Analyzing Economic Impact of Global Trade

The given assignment is about analyzing the economic impact of global trade, specifically focusing on the Australian economy's recovery from a major shock. The task involves comparing the economies of Australia, Denmark, and India in terms of trade policies, trade volumes, and services. It also requires discussing the benefits and challenges of free trade agreements and providing a summary of key findings.

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Table of content
International trade and enterprises 2
 Introduction 2
Pattern of Trade: Denmark and India 3 Analysis of the factors responsible for
changing pattern and the past trade data 3
What theories predict 6
The effects of the pattern of trade
on Australia: the case of Denmark and India 6
 India and Denmark 6
 India and Australia 7
 Australia and Denmark 7
Conclusion 8
References 8

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International trade and enterprises.
Introduction
The future of the any country’s economy could be predicted using the analysis of trade
flow i.e. imports and exports. We can take a bird eye view of India and Denmark’s trade
flows to analyze the pattern of trade of these countries. The main tool which will be very
helpful in such regards will be trade theory. It explains about the current patterns of
trade, the impact of trade on the local economy, and the kind of public policies which
should be presented to enhance the country's welfare.
Considering India and Denmark, India is a country whose GDP stood at number 7 in the
top economies of the world in terms of GDP. The total exports of India in FY18 was
$326 Billion and their imports were $492 billion (OEC, 2018). Whereas, Denmark ranks
number 36 in the world in terms of DGP. Denmark’s total exports were $101 billion and
imports were $103 billion (OEC, 2018).
India has experienced a sequence of economic restructurings towards opening up of
the economy. Prominent efforts between 90’s had been the effort to open its
international trade. It had been observed that the expected trade liberalization in India
would have led to the variations in the constituents of exports thus to replicate India’s
comparative advantage picture in the world economy. Moreover, Comparative
advantage in an international trade could be prejudiced by the change in the meeting of
production factors or due to the improved trade incorporation of other countries.
Whereas, Denmark is the country with high dependency on the foreign trade. The trade
to GDP ratio of Demark was 105% whereas India’s trade to GDP ratio was only 40.02%.
It shows that how much the economy of Denmark is dependent on the trade, whereas
the Indian economy do not have all their eggs in the same basket. Similarly, the terms
of trade of India increased to 73.3 index in 2018 and the Denmark’s terms of trade
averaged at 99 points and it is increasing without any break. This means that the ratio of
exports prices to the imports prices is higher in Denmark. As it is beneficial for the
country to have higher terms of trade because the country will need lesser exports to
purchase given amount of imports (OEC, 2018).
This whole scenario of understanding different indicators helps to identify the trade
flows of the country. It also helps to analyze the comparative advantage of the
countries. The major thing is that to determine the trade structure, and the countries
have to analyze their opportunity costs (OC). So, if the country has the lower
opportunity cost, then that country will have the comparative advantage in the
production as compared to the other country (USI, n.a). Basically, comparative
advantage determines the terms of trade, for the benefit of the both countries (Khan
academy, 2020).
Pattern of Trade: Denmark and India
Analysis of the factors responsible for changing pattern and the past trade data

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Following is the Indian exports data of past 30 years from 1990 to 2020. In the early
90’s India’s total exports were $17,940 million and imports were $23,799 imports. The
major exports at that time were iron ores, petroleum, cotton, and black tea. The trade as
the percentage of GDP was 15.51%. whereas, trade in services as the percentage of
GDP was only 3.34% (CIA world factbook, 2003). Then further progressing towards the
early 2000, many technological advancements were taking place, including the arrival of
internet and many other giant companies. In the terms of trade, the major advancement
that took place was the advancement in the production of shirts that value added of
worth $710,331 in their exports. The other major development in their export sector was
the increase in the percentage of trade in services as the percentage of GDP. It reached
to 7.66%. Similarly, another major jump was the increase in their trade as the
percentage of GDP (country economy, 2019).
But this could be observed that in 2008-09 their exports declined suddenly due to the
financial crisis. The major decrease was in the trade services as the percentage of GDP
which decreased to 13.48%. Observing the graph and comparing that crisis with the
current scenario of COVID-19 crisis it is very much similar that the exports decrease to
19.74% (WITS, 2010).
Indian Export Data
Following is the Indian imports graph of ranging from the year 1990 to 2020. In the
early1990’s the Indian imports were stood at $23,799 million. India was importing goods
from US, Japan, UK and Germany. In the early time the import and export structure
were quite similar, but the imports are always been high. Later in early 2000, the
imports were increased to $52,940 million. The import pattern was brutally disturbed
during the financial crisis of 2008 and it dropped. After the crisis and its recovery Indian
imports reached to maximum peak. But the recent COVID-19 crisis brings back the
imports to the position of financial crisis of 2008. Currently Indian imports as the
percentage of GDP are 18.50% (WITS, 2010).

