AUSTRALIA S TRADE AND INVESTMENT WITH THE FIFTY UNITED STATES

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Teresa Manning
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1 AUSTRALIA S TRADE AND INVESTMENT WITH THE FIFTY UNITED STATES

2 Australia s oversized economic impact in the United States PLANT EXPENDITURES PER EMPLOYEE IN THE US $73,000 AUSTRALIA AVERAGE ANNUAL SALARY OF US EMPLOYEES $88,783 $419,000 JAPAN $84,373 $337,000 $195,000 UK NETHERLANDS $74,50 $74,011 Australian companies pay US employees high wages $473,000 CANADA $70,685 $159,000 FRANCE $68,698 $63,000 SINGAPORE $67,840 $90,000 SWEDEN $59,667 $675,000 CHINA $49,383 $173,000 BELGIUM $45,006 $176b+ in sales by US firms in Australia in 016 alone more than four times as much as the US exported to Australia $486b total Australian investment in the US through k+ workers employed by US affiliates of Australian firms, more than companies in the US from China, Italy, Spain, or even the entire the Middle East 64k+ US jobs supported by exports of goods and services to Australia No.1 The US has been the number one destination of Australian foreign investment for more than 30 years 86%+ increase in US jobs related to services exports to Australia since 006 Australian-owned companies in the US have more assets than all South American firms, Middle Eastern firms, and Chinese firms in the US Size of US-Australian investment relationship in 016 MORE THAN $1 TRILLION

3 Australia s economic relationship with America The United States and Australia enjoy a deep and multi-faceted relationship spanning many years and generations. Having fought in every major war together for the past century and bound by a formal military alliance since 1951, much attention has focused on the security relationship between the United States and Australia. But there is also a major economic story in the US-Australia relationship that often goes overlooked. There are obvious differences when comparing the United States to Australia the United States has 13 times the population of Australia and is the world s largest economy, while Australia is the world s 14th largest. Yet a look at the data on the deep and historic economic ties between these two nations make clear that Australia has a disproportionately large trade and investment relationship with the United States, making the United States Australia s most important economic partner. With a population of just 4 million, Australia welcomes more American exports than almost anywhere in the world. The Australia-US Free Trade Agreement has seen US goods exports to Australia increase 76 per cent since it went into effect in 005 and US services exports more than double in the same period. In 016 alone, exports to Australia generated 64,000 US jobs 1 and in more than 15 states Australia ranks among the top 10 export destinations. Australia was the single largest export market for Hawaii, having received nearly 40 per cent of all Hawaiian exports in Australia was also the second largest export market to Maryland and the fifth largest export market for Illinois in Trade is just one part of the story. Investment between Australia and the United States is also a powerful driver of economic growth in both countries. The United States has been the largest source of foreign investment into Australia for more than 30 years; Australia has received more US direct investment than China, Japan, Mexico or even all of Africa and the Middle East combined. At the same time, the United States has also been the largest destination of Australian foreign investment for many decades. There are estimated to be more than 3,000 points of presence for Australian business entities across all 50 states, with more than 140 Australian companies earning or valued at $0 million or more, 47 of which have 50 employees or more. 5 The average salary across the 101,000 employees at Australian companies in the United States is more than $88,000 a year, which is nearly $10,000 more than the average salary paid by European affiliated companies in the United States and $40,000 more than the average US income. 6 This is an impressive economic footprint into the world s largest economy just one of the many ways Australia and Australians punch above their weight in the United States. None of this is an accident. There are lots of destinations for capital in a globalised economy. Like Australia, the United States is a liberal democracy, committed to the rule of law, secure property rights, limits to state power and procedural fairness. Growing populations, dynamic cities separated by vast distances and abundant natural resources add to the similarities and opportunities. In the United States, Australian businesses and investors see a country that mirrors their own. As in the United States, our forebears made credible commitments to these institutions and successive generations have stuck by them. That s why so much American capital goes to Australia, that s why so much Australian capital goes to the United States, and why our countries both benefit from their deep economic relationship. 1. US Census Bureau: Trade in Goods with Australia gov/foreign-trade/balance/c601.html. US Census Bureau: State by Top 5 Commodities and Countries 3. Ibid. 4. Ibid. 5. Australian Trade and Investment Commission, Australia s Investment Footprint in the US, May ArticleDocuments/5081/Australias_investment_footprint_in_the_USA. PDF.aspx; US Bureau of Economic Analysis: U.S. Affiliate Activities: Preliminary 015 Statistics, Majority-Owned Affiliates US Census Bureau, Table P-7. Regions People (Both Sexes Combined) by Median and Mean Income tables/time-series/demo/income-poverty/historical-income-people.html The United States Studies Centre The United States Studies Centre at the University of Sydney deepens Australia s understanding of the United States through research, teaching and public engagement. Established in 006, the Centre is a national resource for the analysis of American politics, foreign policy, economics, culture and history, building Australia s awareness of the dynamics shaping American society and critically their implications for Australia.

