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Feature Article - Australia's Trade with the USA


Introduction

This article provides an overview of Australia's international trade in goods and services with the United States of America (USA) over the period from 1994 to 2003, with more detailed analyses of the major commodities and service types traded covering the period from 1998 to 2003.

The purpose of the analyses is to provide an understanding of Australia's trade patterns with the USA in the years prior to the proposed implementation of a free trade agreement between the two nations.

Data on trade in goods are on a recorded trade basis, consistent with the detailed merchandise trade data released by the ABS. Data on trade in services are on a balance of payments basis. This conceptual difference has minimal effect on the analyses.

Merchandise trade data are classified by commodity according to the Standard International Trade Classification (Rev. 3) (SITC). Trade in services data are classified by service type according to the Balance of Payments Services (BOPS) Classification. Information on the current levels of tariffs and quotas for individual commodities has been provided by the Department of Foreign Affairs and Trade.

Further information

Further information can be obtained by contacting Heather Burgess on Canberra 02 6252 7094, or fax 02 6252 7438, or email at heather.burgess@abs.gov.au.

AUSTRALIA'S TRADE

Since 1994 there has been substantial growth both in the value of Australia's total exports (up 67%) and in the value of its imports (up 83%). Australia's exports peaked in 2001 at $154.8b and have declined in each of the past two years reaching $140.5b in 2003. Australia's imports have risen in each of the past ten years, reaching a record $162.9b in 2003.

Australia's balance of trade has been volatile in recent years. In the period since 1994, small trade surpluses were achieved in 1997 ($0.8b) and in 2001 ($4.3b), with trade deficits occurring in all other years. The trade deficit was a record $22.4b in 2003, due to a combination of factors including the severe drought affecting agricultural exports, the high value of the Australian dollar relative to other currencies, and the impact of SARS and the war in Iraq on international travel.

1. TOTAL TRADE, Goods and Services

2. BALANCE OF TRADE, Goods and Services

The value of the $A relative to the currencies of our major trading partners, particularly the $US, has varied substantially over the past ten years. It reached a record low value against the $US in 2001, worth, on average 52USc. This record low coincided with the record high value of Australian exports in that year. In the past two years, the $A has recovered much of its lost value, rising by over 25% to an average of 65USc in 2003.

About two-thirds of Australia's goods exports and about one-half of Australia's goods imports are invoiced in $US, with most of the rest invoiced in $A. As a result, changes in the value of the $A against the $US have a substantial impact on the value of exports and imports. Further analysis on trade invoice currencies is available in a separate article on the ABS web site (see Export and Import Currencies, 2003).

The volatility of the $A has been less pronounced against the Trade Weighted Index (TWI). In 2003, the $A was worth only marginally less than the 10 year high in 1997.

3. MOVEMENTS IN SELECTED EXCHANGE RATES

In 2003, Australia's exports to these destinations were: Japan, $22.8b (16% of total exports), EU, $21.8b (16%) and USA, $14.2b (10%). Exports to both Japan and the USA were lower in 2003, compared with the three previous years, whereas total exports to EU countries have risen each year since 1999.

EU countries provided $38.4b (24%) of Australia's imports in 2003. The USA was the most important individual source, accounting for $26.7b (16%) of Australia's imports, followed by Japan with $18.1b (11%).

4. MAJOR EXPORT MARKETS, Goods and Services

5. MAJOR IMPORT SOURCES, Goods and Services

6. BALANCE OF TRADE, Goods and Services

Between 2000 and 2002 Australia's exports to the USA were worth over $16.2b annually, but they fell to $14.2b in 2003. The USA received 10% of Australia's total exports in 2003, down from 12% in 2000.

The USA's relative importance to Australia as a source of imports has declined steadily over the past five years (down from 22% of total imports in 1998 to 16% in 2003). In 2003, the value of Australia's imports from the USA were at their lowest level of the period studied ($26.7b).

7. TRADE WITH USA, Goods and Services

8. BALANCE OF TRADE WITH USA, Goods and Services

Australia has had a trade in goods deficit with the USA of over $11b in five of the past six years. The deficit peaked at $13.1b in 1998 and was lowest in 2001 at $9.5b. The value of both exports and imports of goods fell in 2003, with the deficit also falling slightly from $11.6b in 2002 to $11.1b in 2003.