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Indian Imports Data
Following is the Denmark imports data of past 30 years ranging from 1990 to 2020. In
early 90’s Denmark’s imports stood at $26.4billion. The major imports were petroleum,
chemicals, grain, food, textile and paper. It could be observed that the Denmark’s
economy grown in spurts. The imports of Denmark were about to reach the peak
position in period of 2007-08. But suddenly the imports experience a drop due to the
financial crisis. It could be observed that the current COVID-19 crisis was the recovery
of the imports. The imports reached back to the position where it drops after the
financial crisis and then suddenly COVID-19 crisis hit the imports. Currently Denmark’s
imports fell five percent compared to the previous fiscal year. Currently Denmark’s
imports as the percentage of GDP is 28.10% (WITS, 2010).
Denmark imports Data
Following is the Denmark exports data of last 30 years ranging from 1990 to 2020. The
data shows the similar start like the imports of the economy of Denmark. The trend
shows the upward slopping, which represents the increase in the value of exports.
Denmark’s major exports back in early 90’s were frozen meat, cheese, furniture,

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wooden items, petroleum and oils. It exports $27.7 billion of goods at that time. The
trade balance of Denmark always had been positive. The Considering the current time,
Denmark’s current exports stood at $101 billion which is far less than that of India’s. But
the major comparison is the exports as the percentage of GDP. India’s exports as the
percentage of GDP is 11.68%, whereas, Denmark’s exports as the percentage of GDP
is 31.83% (WITS, 2010). It represents the dependency of the economy on the exports
sector. This could be the major reason behind the fall of GDP of Denmark and the major
shock that Denmark experience due to COVID-19 crisis. It is because the Denmark was
majorly dependent on the exports. Danish Economy is always been prosper in terms of
exports. The major reason is that the Denmark’s exports contains very stable
components, which are always been fruitful for the Denmark’s economy (WITS, 2010).
Denmark Export Data
Basically, International trade had a constructive effect on the growth and the success of
the countries. Especially small and an open country like Denmark, which, get benefits
from trading with other countries. The major reason behind it is that the international
trade provides entree to the bigger markets, which helps in escalating the competition
and it provides chances for specialization in that specific field. It also helps in knowledge
sharing and making the economy more prosper. Moreover, the thing which changed the
pattern of trade in the positive way was the free trade, which may result in welfare
advances through increased purchasing powers. Moreover, Denmark’s terms of trade
had been increased significantly. It helps to increase the consumption of Danish
households. For such a small, and an open economy like a Denmark’s economy, it is
significant that economic policy (EP) provisions free trade via international cooperation
and other corporative facilities (Denmark national bank, 2016).
On the other side, India is also an open economy. It’s trade as a percentage of GDP is
approximately 40%. India’s exports had spread mutually in standings of markets and in
products side too, in the past three decades. Indian exports had progressively created
their way into the new markets. The export side of India has stimulated the value chain,
taking the place with high-value added products including manufacturing equipment,

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automobiles and vehicle parts, and most importantly the refined petroleum goods
(Saraswat, VK, Priya, P, Ghosh, A, 2018).
India’s exports are considerably more receptive to income variations related to the price
variations. So, if a tariff decreases or abolished, it will not lift up exports expressively.
So, before receiving any joint trade deal, India should evaluate its current Free Trade
Agreement (FTA) in terms of benefits to their economy. It is necessary to evaluate
because it helps for the benefit of stakeholders like industry, market, customers, trade
complementarities and understanding the varying trade patterns in the past decades.
So, conveying joint Free Trade Agreements with other countries where trade
complementarities and sideline of preference is considerably up, it could be beneficial
for the Indian economy in the long run.
What theories predict?
According to a theory of international trade i.e. trade theory, it proposes that the trade
liberalization could consequence in the higher comparative increase in the yields to the
most profuse element, which in the India’s situation i.e. unskilled labor. Basically, many
of the studies of current incidents of trade liberalization have suggested that the
unskilled labor was not the comparative winner, even in countries where it was the most
profuse element. A number of new theories have been proposed to solve this enigma,
which includes the suggestion that under the current circumstances, unskilled labor now
can participate in international labor market (Pulaski, S. Kumar, AG. McDonald, Panda,
M. Robinson, S, 2008)
Essentially, the services sector is the major source and the provider of jobs for the
skilled labor. Considering the trade in services as the percentage of GDP in India, it
could be analyzed that the trade in services as the percentage of GDP was 41.87% in
2019, whereas in the case of India it was only 12%. This is the major difference and the
major differentiator between skilled labor and unskilled labor. Because the skilled labor
is able to contribute more in the trade in services.
Another description of the trade theory is comparative advantage. It will help more to
understand the above provided scenario. Comparative advantage is when the economy
is talented enough to yield a product which is comparatively cheap as measured by the
quantity of other goods which are not manufactured locally. Both economies, local and
international, will benefit economically from specializing in production of one that
specific goods. Due to this their productivity comparatively can be increased or reach to
the highest and similarly trade with each other.
This could be analyzed from the theory that the Denmark has the comparative
advantage in the trade services as the percentage of GDP, which also helps in
analyzing the pattern of trade. Another reason is that the Denmark has the higher
standard of living then of India. India has more poverty and income equality which is
making hurdle for prosperity of the economy.
The effects of the pattern of trade on Australia: the case of Denmark and India
India and Denmark