4 Australian investment into the United States The United States has been the single largest destination of Australian investment for many years. More than 8 per cent of all outbound Australian investment comes to the United States, and is cumulatively valued at $486 billion equivalent to more than one-third of Australia s GDP in 016 more than seven times the $68 billion that Australia has invested in China. Major Australian firms, ranging from biotechnology giants like ResMed to shipbuilders like Austal, see the United States not just as one of its largest markets but as a springboard to the world. Australian investment in the United States continues to grow significantly, doubling since 005 and nearly tripling since 001. High-paying jobs are supported by Australian firms US operations. Per employee, Australian firms in the United States pay more than Japanese, British, French, or Swedish firms in the United States. There are other countries with a larger direct investment footprint in the United States than Australia s, but in many cases Australian firms are outspending firms from these countries in expenditures for property, plant, and equipment (e.g., Ireland, Spain and Belgium). 7 The Perth-based Austal, for example, employs 4,000 workers in Alabama. Australian property giant Lendlease has helped implement new public private partnerships in the US real estate sector. The Sydney-based Brambles, one of the largest and oldest supply chain solution companies in the world, employs 3,000 workers across the United States. ResMed, a company that began marketing technology developed by a University of Sydney professor, has moved headquarters to San Diego and now leads the world with more than four million cloud-connected medical devices. This is but a sampling. Few Australians and even fewer Americans know Australia has grown a titanic stock of capital in its superannuation funds (pension and retirements funds). In 015, Australian superannuation funds were assessed as the third largest in the world, behind the United States and the United Kingdom, with investments valued at $1.5 trillion, equivalent to 10 per cent of Australian GDP. Massive amounts of this colossal investment pool comes to the United States as portfolio investment, the demand for diversification, yield and confidence pushing vast amounts of Australian capital into the United States. This investment helps grow American firms, build and repair US infrastructure, creating American jobs and securing economic prosperity for both countries. Australian-owned companies in the United States CA 79 OR 11 AK 4 WA 9 NV 19 ID AZ 45 UT 31 CO 48 HI MT WY 3 NM 5 ND 3 SD NE 6 TX 154 KS 8 OK 16 MN 19 IA 7 MO 4 AR 3 LA 9 WI 1 IL 79 MS 15 IN 17 TN 3 MI 1 AL 9 KY 18 OH 39 VT GA 41 WV 5 SC 8 PA 37 VA 3 FL 6 NH NC 70 NY 90 ME 1 MA 31 RI 7 CT 0 NJ 63 DE 4 MD 8 DC 6 Source: D&B Hoovers 7. BEA source US Census Bureau: Table H-6 Regions by Median and Mean Income

5 Real estate, rental and leasing 5% Professional, scientific, technical services 5% Types of Australian direct investment into the United States Source: US BEA, Balance of payments and direct investment position data - foreign direct investment in the U.S. Finance and insurance 19% Manufacturing 50% Depository institutions 6% Wholesale trade 15% Employment directly supported by exports to Australia, per 100,000 residents CA 110 OR 75 AK 79 WA 98 NV 141 ID 39 AZ 59 UT 73 CO 68 HI 18 MT 35 WY 56 NM 36 ND 117 SD 63 NE 97 TX 68 KS 65 OK 35 MN 75 IA 86 MO 61 AR 40 LA 64 WI 78 IL 143 MS 47 IN 8 TN 99 MI 58 AL 51 KY 70 OH 60 VT 61 GA 75 WV 3 SC 119 PA 60 VA 58 FL 6 NH 7 NC 64 NY 110 ME 5 MA 110 RI 58 CT 74 NJ 68 DE 13 MD 96 Source: The Trade Partnership

