Essay on International Trade Performance of Australia

Australian Trading Partners

This Essay has been prepared to understand the International Trade Performance of Australia. The aim of this essay is making a clear picture of Australia’s contribution in the International market place discussing Australia’s trade policy, Exports and import magnitudes of Australia, the major Trading Partners of Australia in the international trade, their Annual Trade Balance indicating the reasons behind it and future movement of Australia’s international trade.

Australia’s Trade policy aims to create jobs by increasing the sustainable rate of economic growth.

Its central task is to secure the best possible conditions and opportunities, especially better market access, for Australian firms and industries trading and investing overseas. The challenges of globalization – the increased opportunities overseas and the increased competition from overseas have made our foreign trade and investment efforts central to the well-being of all Australians.

Responding to the challenges, Australians are increasingly to be found doing business overseas and in more diverse places and products than ever before [Trade Outcomes and Objectives Statement 1997, p- 1 – on line].

Australian trade policy progressed with some Australian Governments targeted trade policy objectives like as-

a. To raise continually Australia’s international competitiveness,

b. To secure better market access for Australian goods, services and investment overseas,

c. To develop markets and promote Australian business and exports overseas,

d. To promote Australia as a destination for inward foreign investment (including as a destination for regional corporate headquarters),

e. To develop markets and promote Australian business and exports overseas. [Trade Outcomes and Objectives Statement 1997, p-17-18]

Australia is a stable with their skilled workforce with a strong competitive economy.

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The economic position of Australia has the most outstanding of the world in recent years. A higher growth, low inflation and lower interest rate economy is more vibrant than before. Australia has the open and innovative economies with a strong rowth over the past decade which has become possible because of lower inflation, interest rates and effective and efficient productivity performance [Australia today – on line].

The Australian Government’s trade policy is pragmatic and flexible which emphasizes on the changing circumstances The Australian Government’s intention is changing their trade policy with the changing needs of Australia. [Trade Outcomes and Objectives Statement 1997, p- 1 – on line] The Australian Government has implemented an integrated trade policy with the goal of creating new and more open market for exports.

In maintaining the trade policy the Australian Government maintains three key trade avenues namely-

• Multilateral trade achieved through the World Trade Organization (WTO);
• Regional trade achieved through Asia Pacific Economic Cooperation (APEC) and other regional trade links; and
• Bilateral trade achieved via free trade agreements and individual country sector negotiations on market access. [Australia’s trade policy – on line]

The international economic and trade outlook of Australia’s exports and imports is positive since a long period of time. Analyzing the Exports composition of Australia is required for verifying this truth. The graph 4. 4 of Trade Outcomes and Objectives Statement 1997 represents Australia’s direction of exports and investment from 1975 to 1996. A copy of the graph 4. 4 directly taken from Trade Outcomes and Objectives Statement 1997, p-23 attached in the appendix named as Direction of Australia’s exports available- www. dfat. gov. au. The graph shows the international outlook and the expected continuation of strong growth in East Asia [Trade Outcomes and Objectives Statement 1997, p- 23 – on line]. Export is a potent factor for economic growth of any country and the Government of Australia has taken several steps supporting their exporters.

The Government is providing them the support they need through some Government departments namely- Austrade, the Export finance Corporation (EFIC) and its other business initiatives. The Australian exporters are provided support also from the Business program administered by other portfolios within the Government namely- Department of Industry, Tourism and Resources and the Department of Agriculture, Fisheries and Forestry [Trade 2006, p-23- on line]. The merchandise Exports of Australia for the March quarter 2003 were $27,782m, down $2,993m (9. 7%) from the December quarter 2002, and down $931m (3. 2%) compared with the March quarter 2002.

The reason of decreasing in merchandise exports in the quarter was due to the result of a small decrease in average prices received for exports [international Merchandise Trade, Australia, March 2003]. The graph of the above discussion attached in the appendix as graph 1. 1. Since 1994 there has been substantial growth both in the value of Australia’s total exports 67% rise and in the value of its imports 83% up. Australia’s exports peaked in 2001 at $154. 8b and have declined in each of the past two years reaching $140. 5b in 2003[International Trade in Goods and Services, Australia, Mar 2004]. The graph attached in the appendix 1. 2.