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The relation among India and Demark is have a great significance in the international
politics. The availability of Indian businesses in Denmark, irrespective of their size, are
the good IT companies. Similarly, in the Information and communications technology
(ICT), India is the globally acknowledged and their labor force is considered as very
professional labor force. The industry is still growing upward with the fast growth rate.
There solid linkages with Australia’s Information and Technology (ICT) companies is
also very helpful for the international trade and he politics.
India and Australia
India was the Australia’s 7th biggest mutual trade partner in services back in 2016.
Australia’s mutual trade in services with the economy of India was cherished at $5.2
billion. It also accounted for one fourth of total Australia trade in goods and services with
India. The mutual trade in services has grown up by an average 6.5% annually over the
last decade, Other than that, the average for Australia’s whole services trade with the
world of 4.6% annually. Spike in services had been conquered by the increase in the
travel services, specifically in the exports of education services. India was the
Australia’s 6th biggest services exporter market in 2016. Whereas, Australia’s thirteenth
major cause of services imports (Australian government, 2018)
Australian proficiency is accessible in an extensive choice of segments that can balance
the Indian the wants & necessities of the Indian industry. In this regard, Australia can
also be a very noteworthy country or economy as the value-addition partner for Indian
industries in their development & growth tracks by providing inexpensive and knowledge
results and proficiency equally in outmoded & developing segments for Indian
industries. (Australian High Commission, 2010).
Australia and Denmark
Australia and Denmark share a solid mutual association built on the collaboration on
many problems in international environment, an assurance to universal safety, and the
intra and inter people connections are established between these two countries over the
periods. The Australian Embassy in Copenhagen was again opened in 2000. The
Denmark’s embassy in Canberra, is shut since 2002, and then it again opened in
September 2007. Denmark holds embassies in most cities and in the capital city of
Australia.
Mutual trade between Australia and Denmark in 2008 was stimulated and it work the
value of Australian dollar (AUD) $1.19 billion. Denmark ranked as the Australia’s thirty
seventh biggest trading companion. Australia's goods exports to Denmark destination
was valued at AUD $170 million. Similarly, in 2008, counting alcoholic drinks as the
product and beef too. Products imports from the Denmark was the worth value of AUD
$1.02 billion in 2008. The two major important items were meat, which is disused before
i.e. beef, and other was medicines.
In the more out-of-date segments Australian mauve exports to Denmark remain to
increase and the Denmark is considered as one of Australia's most significant wine

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marketplaces. There are other developing chances for corresponding products Like
gourmet food.
Similarly, Denmark is also one the major and the top ranked artist student recruitment
areas in Europe for Australia. In the year 2007, the Denmark’s Government approved a
new rule which introduce a lot of an international scholarships, which makes it more
economically feasible for Denmark’s students to study in other countries, which will be
beneficial for the Denmark’s people. The rule took, was become completely effected on
1st of July 2008 (Throup, 2009)
Conclusion
This whole research analyzes, that we have discussed the theory and the fundamental
statistics and data for the better understanding of patterns of trade of Denmark and
Indian economies. As theory says that the Denmark has the comparative advantage in
the trade services as the percentage of GDP, which also helps in analyzing the pattern
of trade. Similarly, the trade in services as the percentage of GDP of India is also low
and secondly for this reason Denmark’s standard of living is much better. Another
reason is that the Denmark has the higher standard of living then of India. India has
more poverty and income equality which is making hurdle for prosperity of the economy.
Moreover, these economies have better relations with Australia. For the Australian
economy. As, currently Australian economy is passing through a major shock which
needs to be recovered by the economy as soon as possible. Fortunately, the cash rate
is also decreasing which will be beneficial for the economy to some extent.
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