12.6
     Simply transformed manufactures (excl nickel) 16.9 14.6 -13.8
     Elaborately transformed manufactures 37.7 33.2 -12.0
Other goods (incl gold) 29.4 32.9 12.1
Services 102.1 71.9 -29.6
Balance of payments adjustment³ 0.8 1.3 ..
Total exports 492.8 436.3 -11.5
Imports of goods & services      
Primary products² 63.4 48.2 -23.9
     Unprocessed food 2.5 2.6 5.0
     Processed food 19.2 19.4 1.4
     Minerals 126.9 144.9 14.2
     Fuels 38.9 23.3 -40.4
     Other primary 1.9 1.8 -0.9
Manufactured products 232.1 232.9 0.3
     Simply transformed manufactures (excl nickel) 15.4 17.4 12.8
     Elaborately transformed manufactures 216.7 215.5 -0.6
Other goods (incl gold) 12.0 12.5 4.0
Services 103.7 56.9 -45.2
Balance of payments adjustment³ 13.9 11.3 ..
Total imports 425.2 361.8 -14.9

Top 15 commodities (goods and services)¹ A$ billion Change
Ranking Exports of goods & services 2019 2020 %
1 Iron ores & concentrates 96.2 116.7 21.4
2 Coal 63.9 43.3 -32.2
3 Natural gas 48.7 36.2 -25.6
4 Education-related travel services 40.3 31.7 -21.4
5 Gold 23.4 25.5 9.1
6 Beef (fresh, chilled or frozen) 10.8 9.6 -11.2
7 Aluminium ores & conc(incl alumina) 9.8 8.3 -15.5
8 Copper ores & concentrates 6.3 7.1 13.1
9 Crude petroleum 9.5 6.2 -34.5
10 Professional services 5.9 5.5 -7.4
11 Telecom, computer & information services 5.2 5.2 -0.4
12 Personal cultural & recreational services 1.7 5.1 206.3
13 Personal travel (excl education) services 22.6 5.1 -77.4
14 Meat (excl beef), (fresk, chilled or frozen) 5.5 5.0 -9.8
15 Technical & other business services 5.3 4.8 -10.2
Ranking Imports of goods & services      
1 Passenger motor vehicles 21.4 18.7 -12.7
2 Refined petroleum 25.1 15.9 -36.9
3 Telecom equipment & parts 14.9 14.8 -0.7
4 Freight services 10.0 11.3 13.4
5 Computers 9.7 10.4 7.8
6 Gold 6.8 9.2 36.0
7 Goods vehicles 9.8 9.0 -8.5
8 Personal travel (excl education) services 46.6 8.6 -81.4
9 Professional services 8.1 8.5 4.4
10 Medicaments (incl veterinary) 7.7 8.3 7.0
11 Crude petroleum 12.6 8.1 -23.6
12 Technical & other business services 5.4 5.8 6.8
13 Telecom, computer & information services 5.2 5.6 7.2
14 Pharm products (excl medicaments) 5.4 5.6 3.2
15 Furniture, mattresses & cushions 5.0 5.2 4.8

Note: 1. Goods on a recorded trade basis, Services on balance of payments (BOP) basis, original data. 2. Includes the DFAT adjustment for coal, (based on the ABS Catalogue 5368.0, Value adjustments, June 2021. 3. BOP adjustment includes low-value goods for imports and timing and valuation adjustments. 4. BOP basis. 5. Includes student expenditure on tuition fees and living expenses.
Sources: Department of Foreign Affairs and Trade, 2021, Trade Statistics, Monthly trade data; DFAT, 2021, Trade in goods and services, Australia's goods and services by top 25 exports 2020; Austrade

A high-growth destination for A$4 trillion of foreign investment

Australia is a highly attractive destination for foreign direct investment (FDI). The total stock of FDI in Australia has risen, on average, by about 8.0% per year since 2000, reaching A$1 trillion around 2020. Other forms of investment – including portfolio investment – grew by 8.4% per year, taking total foreign investment to A$4 trillion. As a percentage of GDP, the total value of foreign investment stock grew from 120% in 2000 to 203% in 2020. Foreign investment was depressed by drought, bushfires and lockdowns in 2020, but still grew by 2.5%.

Austrade-BM-total-foreign-investment-stock-in-australia-2000-01-to-2019-20-min

Notes: 1. Other investment is the balance of total investment less direct investment. As such, it represents portfolio investment, financial derivatives and other investment categories from the source ABS data.
Sources: Australian Bureau of Statistics (ABS), 2021, International Investment Position, Australia: Supplementary Statistics 2020, Table 2; ABS, 2021, Australian National Accounts: National Income, Expenditure and Product, Table 3; Austrade

A magnet for investment from North America, Europe and Asia

Australia attracts investment from around the world. Over the past decade, foreign direct investment from Korea grew by 15% per year, China by 13%, Canada by 12% and Hong Kong SAR by 10%. Australia’s top three overseas investors are the US, Japan and the UK, with holdings equivalent to 19%, 13% and 12% of total FDI in Australia respectively. Over the same period, investment activities from ASEAN, mainly Singapore and Malaysia, have been solid, growing by an average of 9% per annum to almost A$60 billion. This group was the fourth largest source of FDI in Australia.