Lets analyses the composition of Australia’s exports of the recent year 2005. The chart indicates a clear view of Australia’s export composition of 2005. In 2005 Australia’s exports was strongest to the Asian markets. The East Asian market performed very strongly with the higher value of goods and services by 25 per cent [Trade 2006,p-16]. The copy of the chart named as Composition of Australia’s exports 2005 directly taken from Trade 2006, p-16 attached in the appendix available www. dfat. gov. au. Australia’s main export market is China where goods and services were rose by 40% in 2005, export to Taiwan was up 32% and to Japan rose by 24%.

But Australia’s export in USA fell by 0. 8%. This slight fall did not affect the economy of Australia cause a number of export sector were benefited from the first year due to the implementation of the Free trade Agreement (AUSFTA) between these two countries [Trade 2006, p-17-18]. According to the Australian Bureau of Statistics the trend of goods and services credits rose $69m between December 2006 and January 2007 to $17,967m. In seasonally adjusted terms, goods and services credits rose $346m (2%) to $18,119m. Non-rural goods rose $378m (3%) while other goods fell $47m (5%) and rural goods fell $28m (1%).

Services credits rose $44m (1%) [International Trade in Goods and Services, Australia, Jan 2007 – on line]. A graph of this statistics attached in appendix as 1. 3. Merchandise Imports for the March quarter 2003 were $31,873m which is down $3,781m (10. 6%) from the December quarter 2002, but up $3,300m (11. 5%) compared with the March quarter 2002. The reason of decreasing in merchandise imports in the quarter was due to decreasing in average prices paid for imports. The Import Price Index fell 1. 9% in the March quarter 2003.

The main contributors to the price decreases were computers, telecommunications equipment, electrical machinery and road vehicles [international Merchandise Trade, Australia, Mar 2003]. A graph attached in the appendix as 1. 4. The import trend of 2007 on goods and services rose $105m which is 1% between December 2006 and Jan 2007 to $19,160m. The imports of consumption goods rose $32m 1% to $4,678. The reason of such scenario was importing of consumption goods, non industrial transport equipment goods and household electronics items [International Trade in Goods and Services, Australia, Jan 2007].

A graph attached in the appendix as 1. 5. In International trade Australia has captured vast position in the world market. This section of this essay will discuss the key Markets (trade partners) of Australia for the international trade with their prospects and difficulties in the market place. Australia’s trade market includes China, India, Indonesia, Japan, Malaysia, Korea, Taiwan, Thailand and USA. China is Australia’s fifth largest trading partner with merchandise exports of almost $3. 8 billion in1995-96. Between 1994-95 and1995-96 Australia’s merchandise exports to China grew by over 27per cent.

Over three-quarters of Australian merchandise exports to China are primary products are principally wool, wheat, sugar, barley, cotton, iron ore, alumina and coal [Trade Outcomes and Objectives Statement 1997, p-65 on line]. India is Australia’s 19th largest trading partner and our 15th largest market for merchandise exports. Exports grew by 21 per cent in 1995-96, (compared with 1994-95), and were valued at $1. 2 billion. Coal is Australia’s principal export commodity to India, valued at $657 million in 1995-96 and India is Australia’s third largest coal market [Trade Outcomes and Objectives Statement 1997, p-75 on line].

Japan is Australia’s biggest trading partner with merchandise exports of $16. 4 billion in 1995-96 which is 21. 6 per cent of Australia’s total merchandise exports. The exported products includes coal, beef, iron, LNG aluminum, crude petroleum, animal feeds, and the main products are of wools, sugar and wheat [Trade Outcomes and Objectives Statement 1997, p-91on line]. The United States is Australia’s second-largest trading partner and fourth largest destination for merchandise exports ($4. 6 billion in 1995-96). The USA is the main source of foreign direct investment in Australia on manufacturing.

The USA is the also main place for Australian investment especially on finance and insurance sector [Trade Outcomes and Objectives Statement 1997, p-133 -on line]. The main section of this essay is understanding Australia’s trade performance that can be analyzed from Australia’s Annual trade balance performance in terms of import and export from 2001 to 2006 with their trading partners. In the 2006, second quarter June, shows that there was a deficit of $154. 2 m which is an increase of 10. 3% from the preceding quarter of the Australia’s merchandise trade balance.

This position is a drop of $41. 3, 21% from the corresponding quarter a year ago. On the other hand, the year ended June 2006 indicates the highest annual trade deficit $ 612 million which is more than double the average annual deficit for the last 4 years ended June [International Merchandise trade 2006, p- 1]. The copy of the graph named as Trade Balance: 2002-2006 directly taken from International Trade Merchandise attached in the appendix, available – www. spc. int/prism/country/sb/stats/Economic/Trade/1. During this period imports decreased by $1. 7m which is down 0. % to $382.

