The USA is one of Australia’s most important trade and investment partners. It is the number one destination for Australian outward investment and Australia’s number one source of foreign direct investment.
“In the past 18 months, the COVID-19 pandemic has emphasised the importance of market diversification for Australian exporters across a variety of industries and sectors,” says Mr Tony Davis, Austrade’s Executive General Manager – The Americas. “The result has been a significant increase in Australian companies seeking to expand into the US.”
“COVID-19 has also accelerated the disruption of technology across various sectors and the workforce, which have played an important role in creating market opportunities for Australian innovations and ingenuity,” he continues.
The Australia-United States Free Trade Agreement (AUSFTA) has been a significant enabler for economic growth, leading to the doubling of two-way trade, tripling of two-way investment, the creation of hundreds of thousands of jobs, and closer integration of our economies.
The Australia-United States Alliance and the AUSFTA are central to the bilateral relationship, which also benefits from widespread collaboration across government, academia and business.
Mr Davis explains that cooperation between both countries spans foreign policy, defence and security, intelligence, energy, environment, critical technologies, supply chains, trade and investment.
“There are more than 4,000 Australian parent companies with 1,500 individual entities in the US and more than 3,000 individual points of presence.
“Major Australian firms include Austal, BHP, Rio Tinto, Incitec Pivot, Brickworks, Visy, LendLease, Macquarie Group and Canva. More than 150,000 people in the US are directly employed by Australian companies, while US trade with Australia supports more than 300,000 US jobs.”
Free Trade Agreement enables Aussie exports
The Australia-United States Free Trade Agreement (AUSFTA) entered into force on 1 January 2005.
Upon AUSFTA’s entry into force, more than 97 per cent of Australia’s non-agricultural exports to the US (excluding textiles and clothing) became duty free and two-thirds of agricultural tariff lines went to zero. Ninety-six per cent of all Australian exports are now tariff-free.
Under AUSFTA, for the first time, Australian companies also have access to the United States federal government procurement market and the government procurement markets of 31 US States.
AUKUS : A vital strategic agreement
On 16 September 2021, Prime Minister Scott Morrison, President Joe Biden and Prime Minister Boris Johnson announced a new enhanced trilateral security partnership between Australia, the United Kingdom and the United States known as AUKUS.
“AUKUS will build on the three nations’ longstanding and ongoing bilateral ties and will enable our countries to significantly deepen cooperation in relation to emerging security and defence capabilities,” says Mr Davis.
“The agreement will also complement Australia’s network of international partnerships, including with ASEAN, our Pacific family, Five Eyes, the Five Power Defence Arrangements, the Quad, and other like-minded partners in the region.
“AUKUS will complement our collective efforts to meet the challenges posed by our strategic circumstances and ensure the Indo-Pacific remains stable, secure and prosperous, and free from coercion.”
President Biden’s US$1.2 trillion dollar Infrastructure Bill
President Joe Biden signed the US$1.2 trillion bipartisan infrastructure bill into law on 15 November 2021, paving the way for significant investments in roads, bridges, waterways and other “hard infrastructure.”
The Infrastructure Bill and subsequent investment represent the biggest public-works bill since former President Dwight Eisenhower created the interstate highway system in 1956. The legislation will cost US$1.2 trillion over eight years and includes more than $550 billion in new spending.
Mr Davis says that Australia is well placed to benefit from opportunities created by the investment into infrastructure through supply-chain, partnerships and competitive open tenders.
Lucrative sectors for Australian exporters
The US is the world’s largest economy and US GDP (nominal) was US$20,807 billion at the end of 2020. While opportunities abound in such a huge market, Mr Davis identifies the following priority sectors, which have experienced technology, supply chain and sector disruption, creating opportunities for Australian exporters:
Fintech
In 2020, the US was the top global fintech market, making up 70 per cent of the global market. This represents significant opportunities for Australian fintech companies seeking to target specialised channels for market entry and expansion.
“COVID-19 has required traditional financial institutions such as banks to accelerate digital solutions to better serve their customers both remotely (beyond the branch) and more efficiently. Often lacking in-house capabilities, many institutions have looked to Fintech companies, via acquisitions or partnerships, to fill their need for more effective, timely and easy customer experience,” says Mr Davis.