9. TRADE WITH USA, Goods

10. BALANCE OF TRADE WITH USA, Goods

The largest growth occurred in Beverages and tobacco (up 269% since 1998) and Chemicals and related products, nes (up 133%). These were offset by falls in Crude materials, inedible, except fuels (down 55%) and Manufactured goods classified chiefly by material (down 30%). The most significant contributors to the latter decrease were aluminium, with exports to the USA down from $350m in 2001 to $135m in 2003, and zinc, down from $254m in 2000 to $9m in 2003.

11. EXPORTS OF GOODS TO USA
	1998	1999	2000	2001	2002	2003	2003	Change from 1998 to 2003
SITC code and commodity	$m	$m	$m	$m	$m	$m	%	%
0 Food and live animals	1,233	1,326	1,832	2,409	2,288	2,065	21.8	68
1 Beverages and tobacco	227	276	423	554	769	838	8.9	269
2 Crude materials, inedible, except fuels	305	260	372	372	270	137	1.5	-55
3 Mineral fuels, lubricants and related materials	519	531	1,248	949	1,059	609	6.4	17
4 Animal and vegetable oils, fats and waxes	6	5	7	8	7	5	0.1	-16
5 Chemicals and related products, nes	284	429	551	879	614	664	7.0	133
6 Manufactured goods classified chiefly by material	977	938	1,170	1,168	1,050	688	7.3	-30
7 Machinery and transport equipment	1,931	2,043	2,379	2,741	3,062	2,236	23.7	16
8 Miscellaneous manufactured articles	530	602	807	955	879	766	8.1	44
9 Commodities and transactions not classified elsewhere in the SITC	2,463	2,002	2,191	1,879	1,548	1,445	15.3	-41
Total	8,476	8,411	10,980	11,914	11,546	9,453	100.0	12

12. MAJOR EXPORTS TO USA, Goods

13. OTHER MAJOR EXPORTS TO USA, Goods

Australia's beef exports are subject to a quota of 378,214 tonnes annually which was negotiated to meet the USA's World Trade Organization (WTO) obligations. Exports below this are subject to a US4.4c per kilogram tariff, whereas exports above this figure attract a much higher tariff of 26.4%. For the last three years, Australia's beef exports to the USA have been at or near the quota. Under the proposed free trade agreement, the quota would be gradually lifted to 448,214 tonnes over an 18 year period.

14. BEEF EXPORTS TO USA, Value

15. BEEF EXPORTS TO USA, Gross weight

16. WINE EXPORTS TO USA, Value

17. WINE EXPORTS TO USA, Quantity

Most cars and parts are duty free or subject to a 2.5% tariff in the USA. The exception is light commercial vehicles (utilities) which have a 25% tariff applied in the USA. The USA does not produce a comparable vehicle. Under the proposed free trade agreement these tariffs would be abolished immediately.

18. CAR EXPORTS TO USA, Value

19. CAR EXPORTS TO USA, Number

20. LAMB EXPORTS TO USA, Value

21. LAMB EXPORTS TO USA, Gross weight

• metalliferous ores and metal scrap, $708m in 2003, down by over 50% from $1,525m in 2000;
• crude petroleum, $583m in 2003, 50% less than the $1,166m of exports in 2000;
• road vehicles (including parts), $633m in 2003, compared with $940m in both 2001 and 2002;
• medicinal and pharmaceutical products, $291m in 2003, after peaking at $561m in 2001; and
• aircraft and parts, $342m in 2003, returning to more normal levels, following the substantial one-off re-export of $322m of secondhand planes in 2002.

