Introduction to Economics
In this assessment, certain components associated with trades of Australia will be depicted. The benefits and costs linked with Bilateral trade agreements shall be discussed along with the description of economic trade outlook for the year 2017 for Australia.
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1. Major Trading Partners
Australia's major trading partners since 1945 include United States, Japan, China and the United Kingdom. Korea has also been the part of this trading process since a long time. Since 1945, that is majorly after the first world war, the trading sequences of Australia and other countries increased because of the post recovery processes (Anderson, McRae and Wilson, 2012). UK and Japan had been the major partners for quite a long time during this period. Further, United States has decreased its import from Australia. Currently, China holds a dominant position as a trading partner of the country. The partnership with China has been on an increasing graph, however US has declined its quantity of exports over these 60 years (Fifty years of Australia’s trade, 2014).
2. Bilateral agreements
Some of the countries with which Australia has signed the bilateral agreements recently include India, Ireland, Korea, Chile, Belgium, Poland, Norway, Portugal, Slovak Republic, Austria, Japan, Latvia, Finland, etc. (Countries Australia has bilateral agreements with, 2017). Following are the advantages and disadvantages associated with bilateral agreements
- Easily negotiable, the bilateral agreements provide both the countries a chance to keep up their point for trading. This further leads to faster achievements of benefits by the signing countries through trades.
- The failure of negotiations of a multilateral trade are overcome through bilateral agreements.
- The advantages acquired from the Free Trade Agreement are withheld due to triggering of competing bilateral agreements amongst other nations (Nguyen and Tongzon, 2010).
3. Types of goods and services dominating Australia's trade
Australia's trade is quite balanced in terms of exports and imports. When considering figures, the number of items being exported is quite high as compared to those imported. The major items that are being imported by the country in its export trade include footwear, computers, watches, appliances, clothes, cars and accessories (Australia's trade in goods and services 2013-14, 2017). These imports have been due to strong multiple cultural links with other nations and Australia. Further, the services are quite largely being exported from the country to different foreign nations. There are huge number of individuals that have Australian nationality and are providing their services. The agricultural products and supply is also exported to trading partners in South Asia and Europe (Armstrong, 2012). Minerals and outsourcing of services is currently dominating the trade of Australia in terms of goods and supply.
4. Favor-ability of Australia for trade
Australia has always been a country with minimum risk involved in the business environment. The country is very ideal to trade with because of the following reasons:
- One of the strongest economies in the world. It automatically generates great feasibility and dependency in terms of economic suitability for the country that plans to deal with Australia (Invest in Australia, 2017).
- There are large number of industries working in this sector which are backed up by abundance of resources businesses. The country has great scope in terms of agricultural businesses and financial services. Hence, this automatically safeguards the trade from risks like recession or inflation.
- Majority of the work force is highly skilled and have diversified knowledge. The companies and countries trading in terms of services shall reap the advantages of Australian minds and intellect.
5. Benefits of Free Trade Agreements
The Free Trade Agreements is a sort of agreement signed by two or more countries for facilitating trading processes in the free-trade area. The benefits of this type of agreement are depicted as follows:
- The countries can initiate their exports to a new market or substantially increase the export of goods for concerned target markets.
- The tariffs on exports of a country's goods are reduced and sometimes made free under the negotiations and provisions of this agreement (Anderson and Yotov, 2016). China-Australia Free Trade Agreement is a prime example of this particular benefit. After complete implementation, majority of the exports i.e. about 95% of Australia's goods will be tariff free in China.
- The countries engaging in a Free Trade Agreement with Australia shall have accessibility of resources that are cheap. This shall help in increasing the competitiveness of goods and services.
6. Economic and trade outlook 2017
The economic and trade outlook of 2017 for Australia depicts that there is a forecast of about 2.8% growth in the gross domestic product of the country. Furthermore, the economic conditions have been enhanced with astonishing surge in the prices of coal and iron ore. The amount of investments in Australian businesses shall bloom but get a sluggish growth because of the consequent rise that is being experienced in the wages (Dyster and Meredith, 2012). On the contrary, the slow growth of GDP in the first and second quarter of 2017 can lead to very little growth till the end of this year. This means that there can be an outcome of 0% growth in 2017 when considering the backlogs of previous year. However, trade outlook depicts that there is significant rise in the amount of exports being handled by the country. Despite of the technical recession, there is a probability of accurate recovery in the third quarter.
The Australian small business Tasty Ice-cream as mentioned is pursuing to enter the Chinese markets. The Free trade Agreement that has taken place between the countries in 2014 can be a beneficial factor which will facilitate the trade in foreign country. Following recommendations can be considered for the exports to China of this small business:
- The food safety laws of China have to be considered so that any sort of legal complication can be avoided when people consume the products of this company.
- The non-tariff barriers have to be focused by the company so that certain financial inputs can be saved and used for the settlement of business in foreign countries (Anderson and Yotov, 2016). These attributes can be accessed through the Free Trade Agreement.
Through this assessment, it can be inferred that the Australian markets are flourishing in terms of exports and are economically feasible for expanding businesses. The bilateral and free trade agreements help in smooth flow of trade with the country with appropriate negotiations.
- Anderson, J. E., & Yotov, Y. V. (2016). Terms of trade and global efficiency effects of free trade agreements, 1990–2002.Journal of International Economics.
- Anderson, K., McRae, C.F. & Wilson, D.W. eds. (2012).The economics of quarantine and the SPS agreement, University of Adelaide Press.
- Armstrong, S. (2012). Australian trade policy strategy contradictions.The World Economy.
- Capling, A., & Ravenhill, J. (2011). Multilateralising regionalism: what role for the Trans-Pacific Partnership Agreement?.The Pacific Review.
- Dyster, B., & Meredith, D. (2012).Australia in the global economy: Continuity and change. Cambridge University Press.
- Handley, K., (2014). Exporting under trade policy uncertainty: Theory and evidence.Journal of international Economics.
- Nguyen, H.O. & Tongzon, J. (2010). Causal nexus between the transport and logistics sector and trade: The case of Australia.Transport Policy.
- Invest in Australia. (2017). Retrieved from https://www.austrade.gov.au/International/Invest/Why-Australia