Agribusiness
The Australian Government is investing $72.7 million to help Australian agribusinesses expand their export markets through the Agri-Business Expansion Initiative (ABEI).
Announced on 23 December 2020, ABEI is part of a long-term strategy and commitment by the Government to achieve sustainable growth and resilience in our agribusiness exports.
Through ABEI, Austrade is delivering scaled up support to over 2,000 agri-food exporters a year. This support for market diversification and increased focus on the US has benefited Australia’s speciality food sector, which has a global reputation for quality in wine, beef, seafood, packaged food, organic products, speciality cheeses and confectionary.
Technology disruption continues to impact food manufacturers, who are increasingly focused on implementing greater automation in the manufacturing process to drive productivity. As a result, the US agribusiness industry is increasingly looking to new technologies, crop science and advanced agricultural practices to improve productivity.
Australia has a strong agri-tech sub-sector, which ranges from water management (making every drop count in rural areas) to satellite and drone tracking of livestock across the continent’s vast open expanses.
Additionally, more than a third of the top 50 global food and beverage processing firms are headquartered in the US, including General Mills, Mondelez, PepsiCo, Campbell’s and Mars;all have investments in Australia.
Opportunities exist for Australian exporters to the US to add value to food processing supply chains as well as research and development in agribusiness, food and animal science.
Digitech
Digital innovation has transformed the way all industries use technology across all verticals. This transformation is driven by digitisation and integration of vertical and horizontal value chains, digitisation of product and service offerings, and digital business models and customer access. Technology is enabling governments, corporations, and individuals to do things they never have before.
More than a quarter of the US$3.8 trillion global IT market is in the US. The industry accounts for 7.1 per cent of US gross domestic product and 11.6 per cent of US private-sector employment.
“While the size of opportunity and capital is large, the US advanced technology and digital innovation sectors are increasingly competitive, sophisticated and specialised with more than 100,000 software and IT services companies in the United States, with more than 99 per cent being small and medium-sized firms,” says Mr Davis.
Domestically, San Francisco’s Bay Area accounts for 40 per cent of the nation’s Venture Capital (VC) investment but is a highly competitive environment and one of the most expensive places to do business.
While VC capital may be smaller, cities like Austin, Boulder/Denver, and Milwaukee are fast becoming destinations for start-ups and established companies alike. Each boasts its own thriving community of technology start-ups and offers a relatively cheaper environment for getting a company off the ground.
Opportunities exist in emerging sub-sectors like prop-tech, infrastructure tech, agri-tech, fintech and workplace/enterprise technology.
The ‘future of work’ has experienced a significant acceleration and disruption due to COVID-19 and the rise of remote work, global border closures and supply chain vulnerability.
“The opportunity for Australian digitech companies looking to enter the US market is understanding the challenges facing the US, which is how do enterprises and governments identify and better manage the impacts of remote teams, critical skill shortages, workforce planning including re-skilling, automation and people management, as well as manage the increasing risk of climate change.”
Health
The US has the largest medical technology (medtech) market in the world, accounting for 40 per cent of the global medical device industry. The US is a net exporter of medtech and exported roughly US$28 billion in instruments and appliances used in medical, surgical, dental, or veterinary sciences in 2020 and imported US$27.6 billion. Australia exported roughly US$69.7 million in instruments to the US in 2020, making it the second largest destination of Australian medical devices.
US innovation in the life sciences is expected to continue to grow, with the medical device market reaching US$208 billion in 2023. An aging population, rise in chronic disease, and high medical costs will drive demand for medtech in the US creating an opportunity for Australian exporters to enter the market.
“Australia’s outstanding medical science capability, strong intellectual property protection, robust regulatory regime, fast-tracked clinical trials, and expertise in successful commercialising medical science and technologies result in high-quality products that are attractive in the US market,”
In 2016, the Australian Government established the first BioBridge with the Texas Medical Center (TMC). The BioBridge seeks to support two-way trade and investment between Australian healthcare companies and the TMC, with a strong focus on enabling Australian companies to participate in the TMC’s Innovation accelerator for medical companies delivering better patient care, creating efficiencies across systems and platforms, faster and more accurate disease diagnosis, and innovative care models.
Emerging opportunities
Largely driven by domestic policy relating to climate change, the evolving business and political environment continues to highlight opportunities across advanced technology, low-carbon technologies, critical minerals and security.