22. IMPORTS OF GOODS FROM USA
	1998	1999	2000	2001	2002	2003	2003	Change from 1998 to 2003
SITC code and commodity	$m	$m	$m	$m	$m	$m	%	%
0 Food and live animals	436	397	417	458	501	537	2.6	23
1 Beverages and tobacco	103	129	147	183	202	190	0.9	85
2 Crude materials, inedible, except fuels	255	279	297	224	199	186	0.9	-27
3 Mineral fuels, lubricants and related materials	258	198	215	273	291	207	1.0	-20
4 Animal and vegetable oils, fats and waxes	6	7	6	6	9	10	-	58
5 Chemicals and related products, nes	2,890	2,797	3,500	3,595	3,204	3,071	15.0	6
6 Manufactured goods classified chiefly by material	1,788	1,612	1,598	1,613	1,600	1,472	7.2	-18
7 Machinery and transport equipment	11,294	11,536	12,729	11,169	13,650	11,617	56.6	3
8 Miscellaneous manufactured articles	3,283	3,264	3,485	3,373	3,164	2,996	14.6	-9
9 Commodities and transactions not classified elsewhere in the SITC	1,236	919	729	506	327	243	1.2	-80
Total	21,549	21,140	23,122	21,399	23,147	20,529	100.0	-5
- nil or rounded to zero (including null cells)

Major commodity imports

Graphs 23 and 24 show the top eight commodity imports from the USA over the past six years. Over the past two years, Australia's major import from the USA, by a significant margin, has been aircraft and parts. These were worth $4.3b in 2002 and $3.3b in 2003. This has been due to Australia's major airlines upgrading their fleets and this is expected to continue for a number of years.

Imports of other major commodities have been relatively static over the past five years or have declined. The most significant fall has been imports of computers and parts, down by almost 50% from $1,933m in 1998 to $978m in 2003, partly due to a steady fall in computer prices. Imports of telecommunications equipment peaked in 2000 at $1,510m due to a period of significant investment in infrastructure. They have declined steadily since, to $616m in 2003.

23. MAJOR GOODS IMPORTS FROM USA

24. OTHER MAJOR GOODS IMPORTS FROM USA

Machinery and transport ($161m) was the next most important, accounting for 22% of the duty collected on USA imports in 2003. Approximately one-third was from road vehicles and parts and the majority of the rest from industrial machinery. Cars and most car parts attract a 15% duty while the duty on most industrial machinery is either 5% or nil.

Many goods imported from the USA attract no duty, while most others have a 5% duty. In 2003, this resulted in an average duty rate for total imports from the USA of 3.6%. For all commodities excluding beverages and tobacco, the average rate of duty was 1.5%.

Under the proposed free trade agreement almost all goods imported from the USA will become duty-free immediately upon the Agreement coming into force. The main exceptions are cars, textiles and clothing which would have tariffs phased out. All Australian tariffs on goods imported from the USA would be zero by 2015 if the Agreement is implemented as proposed.

25. IMPORT DUTIES COLLECTED, 2003
	ALL COUNTRIES		USA
	Imports	Duties	Imports	Duties	Duties	Average rate of duty	Proportion all countries duties
SITC code and commodity	$m	$m	$m	$m	%	%	%
0 Food and live animals	5,171	69	537	9	1.3	1.7	13.6
1 Beverages and tobacco	960	1,479	190	423	57.9	222.7	28.6
2 Crude materials, inedible, except fuels	1,938	13	186	1	0.2	0.7	10.1
3 Mineral fuels, lubricants and related materials	10,046	40	207	1	0.1	0.3	1.7
4 Animal and vegetable oils, fats and waxes	356	3	10	-	-	0.8	2.8
5 Chemicals and related products, nes	14,935	203	3,071	49	6.6	1.6	23.9
6 Manufactured goods classified chiefly by material	15,809	608	1,472	48	6.6	3.3	7.9
7 Machinery and transport equipment	59,170	1,602	11,617	161	22.0	1.4	10.0
8 Miscellaneous manufactured articles	18,347	1,057	2,996	34	4.7	1.1	3.2
9 Commodities and transactions not classified elsewhere in the SITC	3,270	23	243	5	0.6	1.9	19.4
Total	130,001	5,097	20,529	731	100.0	3.6	14.3
- nil or rounded to zero (including null cells)

SERVICES

The USA is Australia's most important trading partner for both exports and imports of services. Australia's exports of services to the USA peaked in 2000 at $5.8b due to the Sydney Olympic Games. Since then exports have been relatively stable at just under $4.8b. Imports of services from the USA also peaked in 2000 at $6.6b, partly due to the Games, but not as significantly as for exports. For the past three years, imports of services from the USA have been worth around $6.1b annually.