Australia's main sources of foreign direct investment stock, 2010–2020

Total value in 2020: A$1 trillion

Rank
2020
Economy 2010
A$billion
2019
A$billion
2020
A$billion
% Share
2020
% Change
2019-2020
% CAGR
2010-2020
Growth ($bn)
2019-2020
% of Australian GDP, 2020
1 US 110.3 221.4 196.3 19.1 -11.4 5.9 -25.1 10.0
2 Japan 51.1 115.9 131.8 12.8 13.7 9.9 15.9 6.7
3 UK 53.7 127.5 123.5 12.0 -3.2 8.7 -4.1 6.3
4 Netherlands 27.6 56.6 52.8 5.1 -6.7 6.7 -3.8 2.7
5 Canada 14.9 46.1 46.2 4.5 0.1 12.0 0.1 2.3
6 China 12.9 46.9 44.3 4.3 -5.4 13.1 -2.5 2.3
7 Singapore 18.7 36.2 39.9 3.9 10.4 7.9 3.8 2.0
8 Bermuda 7.5 41.9 39.9 3.9 -4.9 18.2 -2.1 2.0
9 Virgin Islands, British np 22.2 22.5 2.2 1.6 np 0.4 1.1
10 Germany 16.8 23.1 21.7 2.1 -6.0 2.6 -1.4 1.1
11 Hong Kong SAR 6.6 17.3 16.8 1.6 -3.4 9.7 -0.6 0.9
12 Malaysia 3.7 14.7 13.6 1.3 -7.3 14.0 -1.1 0.7
13 France 13.0 12.7 12.1 1.2 -4.8 -0.7 -0.6 0.6
14 Switzerland 20.9 11.6 11.6 1.1 0.0 -5.7 0.0 0.6
15 Luxembourg 1.5 9.3 9.1 0.9 -2.9 20.0 -0.3 0.5
16 Korea 2.1 7.1 8.0 0.8 12.4 14.6 0.9 0.4
  Other economies 158.1 233.0 236.6 23.0 1.5 4.1 3.6 12.0
  FDI stock all economies 519.3 1,043.6 1,026.6 100.0 -1.6 7.1 -17.1 52.1
  OECD 340.6 653.1 635.9 61.9 -2.6 6.4 -17.2 32.3
  APEC 231.0 517.1 508.7 49.6 -1.6 8.2 -8.4 25.8
  EU (excl. UK) 80.2 117.0 112.3 10.9 -4.1 3.4 -4.8 5.7
  ASEAN 25.8 56.1 59.0 5.7 5.0 8.6 2.8 3.0
  FDI stock as a percentage of GDP 38.1 52.2 52.1          

Notes: ASEAN = The Association of Southeast Asian Nations. CAGR = compound annual growth rate. np = not available for publication but included in totals where applicable, unless otherwise indicated. SAR = Special administrative region of China.
Sources: Australian Bureau of Statistics (ABS), 2021, International Investment Position, Australia: Supplementary Statistics 2020, Table 2; ABS, 2021, Australian National Accounts: National Income, Expenditure and Product, Table 3; Austrade

Foreign direct investment flows into Australia’s services sector

Foreign direct investment (FDI) powers productivity growth in Australia’s domestic and export industries. Services take about half of all FDI. From 2016–2020, FDI in real estate and financial services, the two largest recipients in the services sector, rose by 12% and 13% per year respectively. Their growth rates were over twice the average growth rate (5%) of all industries. FDI in the professional, scientific and technical sector grew rapidly, at 22% per annum since 2016. Australia’s export-focused mining sector is the biggest primary-industry beneficiary, accounting for 35% of the total FDI, or A$360 billion.

Austrade-BM-foreign-direct-investment-stock-in-australia-by-industry

Notes: 1. Others includes unallocated (A$88.9bn); manufacturing (np); public administration, activities of households and of extraterritorial organisations (np); education (np); arts, entertainment and recreation (np); and other services (np).
Sources: Australian Bureau of Statistics, 2021, International Investment Position, 2020, Australia: Supplementary Statistics, Table 15; Austrade

Australia’s liberalised trade with Asia

Australia benefits from 15 free trade agreements (FTAs), including with the US, China, Japan and Singapore, and with countries participating in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. These FTAs cover approximately three-quarters of all Australian trade. Today’s network covers multiple export sectors, from agriculture and seafood to minerals and energy. They make Australia a natural gateway for trade between Asia-Pacific economies.

 
Austrade-BM-australias-free-trade-agreements

 

Austrade-BM-australias-free-trade-agreements-table

Notes: 1. The Regional Comprehensive Economic Partnership has been concluded but was not in force at the time of publication. As at March 2021, Australia’s FTA negotiating agenda included: an Australia-European Union Free Trade Agreement, an Australia-India Comprehensive Economic Cooperation Agreement, an Australia-UK Free Trade Agreement, a Pacific Alliance Free Trade Agreement and Trade in Services Agreement. Information on the status of FTA negotiations can be found at: https://dfat.gov.au/trade/agreements/Pages/trade-agreements.aspx. 2. The Pacific Agreement on Closer Economic Relations Plus (PACER-Plus) entered into force in December 2020. Australia, New Zealand, Samoa, Kiribati, Tonga, Solomon Islands, Niue and Cook Islands are parties to the Agreement.
Sources: Department of Foreign Affairs and Trade, 2021, Australia's free trade agreements; Austrade