The changing business and political environment have created opportunities for Australian exporters across key sectors, including:
Security & Defence
The recently signed AUKUS agreement will further enhance joint capabilities and interoperability, focusing initially on cyber security, artificial intelligence, quantum computing technologies and additional undersea capabilities.
“Australia is a world-leader in the advanced cyber security industry and is well positioned to not only contribute and compliment the AUKUS objectives, but to play an important role across industries and sectors that are increasingly under threat of cyber-crime, cohesion and deception,” says Mr Davis.
“Cyber security is the fastest growing technology sector and has implications across all parts of the global economy. While many technologies are in demand for their ability to reduce inefficiencies and increase productivity, the growth in demand for cyber security technologies is a direct response to an increase in cyberattacks.”
The overall impact of cyberattacks on hospitals and healthcare systems is estimated to be nearly US$6 billion per year. In order to combat this massive cost, the healthcare cyber security market is projected to exceed US$10.85 billion globally by 2022.
Additionally, cyber-attacks on critical infrastructure are seen as one of the greatest threats. Cyber security spending for critical infrastructure protection was an estimated US$109 billion globally in 2020.
Resources and Energy – Critical Minerals
The Biden Administration has made a significant stride in US plans for renewable energy development, smart grids and a large electric vehicle (EV) industry with the $1.2 trillion Infrastructure Bill. This investment will lead to the renewables sector surpassing the defence sector as a customer for critical minerals.
Increased demand and supply chain diversification will boost demand for Australian critical minerals in the medium term. Opportunities for Australian exporters include:
- Supplying rare earth materials for EV permanent magnet motors among tiered suppliers;
- Selling custom battery-grade lithium, nickel, manganese, cobalt and graphite cathode/anode precursors into US-based EV battery manufacturing clusters; and
- Improving prospects for Australian rare earth companies to partner with US manufacturers and processors.
US domestic policy is prioritising the on-shoring of manufacturing. It will also promote the development of metal and battery production in the US for domestic vehicle manufacturers. This on-shoring move will have implications for Australian producers’ value chain strategies. As a result, Australian mining companies are likely to consider partnering with US processing companies to help them achieve supply chain diversification.
Competition remains fierce in the US market
Every export market presents challenges, and the USA is no different. “The US is an attractive and highly competitive market. As a result, the opportunity of doing business in the US can cause some exporters to overlook key market aspects and points of difference to their more familiar Australian market,” warns Mr Davis.
“The US market is the most competitive in the world and attracts ambitious companies and entrepreneurs from domestic and international markets. In many ways, the ‘United’ States of America are not so united – its 50 states all have different tax, corporate and HR laws, business cultures and market players.
“A competitive, well-formulated market strategy is essential. Companies need to spend time and often money to gain a deeper understanding the market, their end customers, their competitive position and their partnering approach to successfully break into the US.”
The US has an established culture of trade expos and conferences – building relationships, showcasing product and services and conducting business – which are fundamental to the business community. While COVID-19 largely put a hold on in-person expositions and conferences, in 2022 this circuit is expected to come back larger than ever. Irrespective, success is built on being present and active in the market and ultimately establishing a permanent presence.
Trade data
Australia’s merchandise trade with the US in 2019-20:
- Exports: A$17,933 million
- Imports: A$37,470 million
- Total merchandise trade (exports + imports): $A55,403 million
- Exports of services to the United States: A$9,470 million
- Imports of Services: A$15,914 million
More comprehensive trade data can be found here on the DFAT website
Austrade Support for exporters
Australia’s prosperity is underpinned by competitiveness, open, diverse and resilient markets, and a rules-based trading system. In the COVID-19 recovery phase, the Australian Government is focused on ensuring it obtains the full benefits of open trade and investment settings. Austrade is working to: expand options for our exporters in key markets; strengthen and modernise the rules-based international trading system; and promote Australia’s high-quality goods and services overseas.
Austrade contact information:
Mr Tony Davis
Executive General Manager – The Americas
Australian Trade and Investment Commission (Austrade)
Email: info@austrade.gov.au
Contact: 13 28 78
Read more: New Zealand: Aussie exporters’ number one destination
Read more: The UK: Aussie exporters discover new opportunities in a familiar market
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