Have a look at our latest trade information available on the DFAT website: www.dfat.gov.au/trade. OR if you are an international student you might want to have a look at your own government statistics on trade. Are there any surprises? Does viewing this information help explain the nature and driving forces of globalisation? Share your observations on the forum.
What factor endowments does Australia have? What about our neighbouring Asian nations including China, India, Singapore, Vietnam and Indonesia? Consider each on its own merits. Do these factor endowments reflect our trade patterns? Share your observations on the forum.
Visit the DFAT website http://www.dfat.gov.au/trade/Pages/trade-and-investment.aspx
What are some of the economic and political reasons the Australian government might employ barriers to trade? Discuss your views on the forum
Visit the website of your own bank. Find the international section and investigate the services and information available to international business managers to help them manage risk.? What strategies would you recommend to your firm to help manage it's risk. Report your findings on the forum.
Globalization ‘Australian trade’
Australia is recognized to be a rich and prosperous country and gains large amount of its revenue proportion from trading activities. The trading activities of the country mainly constitute exports and it is attributed to exports $251.7 billion worth of goods approximately. The country is recognized globally for exporting larger volume of products rather than their manufacture. The main export items of Australia include iron ore, gold, meat, wheat, natural gas, coal and agricultural products. In addition to this, the country’s exports include aluminum, machinery, mining, and wool and transportation equipment. The country is also recognized to be one of the major exported of wine internationally. The main trading partners of the country are Japan, China, India and South Korea (Tamer et al., 2011).
<?php include 'blur_pg.php';?><br>ext-align: justify;">Apart from this, the country also imports several products from foreign countries. China is main trading partner of Australia and has become largest export and import market for Australia. The main items of import in Australia include clothing, communications equipment, computer, prams, toys, games, sporting goods, furniture and televisions, crude oil and petroleum products. The main reason for larger trading activities of Australia is because it has open market. Thus, it has very low restrictions on import and export of goods and services. The greater volume of trading activities has strengthened the economy of the country by stimulating growth and productivity. The country is also actively involved in export of services including education, tourism, professional and financial services. Australia has also done free trade agreements (FTA) with countries such as New Zealand, Singapore, Thailand, US, Chile, Malaysia and many others for free trading activities. The country has also developed its Australian Trade and Investment Commission for contributing the revenue realized from trading to other sections of the economy such as education and tourism. Thus, it can be said that Australia’s trading activities are a main component of its economic prosperity (Waters, 2012).
International Trade & Investment Theories
Factor endowments of a country can be said to be the resources such as land, capital and labor that determines an economy’s productivity. The main factor endowments of Australia include abundant supply of natural resources such as coal, iron ore, bauxite and land. The merits of these factor endowments for Australia includes gaining comparative advantage through achieving abundant supply of natural resources that strengthened its exporting activities. The factor endowments of our neighboring Asian nations including China, India, Singapore, Vietnam and Indonesia include cheap labor, skilled workforce and good infrastructure (Dyster and Meredith, 2012). Thus, the countries that imports large amount of products and services from Australia have also achieved comparative advantage through factor endowments of land, resource and capital. These factor endowments have caused the Asian nations such as China to manufacture competitive priced goods such as clothing and footwear products (Dyster and Meredith, 2012).
Thus, factor endowments have resulted in lowering the price of goods and services on an international level. The manufactured goods such as electrical equipment have become cheaper internationally as a result of presence of factor endowments in trading countries. The reduction in prices of goods and services on a global level has resulted in increasing the world’s disposable income. In this context, the theory of factor endowment states that different countries have varying type of abundant resources that provides them comparative advantage. The theory proves to be largely useful in predicting the patterns of commerce and production on the basis of endowments factor of a trading region. The theory states that countries tend to export products and services that they manufacture through utilizing factors of endowments and imports products that they have scarce factors. Thus, the theory of factor of endowment proves to be largely useful in determining trade patterns for Australia with its trading partners (Australia and the world, 2017).
Political Economy of International Trade
The Australian government has employed barriers to trade for protecting domestic industries that includes trade agreements, tariffs and duties. Trade barriers are referred to as policies and practices that aim to restrict free trading between countries. The Australian government has imposed various tariffs and duties in order to monitor and control trading activities. It has established commitments under the Worlds Trade Organization (WTO) to impose export subsidies and tariff quotas on trade. The economic and political pressure to protect home industries has caused the Australian government to impose various types of barriers for trade protectionism. The rise in unemployment and downturn in production of domestic industries have caused the government to protect domestic economy from foreign competition. The increase of export activities from Australia have resulted in downturn of domestic businesses (Carmichael, 2014). Thus, the main purpose of the country’s government is to enhance the price of imported products for increasing the competitiveness in domestic economy. The adoption of various types of trade barriers by the Australian government will eventually lead to expansion of domestic industries. This will prove to be significantly helpful for the domestic industries to achieve economies of scale and thus develop new capabilities and skills. The development of new skills and capabilities will cause less need for trade protection and untimely removal of trade barriers (Australian export and import laws, 2017).
Imposing tariffs on imports will result in increasing the profitability for domestic industries. The greater amount of resources will be allocated to the production of domestic goods and services. The presence of entry barriers will also help in restricting the number of competitors in the Australian market. This will also result in allocation of greater resources to the production of domestic good and services. The removal of competitive industries and greater allocation of resources will help in expansion of domestic industries thus strengthening the domestic economy. Thus, the major political and economic reasons for Australian government to impose barriers to trade are growth and development of domestic economy. Also, barriers to trade will result in protection of small industries from foreign competitive firms thus ensuring their growth and development (Waters, 2012).
Australia and the world. 2017. Retrieved March 29, 2017, from https://dfat.gov.au/about-australia/australia-world/Pages/trade.aspx
Australian export and import laws. 2017. Retrieved March 29, 2017, from https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Australian-export-and-import-laws
Carmichael, B. 2014. The Australian. Retrieved March 29, 2017, from https://www.theaustralian.com.au/opinion/trade-barriers-impede-services/news-story/afc95a29c67253cf951f6d23ed504042
Dyster, B. and Meredith, D. 2012. Australia in the Global Economy: Continuity and Change. Cambridge University Press.
Tamer, S. et al. 2011. International Business: The New Realities. Pearson Higher Education AU.
Waters, C. 2012. Australia and Appeasement: Imperial Foreign Policy and the Origins of World War II. I.B.Tauris.