Peru and Australia manage to reach a free trade agreement


After several months of negotiations, Australia and Peru have managed to reach an agreement on trade matters. Both Australian Trade Minister Steve Ciobo and his Peruvian counterpart Eduardo Ferreyros have signed a trade agreement in Canberra aimed at significantly reducing tariff barriers.

At the end of World War II and with the signing of the Bretton Woods agreements, it was intended to put an end to the protectionism that had prevailed between 1914 and 1945. And it is that an important advance for concord and world economic prosperity had to come through the free trade. Since then, at the international level, much work has been done to reduce tariffs, all through a system of negotiated and consensual trade rules, but also through agreements that eliminate or reduce barriers to trade.

Peru and Australia have acted along these lines, which have managed to reach a bilateral agreement. The objective of this treaty is that free trade between both nations increases well-being, reducing poverty and stimulating development. The agreement is also expected to have positive effects on employment levels. Precisely, Adam Smith, whom many consider the father of modern economics, argued that free trade contributes to improving the well-being of the population.

Important tariff reductions

The free trade agreement between Peru and Australia (known as PAFTA) will be fully operational within five years, with 99% of products duty free. In other words, Australian products entering Peru will not have to pay taxes for entering Peruvian territory.

For its part, Peru will be able to export 93% without having to pay tariffs. Now, used cars will not be exempt from tariffs. Despite efforts to reduce trade barriers, certain Peruvian products will have to continue to comply with the stringent Australian quarantine regulations. This is the case of avocados and blueberries that Peru exports.

Australian producers will be able to find an attractive market in Peru. And it is that the opening to international trade always offers interesting business opportunities in new countries. Australians will export meat, rice, dairy products, sugar, drugs and medical equipment among others.

An agreement that allows a wide range of exchanges

It appears that to a large extent trade agreements tend to focus on exports and imports of products related to the primary sector, however, trade also offers substantial benefits for the secondary sector. That is why the agreement will have an important weight in activities such as mining, which will be able to supply equipment and services for its activity. Nor should we forget the service sector, which is increasingly important in international trade. In this sense, the export of services related to education and legal and financial services will be favored.

The agreement signed between Peru and Australia, which is expected to improve the welfare of both countries and improve the supply of goods and services, is the result of negotiations that are part of the Asia Pacific Cooperation Forum that took place in Vietnam.

Even before the signing of the agreement in Canberra, the volume of exchange between the two states was remarkable. We are talking about a trade that in 2016 was for a total of 443 million US dollars.

The future that the so-called PAFTA holds looks hopeful and attractive. Trade can improve the population's access to a wider range of goods and services, as well as allow new business scenarios for Australian and Peruvian companies.

Tags:  opinion culture Commerce 

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