Australian Trade Relationships and Import-Export Imbalance

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MAE 213 INTERNATIONAL TRADE
WRITTEN ASSIGNMENT
TRIMESTER 2 2019

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Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................5
Question 3..................................................................................................................................7
Question 4..................................................................................................................................8
Reference..................................................................................................................................11

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Question 1
Australian trade relationships have boosted import more than the exports
Import and export is an important component of the economy and also contributes to the
aggregate demand of the economy. Jointly, the import and export have a huge role to play in
increasing the average income of the country and improving the living standard of the people
of the economy. In the given article, the statement given by Peter Martin is partially justified
as we can see from the trade data with the partners. In order to examine the validity of the
claims made by Peter Martin, we can analyse the trade data with the old trade partners of
Australia.
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
0
500000000
1000000000
1500000000
2000000000
2500000000
3000000000
3500000000
4000000000
4500000000
5000000000
International trade with New Zealand
Export
Import
Years
US Dollars
Figure 1: the import and export between Australia and New Zealand
(Source: Leamer and Stern, 2017)
One of the oldest trade partners of Australia is New Zealand which initiated formally in the
80s. There was no specific formal trade agreement between the two countries and low tariff
levels were used for the free flow of goods and services. The table above furnishes the import
and export data between Australia and New Zeeland between 1981 and 2000. It can be seen
that there was a trade surplus of Australia in 1981 which increased significantly by the year
2000. That means the export increased more than the increase in import. Therefore from the
past case of trade with New Zealand, the statement of Peter Martin cannot be justified. In this

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case, the trade with New Zealand has improved the trade surplus of Australia that in turn has
allowed Australia to increase its per capita wealth during that time.
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
0
5000000000
10000000000
15000000000
20000000000
25000000000
30000000000
35000000000
International Trade with the USA
Export
Import
Years
US Dollars
Figure 2: the import and export between Australia and the USA
(Source: Jones and Kierzkowski, 2018)
On the other hand, another major trade partner of Australia has been the USA. Australia has a
fully-fledged formal trade agreement with the USA that was signed in the year 1990. It is this
time when the scenario had changed from the case of New Zealand where international trade
improves the trade balance of the Australian economy. In this case, as can be seen from the
above diagram, the import has increased more than the export (Chaney, 2018). Therefore, this
case justifies the claims of Peter Martins that most of the trades for which data is available,
the import has been boosted more than the export. The figure also shows that the import of
the goods and services from the USA got affected due to the global financial crisis of the year
2007. Other than that, the trade agreement with the USA has been mainly a path to increase
the import from the USA.