Australia's Agricultural Sector: Winner in China-US Trade Battle

The report analyses the recent dynamics in the export market activities of the agricultural sector of Australia and recommends solutions for concerning issues under the light of the conceptual framework of economics.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Essence of the article considered...............................................................................................2
Economic Interpretation.............................................................................................................3
Recommendation and Conclusion..............................................................................................6
References..................................................................................................................................7

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Introduction
Over the years, the economies across the world has experienced considerable
dynamics in their growth patterns, much of which can be attributed to the changes and
modifications which have been occurring, both exogenously as well as endogenously within
the economies of the countries (Argy, 2013). The economy of any country and its growth and
prosperity is determined by the performances of the different sectors of the economy, mainly
the agricultural, industrial, manufacturing, service as well as foreign export and import sector,
which have considerable impacts on the macroeconomic factors like the GDP growth, level
of employment, aggregate demand and supply as well as the overall economic welfare of the
residents of the country. However, apart from these, the economy of any country is also
subjected to its international trade relations and the advantages and economic benefits
accrued from the same (Gandolfo, 2013).
Keeping this into consideration, the report tries to analyse the recent dynamics in the
export market activities of the agricultural sector of one of the most dominant contemporary
global economies, Australia and also tries to observe the growth in the same taking reference
to the news article, “Australia could be a winner in China-US trade battle”, thereby
interpreting the dynamics and recommending solutions for concerning issues under the light
of the conceptual framework of economics (NewsComAu, 2018).
Essence of the article considered
As per the assertions of the concerned article, the recent hostile trade relations and the
tariff wars which have emerged between the two globally dominant economies, the USA and
the China, is expected to benefit the economy of Australia, especially its agricultural sector to
a considerable extent. The argument put forward by the article in favour of such expectation
is that due to the previous action of the USA of imposing high import tariff on the

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technological goods of China, the latter has retaliated by announcing an import tariff of as
high as 25% on 128 American agricultural products. This can visibly reduce the imports of
American agricultural commodities in China, which thereby makes it making it even easier
for the agricultural sector of Australia to export its products, especially wine and nuts and
fruits to China, thereby capturing a bigger market share of the country in near future.
The article also highlights the fact that within a couple of years, with the decrease in
import of US wine in China, the share of Australian wine imported increased by nearly 63%
to 848 million dollars, along with the success of the fruit sector of the country as well, whose
40% of total export was to China alone (Daniels, 2018). The export of tree nuts of Australia
is also seen to be increasing to China at an impressive rate (from 6 million dollars in 2011 to
a valuation of nearly 63 million dollars in 2016).
Thus, from the above assertions of the concerned article it can be seen that in the
recent period, mostly due to the change in the global politics which have implications on the
international trade dynamics between the major global economies, the export of the
agricultural products of Australia is increasing considerably, much of which is being
channelled to China (Anderson & Nelgen, 2012). This in turn indicates towards the
possibility of Australia capturing a huge share of the large market of China, thereby
indicating towards the potential prospects of development of the agricultural sector of
Australia.
Economic Interpretation
The economic growth a country is dependent on the growth in the Gross Domestic
product of the same, which in turn increases with the increase in the consumption,
investment, expenditure on part of the government as well as with the increase in the exports
of the commodities and services produced in the country (Mankiw, 2014). keeping this into

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account, the export of the agricultural sector of Australia is seen to be increasing over the
years, especially in terms of exports of fruits and vegetables, the trend of which can be seen
as follows:
Figure 1: Export of fruits and vegetables from Australia over the years
(Source: Tradingeconomics.com, 2018)
It is evident from the above sector, that the exports of the agricultural commodities
produced in Australia, especially fruits and vegetables has been showing a positive trend over
the years, barring a few fluctuations. The trend showed consistent increase till 2016, followed
by a considerable dip. However, in the recent years the dip is seen to be overcome with an
even higher trend in the exports of the same.
The wine sector of the country is seen to be especially benefited as with time the
export of wine from Australia to almost all its trading partner countries and especially China,
has increased considerably:

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Figure 2: Export value of wine from Australia to China
(Source: Wineaustralia.com, 2018)
The same is expected to increase even more with time, given the tariff wars between
the USA and China, as shown in the concerned article, which increases the possibility of
Australia being the biggest exported of agricultural products in China, manifold.
This in turn is not only expected to benefit the producers of the concerned agricultural
products in Australia but also is expected to increase the productivity as well as prosperity of
the agricultural sector of the country as whole, contributing to an increase in its share of GDP
in the country, which is already observed to be showing a positive trend:

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Figure 3: Share of Agricultural Sector in GDP of Australia
(Source: Tradingeconomics.com, 2018)
Thus, the current trade scenario of China and Australia and the potential increase in
the agricultural exports of the latter to the former is expected to benefit the already growing
agricultural sector and its export performance considerably (Mankiw, 2014).
Recommendation and Conclusion
The expected expansion and prosperity of the agricultural sector of Australia and its
performance in export market of the country is subjected to the provision of proper
infrastructure and support to the farmers of the country on part of the government of
Australia. Given the fact that that there exists considerable volatility both in the agricultural
productivity as well as in the global import export market for agricultural products, the
farmers of the country need to be provided with sufficient monetary as well as non-monetary
assistance and financial risk-proofing assurance by the government. This, if done
appropriately, can take the agricultural sector of the country and its export scenario on the
path of a long term growth and sustained development in future.

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References
Anderson, K., & Nelgen, S. (2012). Trade barrier volatility and agricultural price
stabilization. World Development, 40(1), 36-48.
Argy, V. (2013). International macroeconomics: theory and policy. Routledge.
Daniels, J. (2018). China tariffs could help Australia gain share from US wine, nut and fruit
producers. CNBC. Retrieved 12 April 2018, from
https://www.cnbc.com/2018/04/02/china-tariff-hit-for-us-agriculture-could-be-big-
gain-for-australia.html
Gandolfo, G. (2013). International Economics II: International Monetary Theory and Open-
Economy Macroeconomics. Springer Science & Business Media.
Mankiw, N. G. (2014). Principles of macroeconomics. Cengage Learning.
NewsComAu. (2018). Australia could benefit from China-US trade war. NewsComAu.
Retrieved 12 April 2018, from http://www.news.com.au/finance/economy/world-
economy/australia-could-be-a-winner-in-chinaus-trade-battle/news-story/
86b8909a7e1fb86fb2ddc54d85b06532
Tradingeconomics.com. (2018). Australia Exports of Vegetables and Fruit | 1988-2018 |
Data | Chart. Tradingeconomics.com. Retrieved 12 April 2018, from
https://tradingeconomics.com/australia/exports-of-vegetables-and-fruit
Tradingeconomics.com. (2018). Australia GDP From Agriculture | 1974-2018 | Data | Chart
| Calendar. Tradingeconomics.com. Retrieved 12 April 2018, from
https://tradingeconomics.com/australia/gdp-from-agriculture

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Wineaustralia.com. (2018). FTAs continue building opportunities for Australian
wine. Wineaustralia.com. Retrieved 12 April 2018, from
https://www.wineaustralia.com/news/market-bulletin/issue-45