The US-Australia Free Trade Agreement (AUSFTA), signed in 2005, was hailed as a milestone in economic cooperation between the two allies. However, nearly two decades on, analysts suggest the agreement primarily benefited the United States while offering limited economic advantages to Australia.
While free trade agreements are intended to reduce barriers and promote mutual economic growth, AUSFTA appears to have entrenched a long-running trade imbalance.
According to research from the Crawford School of Public Policy, the deal distorted trade flows, restricted Australia’s negotiating power in key sectors, and contributed to America’s consistent trade surplus with Australia.
A Persistent Trade Imbalance
Economic data shows that, rather than increasing Australian exports to the US, the agreement coincided with a decline. The year after AUSFTA came into effect, Australian exports to the US dropped, while American imports surged.
This imbalance has persisted, with the International Monetary Fund (IMF) estimating that the deal cost Australia over $5 billion annually.
According to Shiro Armstrong from the Crawford School of Public Policy, AUSFTA led to trade diversion, meaning Australia reduced trade with lower-cost partners in favour of the US, despite less favourable economic conditions.
Over the past two decades, America’s trade surplus with Australia has remained largely uninterrupted, reinforcing concerns that the deal disproportionately benefited the larger economy.
The agreement also deviated from the prevailing trend of regional trade partnerships at the time. By prioritising a bilateral deal with the US, Australia potentially sacrificed greater economic opportunities that could have emerged from broader Asia-Pacific trade agreements.
Intellectual Property and Pharmaceutical Costs
Beyond trade imbalances, AUSFTA had significant implications for intellectual property laws and pharmaceutical pricing in Australia.
According to the Australian National University, one of the most controversial aspects of the agreement was the extension of copyright protections, which aligned Australia’s laws with US standards, delaying the entry of cheaper generic alternatives.
More critically, AUSFTA altered the Pharmaceutical Benefits Scheme (PBS), which had long enabled Australia to regulate medicine prices effectively.
Under US pressure, the system was modified to introduce a two-tiered structure, weakening Australia’s ability to negotiate drug prices. As a result, American pharmaceutical companies gained greater leverage, leading to higher costs for certain medications.
Critics argue that these intellectual property and healthcare provisions illustrate how AUSFTA served US corporate interests while limiting Australia’s ability to maintain independent pricing policies.
According to Thomas Faunce of the Australian National University, the Pharmaceutical Benefits Scheme (PBS) was altered under US pressure, introducing a two-tiered system that weakened Australia’s ability to negotiate drug prices.
This change limited Australia’s buying and pricing power with US pharmaceutical companies, leading to shortages of lower-priced generic drugs as big pharmaceutical firms pushed their branded, higher-margin products.