6 Australian trade with the United States The US-Australian economic relationship dates as far back as 1793, when the American trading ship Hope delivered 7,500 gallons of rum to Sydney. 8 While bilateral trade and investment between the United States and Australia flourished from that date onward, the Australia-US Free Trade Agreement heralded a new era when it came into force in 005, as US exports to Australia have more than doubled. 9 More than a decade later, 96.1 per cent of all Australian exports are tariff-free. 10 In 016, the United States remained Australia s second largest trading partner in goods and services and the largest trading partner for services, exporting machinery, travel services, industrial supplies and materials, consumer goods, and financial services. 11 Today, the US trading surplus with Australia is the fifth highest out of all of America s bilateral trade relationships, only following Belgium, the Netherlands, UAE and Hong Kong all of which are nations with favourable corporate tax structures. The make up of what Australia imports from the United States is diverse, with the top four goods being passenger motor vehicles; aircraft, spacecraft and parts; medical instruments; and measuring and analysing instruments. This surge in exports to Australia has supported a commensurate rise in jobs related to exports to Australia, with jobs supported by US exports to Australia increasing by 37 per cent since 006 and services exports jobs alone increasing by 86 per cent in the same period. In 016, a total of 64,000 US jobs were either directly or indirectly supported by state exports to Australia, an increase of around 7,000 from 006. On a proportional level, the employment impact is highest in Hawaii, Illinois, and Nevada, where they have, respectively, approximately 18, 143, and 141 jobs per 100,000 residents from exports to Australia. 8. David Solomon and Tom Spurling, The Plastic Banknote: From Concept to Reality. CSIRO Publishing, 014, p US-Australia relationship as essential and vibrant as any time, The Australian. 3 June The Department of Foreign Affairs and Trade: United States of America country brief united-states-of-america-country-brief.aspx Employment directly supported by exports to Australia ,000,499,500 4,999 5,000 + OR 1,675 CA 4,380 AK 34 WA 3,895 NV,754 ID 355 UT 1,167 CO,34 AZ,50 HI 1,56 MT 33 WY 151 NM 474 ND 345 SD 314 NE 806 KS 946 TX 10,563 OK 838 MN,113 IA 1,153 MO,086 AR 617 LA 1,703 WI,13 IL 8,80 MS 89 MI,69 IN,383 TN 3,389 AL 1,016 KY 1,596 VT 34 OH 3,637 GA 3,990 WV 349 PA 3,954 VA,758 SC,519 NH 546 NC 3,606 FL 8,080 NY 1,50 ME 405 MA 4,50 RI 37 CT 1,380 NJ 3,45 DE 639 MD 3,3 Source: The Trade Partnership

7 Total exports to Australia Sources: 1. US Census Bureau: State by Top 5 Commodities and Countries Estimated by the Trade Partnership Export market Total exports in 016 rank for Australia 1 (US$ million) Top goods export to Australia in 016 Hawaii Transportation equipment Maryland 1,015 Transportation equipment North Dakota Machinery Illinois 5 3,116 Machinery South Dakota 5 79 Computers and Electronic Products Nebraska 6 84 Machinery Iowa Machinery Wisconsin Machinery South Carolina Transportation equipment Arkansas Transportation equipment Wyoming 9 54 Chemicals Kansas Transportation equipment Missouri Transportation equipment Alaska Minerals and Ores Indiana Transportation equipment Alabama Transportation equipment Total increase in exports to Australia since 006 < CA 56% OR 4% AK 65% WA -3% NV 9% ID 114% UT 9% CO 36% AZ 86% HI 515% MT 151% WY 96% NM 18% ND 56% SD 147% NE 19% KS 6% TX 64% OK 33% MN 4% IA 85% MO 48% AR 99% LA 1% WI 44% IL 30% MS 35% MI 91% IN 106% TN 8% AL 69% KY 70% VT 131% OH 39% GA 10% WV 55% PA 75% VA 51% SC 133% NC 10% FL 84% NH 19% NY 119% ME 9% MA 100% RI 15% CT 56% NJ 54% DE 347% MD 190% Source: The Trade Partnership

The United States Studies Centre at the University of Sydney deepens Australia s understanding of the United States through research, teaching and public engagement.

8 The United States Studies Centre at the University of Sydney deepens Australia s understanding of the United States through research, teaching and public engagement. United States Studies Centre Institute Building (H03) The University of Sydney NSW 006 Australia T: E: us-studies@sydney.edu.au W: ussc.edu.au Established in 006, the Centre is a national resource for the analysis of American politics, foreign policy, economics, culture and history, building Australia s awareness of the dynamics shaping American society and critically their implications for Australia.

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