Australia has had a deficit in trade in services with the USA for the entire period covered by the analysis. Apart from 2000 when the deficit fell to $771m, Australia has consistently had a deficit of almost $1.4b annually since 1999.

26. TRADE WITH USA, Services

27. BALANCE OF TRADE WITH USA, Services

28. EXPORTS OF SERVICES TO USA
	1998	1999	2000	2001	2002	2003	2003	Change from 1998 to 2003
Type of service	$m	$m	$m	$m	$m	$m	%	%
Transportation services	643	588	814	785	754	747	15.7	16
Travel services	1,064	1,218	1,435	1,460	1,439	1,398	29.3	31
Communication services	304	269	309	180	199	217	4.6	-29
Construction services	-	-	2	-	-	2	0.1	1,352
Insurance services	359	343	317	285	284	286	6.0	-20
Financial services	216	244	272	285	294	300	6.3	39
Computer and information services	388	425	334	265	267	316	6.6	-19
Royalties and licence fees	228	298	359	302	264	272	5.7	19
Other business services	810	864	1,008	978	976	982	20.6	21
Personal, cultural and recreational services	94	84	784	85	102	89	1.9	-6
Government services n.i.e.	89	86	156	153	154	169	3.5	89
Total service exports	4,195	4,419	5,789	4,779	4,732	4,771	100.0	14
- nil or rounded to zero (including null cells)

Travel services, other business services and transportation services are Australia's three major service exports to the USA. They accounted for almost two thirds of Australia's total service exports to that country in 2003 and were worth, respectively, $1,398m (29%), $982m (21%) and $747m (16%). Exports of each of these services have increased by between 16% and 31% since 1998. However, levels have been relatively stable for the past four years.

The effect of the Sydney Olympic Games in 2000 was most evident for exports of personal, cultural and recreational services which were boosted by $700m in that year.

Under the proposed free trade agreement Australia - USA trade in services will be enhanced by the introduction of a framework to promote mutual recognition of qualifications, and Australia becoming a "designated" country in USA law, allowing Australian companies to bid on USA federal government contracts.

29. MAJOR EXPORTS TO USA, Services

30. SELECTED EXPORTS TO USA, Services

31. IMPORTS OF SERVICES FROM USA
	1998	1999	2000	2001	2002	2003	2003	Change from 1998 to 2003
Type of service	$m	$m	$m	$m	$m	$m	%	%
Transportation services	891	1,000	1,255	984	628	674	11.0	-24
Travel services	1,306	1,459	1,681	1,376	1,420	1,423	23.1	9
Communication services	179	223	412	256	270	230	3.7	29
Construction services	-	-	-	-	-	-	-	-
Insurance services	318	316	315	295	297	299	4.9	-6
Financial services	142	169	189	191	189	184	3.0	29
Computer and information services	158	162	385	334	443	422	6.9	167
Royalties and licence fees	921	1,011	943	857	984	1,059	17.2	15
Other business services	796	820	728	1,078	1,092	1,139	18.5	43
Personal, cultural and recreational services	484	471	460	437	541	491	8.0	2
Government services n.i.e.	170	165	192	202	217	230	3.7	35
Total service imports	5,363	5,797	6,560	6,009	6,082	6,151	100.0	15
- nil or rounded to zero (including null cells)

Travel services account for nearly one-quarter of Australia's service imports from the USA. They were worth $1,423m in 2003. Other business services, and royalties and licence fees, have been the next most important service imports for the past two years. Imports of these services were worth, respectively, $1,139m (18%) and $1,059m (17%) in 2003.

Transportation services imports from the USA rose steadily until 2000, from $891m to $1,255m. They have since almost halved to be worth $674m in 2003. The main contributing factor to this fall was a reduction in the import of freight services, mainly due to competitive pressures on freight rates in sea traffic between Australia and North America.

