Trade Liberalisation: Australia’s Story
As many nations of the world move towards economic protectionism, Australia may need to change its trade policies.
With the recent major events, such as Brexit and the Trump Presidency, concerns are increasing about trade barriers and the negative impact on Australia by the growing global protectionist movement. Trade protectionism is alive and well in the Global 20 which is made up of the countries that account for seventy-eight percent of global trade. However, the protectionism adopted by countries in the Global 20 is not in the form of tariffs, but through import quotas, local content rules and subsidies. Australia has no need to reconsider its trade policy as overall, protectionism will not
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Nevertheless, employment losses for trade–exposed industries can be concentrated in some locations, as is the case with metal smelting and the car industry in Australia. This can be shown with the loss of jobs from the car industry in 2013-2014. As Stated by Simon Cowan, the automotive manufacturing industry employs 45,000 people, which is less than half a percent of the Australian workforce of that time. Three companies, Holden, Toyota and Ford have cited the fact that the Australian automotive manufacturing industry does not have the scale to compete internationally. This is due to the costs of manufacturing vehicles in Australia. The automotive industry in Australia offers high wages and good conditions. Ford has estimated that the cost of building cars in Australia was 2 times the amount that of Europe and 4 times the amount that of Asia (Simon Cowan, 2014). With the loss of employees in these industries, the domestic economy is negatively affected by an increase in the inequality of income. The alternative employment opportunities in these locations may not only be more scarce, but also offer lower wages and poorer conditions. These issues cannot be resolved by protectionism.
WHY TRADE LIBERALISATION?
There are positive and negative consequences of trade liberalisation. Trade liberalisation reduces tariff barriers leading to more trade, increases international competition, and leads to an increase in
Unfortunately, there has been poor progress in reducing agricultural protection in recent years. In fact, if global trade liberalisation was achieved by the WTO 's Doha Round, it could have boosted Australia 's agricultural exports by US$9 billion by 2020; thus displaying how highly protectionist economies and trade blocs adversely affect the Australian economy.
rise Australia's efficiency and add to higher GDP growth by sanctioning domestic businesses admittance to inexpensive inputs, leading innovative technologies, and nurturing competition and advancement
Although Australia remains geographically isolated from the world, international trade still remains a main factor that allows Australia’s economy to prosper. Australia’s long history of trade has created tight links and connections with other nations. Being a member of many worldwide organisations, Australia has produced many free trade agreements with countries around the world. However, recently Australia has seen a change in the composition and direction of its trade and has developed a strong trade link with the Asia-Pacific Region.
Protectionism by way of the price mechanisms such as tariffs, subsides, quotas, export licences and import duties (Rugman, 2009) are just some of the measures which can seriously impact on a foreign company. For example the American steel industry was afforded protection under the Bush administration when large tariffs were imposed on foreign steel imports in order to safeguard the jobs of the national steel workers (Mankiw and Taylor, 2008).
China has, for a sustained period of time, been one of Australia's most important trade and economic partners. But this has not always been the case. Since the late 1970s China has moved from a closed, internal focused economy to more of a global market oriented one that plays a major part in other nations economies, like Australia's. Although China is technically a Socialist nation, market capitalism is actively encouraged, much the same as in Australia. In 2010 China became the world's largest exporter, with exports ranging from natural resources to manufactured goods. (CIA-World fact book) Australia's economy, in this sense, differs from that of China's. As Australia is simply too expensive to manufacture goods ("Holden, Ford,
Another prospect is Australia’s mineral resources. Australia is predicted to be holding much of iron ore, coal etc. This means that we are on top of vast resources that can be sold to other countries. Japan would benefit as it purchases a large amount of our coal and iron ore. This advantage could also be used to lever a FTA with the Japanese. The infinite capabilities of Japanese technology would allow Australia to keep up with the world in many areas. Of course, most of these are technologically related.
Achieving external stability is an important objective of economic policy, achieving this stability ensures that imbalances in Australia’s economic relationships with other economies do not hinder achieving domestic economic policy goals such as lower rate of unemployment, higher rate of growth and lower inflation. There are three main factors that effect external stability the deficit on the current account (CAD), net foreign liabilities and the Australian dollar. Australia’s experienced times when overseas investors decided that the economy’s external position was unstable, and when investors like such decide to withdraw their
The EU and Australia end the negotiations for economic and trade cooperation supplying. Australia is the most important economic and trading partner for the EU, China and Japan. The EU and Australia are like-minded partners who share many common concerns in today’s global trade environment , for instance initiative for further rebel trade in green goods, trade in services, and others.
With a GDP of over $1 trillion USD, the Australian economy is among the largest in the world (Cornett and Saunders, 2014). Australia is trading partners with the United States, China, and Japan, but their economic ties are mainly centered in the Pacific Rim. Exports are crucial to the country’s GDP and this has created problems regarding sustainability in the Australian economy.
The Australian Government participated in the reduction of trade barriers as part of the General Agreement on Tariffs & Trade (GATT). As a result there have been pressures on the above mentioned industries that were previously protected. They have effectively become, or are becoming, casualties of what is termed ‘a race to the bottom’ between national governments as they attempt to attract investment by undercutting competition.[vi] The industries without protection are inefficient and thus profit is affected forcing firms to shift elsewhere or outsource in search of improving efficiencies.
Australia has several ties with other countries. These ties are established in several ways, one of which is through trade. The nature of trade includes exporting and importing goods and services which form trade links with partner countries. Trade comes with its advantages and disadvantages. Australia also takes part in multilateral agreements, such as APEC, to be able to strengthen trade links.
The second key national interest of Australia is the economy. Australia’s capital, jobs, standards of living, technological innovations and social advances rely substantially on exports and commodity values within Southeast Asia and the Pacific (Department of Foreign Affairs and Trade 2016a). The stability of South East Asia and the Oceania
Australia’s political view has been recognized by other countries as a strong market leader and a valuable country to have free trade agreements with. All Australians can see that this is a huge benefit to the Australian economy. An increase in trade agreements means more jobs and security for the
Since 2012, Australia has maintained a mostly negative trade balance, perhaps amid uncertainty of its currency against the US dollar, but more likely is its economic growth is causing it to import more and more petroleum products which it’s exports of its own natural resources is not able to match.
Liberalisation of trade has been made possible through the formation of the World Trade Organisation and several other regional trade agreements. The establishment and operation of these trading blocs has been made possible through the electronic revolution. The efficiency of the trade agreements due to the accelerated technology contains many long term benefits for member nations. Prime Minister John Howard outlines the benefits of trade liberalisation with reference to the proposed bilateral trade agreement with the United States. “A free trade agreement