Upgraded AANZFTA Agreement Takes Effect from 21 Apr 2025 to Enhance Trade, Consumer Protection and Sustainability

Introduction

On 21 April 2025, the Upgraded Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (“Upgraded AANZFTA Agreement“) entered into force. The enhanced agreement will create a conducive environment to enable businesses, in particular small and medium enterprises, to better seize opportunities in the Association of Southeast Asian Nations (“ASEAN“), Australia and New Zealand. The upgrade introduces significant improvements in trade facilitation, consumer protection, digital connectivity, and sustainability.

This Update delves into greater detail on the key benefits and implications of the Upgraded AANZFTA Agreement for businesses, investors and consumers.

Background 

ASEAN, Australia and New Zealand share strong economic ties. In 2023, ASEAN’s total trade in goods with Australia and New Zealand amounted to US$138.4 billion, while Australia and New Zealand’s Foreign Direct Investment into ASEAN was at USD$304.54 million.

The Upgraded AANZFTA Agreement builds upon the AANZFTA Agreement which first entered into force in 2010, creating a free trade area encompassing over 703 million people and a combined Gross Domestic Product exceeding US$5.6 trillion.

The AANZFTA Agreement is one of the most comprehensive ASEAN-Plus Free Trade Agreements (“FTAs“) in force as of April 2025.

Key Benefits

The key benefits of the Upgraded AANZFTA Agreement are as follows: 

1. Simplified rules of origin:

• • The Upgraded AANZFTA Agreement introduces full cumulation among participating countries (“Participating Parties“) and is the first ASEAN FTA to operationalise full cumulation. Full cumulation means that: (i) goods and materials originating from a Party, when used in the production of another good or material, can be considered as originating in the Party where the processing of the finished good took place; and (ii) when non-originating materials undergo processing in any Participating Party before being used in another Participating Party’s production, all such processing will be counted towards meeting the origin criteria of the final product.

• • This allows businesses to source materials more flexibly, improving production efficiency and reducing costs.

• • To operationalise the changes, Singapore Customs has issued new procedures for claiming preferential tariff benefits for both exports and imports under the Upgraded AANZFTA Agreement.

2. Streamlined transit arrangements:

• • New trade-facilitative transit processes allow for easier consolidation of shipments and, for the first time in Singapore FTAs, the sterilisation of goods during transit.

• • These changes are expected to save time and reduce costs for businesses moving goods across borders.

3. Enhanced supply chain resilience for essential goods:

• • The Upgraded AANZFTA Agreement includes commitments to maintain the flow of essential goods during crises such as pandemics or humanitarian emergencies. Parties will refrain from imposing restrictions on essential goods and will expedite their movement and clearance during crises.

• • A first for Singapore and ASEAN FTAs, this commitment helps business continuity and supports consumers who rely on the continued flows of essential products in their daily lives. 

4. Improved services sector collaboration:

• • New annexes on professional and education services promote deeper cooperation, information exchange, and standards setting. Notably, the new Education Services Cooperation annex is the first of its kind across ASEAN FTAs and serves to build on the Regional Comprehensive Economic Partnership (“RCEP“) Agreement. For more information on the RCEP Agreement, please see our 6 January 2022 Legal Update titled “Regional Comprehensive Economic Partnership Agreement Enters into Force”. 

• • The enhanced financial services annex offers better protection in investment disputes and supports efficient, secure cross-border electronic payments.

• • The enhanced telecommunication services annex offers telecommunication providers improved regulations, faster market entry, and clearer dispute resolution processes. 

5. Improved digital connectivity:

• • The Upgraded AANZFTA Agreement aligns digital trade standards and promotes interoperability in areas such as e-invoicing.

• • Enhanced dispute settlement mechanisms are expected to support safer and more efficient digital transactions.

6. Stronger consumer and business protections:

• • Comprehensive consumer protection provisions are included for the first time in an ASEAN FTA.

• • The Upgraded AANZFTA Agreement also strengthens cross-border enforcement cooperation among competition authorities, protecting businesses from anti-competitive activities. 

7. Focus on sustainability and green opportunities:

• • The Upgraded AANZFTA Agreement is the first ASEAN FTA to introduce a standalone chapter on trade and sustainable development (TSD), which advances cooperation on green initiatives and supports the transition to a green economy.

• • It encourages information sharing and capacity building to improve access to green opportunities. 

8. Transparent regulatory measures and preferential treatment for investors:

• • The Upgraded AANZFTA Agreement provides for clearer, more transparent regulatory measures, which enhances certainty for investors and clarifies investment regimes across the region.

• • Investors in the AANZFTA countries, including Singapore investors, will benefit from preferential treatment accorded by other AANZFTA Parties to foreign investors, and stand to enjoy treatment that is at least as favourable as the treatment accorded to local investors in like circumstances.

9. Improved government procurement: 

• • The new government procurement chapter introduces transparent rules and procedures, promotes sustainable procurement, and encourages the use of electronic means.

10. Support for Micro, Small, and Medium Enterprises (“MSMEs”):

• • The new MSME chapter promotes collaboration to enhance MSME capabilities and improve the business environment, especially in the green economy and FTA utilisation.

Concluding Words

The Upgraded AANZFTA Agreement represents a significant step forward in regional economic integration, offering tangible benefits for businesses and investors. It is particularly welcome in the light of the uncertainty and significant trade disruptions brought about by the reciprocal tariffs announced by the United States of America (“US“) and the escalating tariff war between the US and the People’s Republic of China.

To mitigate the effects of the trade war and increased protectionism by the US, businesses in the region can seek to expand their markets and deepen trading relationships with the AANZFTA Parties through the facilitative measures put in place under the Upgraded AANZFTA Agreement. As noted above, the upgrade introduces many groundbreaking provisions that are a “first” for an ASEAN and/or Singapore FTA.  

Companies are therefore encouraged to review the new provisions and consider how best to leverage these opportunities to enhance competitiveness, resilience, and growth in the region.

For further information or tailored advice on how your business can benefit from the Upgraded AANZFTA Agreement, please reach out to our Team members set out on this page.