The effect of the Olympic Games can be seen on imports of travel services. The Olympic Games also affected imports of communication services due to work undertaken to improve communication networks in readiness for the Games. Since then imports have dropped back to less than $300m annually.

Imports of personal, cultural and recreational services have been relatively stable for the past six years, generally around $500m, while imports of computer and information services have exceeded $400m for the past two years.

32. MAJOR SERVICE IMPORTS FROM USA

33. SELECTED SERVICE IMPORTS FROM USA

More information about the details of the AUSFTA and its possible impacts on trade between the two nations is available from the web sites of the appropriate government agencies, the Department of Foreign Affairs and Trade in Australia (www.dfat.gov.au) and the Office of the United States Trade Representative in the USA (www.ustr.gov).


LEGEND

34. LEGEND
Term used		SITC
Beef		11
Lamb		12
Alcoholic beverages		112
	Wine	11215 and 11217
Metalliferous ores & metal scrap		28
Crude petroleum		333
Medicinal & pharmaceutical products		54
Aluminium		684
Zinc		686
Power generating machinery		71
Machinery for particular industries		72
Computers & parts		752 and 759
Telecommunications equipment		764
Road vehicles		78
	Cars	781
Aircraft & parts		792
Measuring/analysing equipment		874

TRADE IN GOODS AND SERVICES(a)
	EXPORTS			IMPORTS			BALANCE OF TRADE
	Total	To USA	USA share of total	Total	From USA	USA share of total	Total	With USA
Year	$m	$m	%	$m	$m	%	$m	$m
GOODS
1994	64,776	4,645	7.2	68,099	14,938	21.9	-3,323	-10,293
1995	71,671	4,626	6.5	77,469	16,735	21.6	-5,798	-12,109
1996	76,983	4,978	6.5	78,410	18,017	23.0	-1,427	-13,039
1997	84,790	6,339	7.5	83,418	18,174	21.8	1,372	-11,836
1998	88,985	8,476	9.5	96,773	21,549	22.3	-7,788	-13,073
1999	86,893	8,411	9.7	101,517	21,140	20.8	-14,624	-12,729
2000	110,354	10,980	10.0	116,955	23,122	19.8	-6,601	-12,142
2001	122,530	11,914	9.7	117,746	21,399	18.2	4,784	-9,485
2002	119,458	11,546	9.7	127,666	23,147	18.1	-8,208	-11,601
2003	107,917	9,453	8.8	130,001	20,529	15.8	-22,084	-11,076
SERVICES
1994	19,394	na	na	21,111	na	na	-1,717	na
1995	21,776	na	na	23,083	na	na	-1,307	na
1996	23,704	na	na	23,755	na	na	-51	na
1997	24,844	na	na	25,396	na	na	-552	na
1998	25,689	4,195	16.3	27,515	5,363	19.5	-1,826	-1,167
1999	26,980	4,419	16.4	28,397	5,797	20.4	-1,417	-1,378
2000	32,130	5,789	18.0	31,699	6,560	20.7	431	-771
2001	32,246	4,779	14.8	32,767	6,009	18.3	-521	-1,230
2002	32,976	4,732	14.4	33,261	6,082	18.3	-285	-1,349
2003	32,583	4,771	14.6	32,943	6,151	18.7	-360	-1,379
TOTAL
1994	84,170	na	na	89,210	na	na	-5,040	na
1995	93,447	na	na	100,552	na	na	-7,105	na
1996	100,687	na	na	102,165	na	na	-1,478	na
1997	109,634	na	na	108,814	na	na	820	na
1998	114,674	12,671	11.0	124,288	26,912	21.7	-9,614	-14,240
1999	113,873	12,830	11.3	129,914	26,937	20.7	-16,041	-14,107
2000	142,484	16,769	11.8	148,654	29,683	20.0	-6,170	-12,913
2001	154,776	16,692	10.8	150,513	27,408	18.2	4,263	-10,716
2002	152,434	16,278	10.7	160,927	29,228	18.2	-8,493	-12,950
2003	140,500	14,224	10.1	162,944	26,680	16.4	-22,444	-12,455
na not available
(a) Calendar year estimates for trade in services by country are not available prior to 1998.

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