Are Free Trade Agreements Making Swiss Cheese of Australia’s Foreign Investment Regime?

Shiro Armstrong, Sam Reinhardt, Tom Westland
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Australia’s foreign investment regime plays an important role in Australia maintaining an open
investment environment while providing the Australian community confidence that new investment
projects are in the interest of the community. Until 2005, the foreign investment regime treated all
investment sources on a non-discriminatory basis but since then some important preferential
exemptions to screening have been introduced. Bilateral deals with the United States and New
Zealand more than quadrupled the threshold to A$1.078 billion for investments that must be
screened by the Foreign Investment Review Board (FIRB), and deals with South Korea and Japan
promise the same treatment. There is expectation that a free trade agreement with China will also
lift the threshold for Chinese investment. This represents a major liberalisation towards investment
from those countries, given that a vast majority of investment is below the A$1 billion threshold.
Some new rules regarding investment have also been introduced in those bilateral agreements
which only apply to the signatories of those bilateral deals, however, the differential treatment is
not at this stage too different or complex and there is scope for them to be unified and made
consistent to all sources of investment. The piecemeal changes to the foreign investment regime
through bilateral trade and economic agreements have occurred without a clear strategy set forth
and further piecemeal changes threaten to impact the operation and function of the regime with
implications for confidence in Australia maintaining an open investment environment.