But the exports rose by $39. 7m which is 21% up to $228. 5m for the same period [International Merchandise trade 2006, p- 1]. Now let’s focus on annual trade balance 2006 of Australia with its major trading partners. Merchandise trade balance by major trading partners continue to record relatively higher deficits with Australia, Singapore, Papua New Guinea and New Zealand whilst China, Japan and South Korea continue to show relatively strong trade surpluses when ranked with other major trading partners [International Merchandise trade 2006, p- 2].

The copy of the graph named as Trade balance of selected trading partners: June Qtr 2006 directly taken from International Trade Merchandise attached in the appendix, available- www. spc. int/prism/country/sb/stats/Economic/Trade/1. The graph shows the deficit with Australia increased by $43. 7m up 49. 3% to $132. 4m [International Merchandise trade 2006, p- 2]. In 2005 Australia’s exports reached the highest record of $176. 7bl. It is contributed by top 20 goods and services including coal, iron ore, natural gas and wine [Trade 2006, p-11].

The Annual trend of 1948 to 2001 from Jackson and Mclver 2005, p-62 represents a clear picture of Australia’s international trade performance in terms of their import and export with the performance of GDP and. In 1948-49 it is notables that Australia’s export was highest with GDP 30. 0 and this figure is highest till 2001. The imports were much higher in the same period with 30. 0 up. But after the following years Australia’s export performance is not as good as it has been discussed in the upper section of this essay.

Gradually their export performance has increased from 2003 discussed before. The graph in the next (Jackson& Mclver 2005, p- 62) page indicates Australia’s import and export scenario from 1948 to 2001. The import had a higher trend comparing to Australia’s export from 1948 to 2001. After the Annual Trade balance the next section comes the reasons of fluctuating their trend. During the period of 1948 to 2001 Australia’s exports performance was not positive for the nation’s economic growth. The import and export was almost same during that time.

For the export the reason could be the technological development and international trade laws. After the 1st and 2nd world war trade policies of different countries have changed with a positive attitude for the international trade. On the other hand with the technological advancement Australian products becoming demanding in the Asian market place that enhancing their export performance. Australia had positive year in 2005 and 2006 still their always there are some barriers and difficulties in the international trade. Each trade partners of Australia causes individual reason as a trade barrier.

Like the China imposes high tariffs on some products, quarantine requirements, domestic and export subsidies, industry development plan, state pricing arrangements. That’s why Australia and china have developed a range of bilateral and other policies which will eliminate these issues [Trade Outcomes and Objectives Statement 1997, p-67-on line]. High tariffs are a common barrier for all times fluctuating Australia’s international trade specially exporting goods and services. Some of their trading partners still have retained high tariffs in certain sectors.

Australia is running sound trade surpluses with its trading partners in East Asia but Australian exporters still face high tariffs in these market in particular sectors of interest to Australia [Trade Outcomes and Objectives Statement 1997, p-55-on line]. In future Australia is expecting a strong world economy for the exporters. Economic growth is expected to remain strong in many of Australia’s major and emerging trading partners including China, India and USA and a modest growth is expected with Japan and Europe [Trade 2006, p- 19].

Australia has forecasted that electronics commerce is becoming the third force for a more open world economy and hence the Australian Government is working to maximize the benefits of electronic commerce in international forums like APEC and the WTO [Speech from the Australian Trade Minister–on line]. Australia is one of the world’s service oriented economy will dominate the China’s market with Australia’s property and business service, communications, finance and insurance, transport and education. Australia’s largest company’s finding it easier to operate their business in China.

The core point is Australia is strongest with their commodities and services where China is weakest. Australia’s exports will go up in the coming decades [China in Australia’s Future– on line] The Government of Australia helping the exporters with a view to performing excellent performance in the international trade market. International trade law and other issues may hamper Australia’s international trade performance still it is common scenario for all trade partners of the world. The cooperation between trade partners only can resolve the critical issues which may be barriers to the trade.

Bibliography

1. Australia today [on line], available: www. dfat. gov. au/trade/ (Accessed 10th April 2007)
2. Australia’s Trade policy [on line], available: www. mla. com. au (Accessed 10th April 2007
3. China in Australia’s Future [on line], available : ceda. com. au/public/publications/growth/growth_55. html (Accessed 11th April 2007
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5. International Trade in Goods and Services, Australia, Mar 2004 [on line], available: www. abs. gov. au (Accessed 11th April 2007)
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