International Trade and Finance

This document discusses the impact of international trade and finance on the agro-based products in China and Australia. It explores the effects of the China-Australia Free Trade Agreement on tariff reduction and its implications for consumers, producers, and the government. The document also examines the trade-offs faced by China, the importance of brand loyalty, the development of temporary entry, and the relationship between coal exports and agro-based product output.

Running head: International trade and finance
INTERNATIONAL TRADE AND FINANCE
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International trade and finance
Table of Contents
Question 1:.......................................................................................................................................2
Question 2:.......................................................................................................................................3
Question 3).......................................................................................................................................4
Question 4).......................................................................................................................................5
Question 5).......................................................................................................................................6
Question 6).......................................................................................................................................7
Reference list...................................................................................................................................8

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International trade and finance
Question 1:
In modern time, the demands of agro-based products in china have increased gradually.
The huge increase in the demand is one of the key factors that have led to the improvement in the
export scenario of Australia regarding the agro-based products. Among the agro-based sections
of Australian economy, the demand is mainly high for live cattle stock and beef meat. Currently
the tariff rate of beef import to china is around 12-25% and economists have claimed the fact that
in the upcoming years, the tariff is going to vanish totally (Deloitte Australia, 2019). The terms
of trade in both the countries are highly elastic in nature. Slight increase in the price of cattle in
China will dismantle the production of fresh breed within Australia. The volume of the cattle
production increases by 2.2% or more approximately, the number of cattle production will
definitely increase by 280,000 head approximately (Deloitte Australia, 2019). When the price
increased by slight margin in recent period, the volume of processed meat has increased by 3%
or approximately about additional 60,000 tones (Deloitte Australia, 2019).
Now in terms of international trade, big countries are considered the one that can have an
impact on the world terms of trade through changing their price level. Now according to the
given article China is considered as the large economy as the little shift in the price level of
China import of Australian beef is increasing the quantity produced within Australia (Deloitte
Australia, 2019).

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International trade and finance
Question 2:
China-Australia Free Trade Agreement (ChAFTA) has reduced the amount of tariff on
beef imports into china from Australia.
Figure 1: Effect of tariff reduction by (ChAFTA)
(Source: Created by Author)
a) The reduction of tariff by ChAFTA is going to have deep impact on the on Chinese
consumers, as they will be able to get more of fresh meats and live cattle. This is because with
the reduction in tariff rate will reduce the prevailing price of beef and processed meats in China
that will release some of the burden from the consumers in the form of deadweight loss. Price of
the imported commodities decreases for the domestic country and in turn, the consumer surplus
will increase, as the customers are always willing to pay less to get a particular quantity of
benefits and in reality, they are paying less.
b) The effect of tariff reduction will not be same in case of the producers of Australia. Since
the tariff is being reduced then the export country will have to pay less for the exports that in turn
will increase the foreign exchange reserves of the exporting countries. The will have spend less

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International trade and finance
of their domestic currency in exchanging with the foreign currencies. Through this kind of
policy, the trade among these countries will definitely improve and in turn will definitely
improve the terms of trade between these two countries. The producer supply is going to increase
in the sense that reduction in tariff will decrease the cost of operation.
c) The impact of the tariff reduction will be harsh on the revenue of the government of
China. The government of the china will be receiving less amount of money from importers. The
Chinese economy will be having less revenue.
Question 3)
The trade off that the China is going to face in the sense that if they reduce the tariff rate
of beef and cow products is that the government of China is going to face is the growth of
revenue. This is important in the sense that it will be highly important in the sense that China is
not going to get the desired level of income from the export countries. Previously it would have
gained the desired level of the revenue from countries doing exports
Figure 2: Chinese government faces tradeoff
(Source: Created by Author)

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International trade and finance
This is important in the sense that through the reduction in the tariff rate, the income
generation is going to decrease that will not only allow the incorporation of better business.
Through the reduction in tariff, the income generation technologies and ways of investment will
be hampered. Since tariff is one of the biggest source of revenue generation from international
trade but reduction of tariff is acting as way for having increased level of future aspects
(Mla.com.au, 2018). This is true in the sense that through the improvement in the transaction
both the countries will be able to indulge the development of international transactions that will
be helping in the improvement in the economy overall.
Question 4)
In order to increase the brand loyalty, regarding the establishment of high quality beef
meat will automatically improve the consumption of the meat products. Through the
development of brand loyalty, the economy will automatically consume more of the high quality
beef meat. Now in order to indulge the resource development within the economies through the
trade and commerce will automatically increase the improvement in the development in resource
capitalization. Now if the Australian meat can improve the brand loyalty within Chinese
economy then the demand of that particular brand will increase and will shift rightwards. The
supply will also increase and that will be immediate consequence of increase in demand. It is
important for the Australia to maintain the brand in order to minimize the probability of
increased level of competitor’s entry to the market.

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International trade and finance
Figure 3: Effect of brand loyalty on demand
(Source: created by Author)
Due to increased level of brand loyalty, the demand in the economy will increase, as the
consumers will be willing to purchase more. However, with increased level of brand loyalty the
improvement in the resource policies and trade off will be crucial for determining the overall
gains from trade. Now after the increased brand loyalty, the re imposition of tariff is going to
increase the price of the products and will upset the valuation of the products.
Question 5)
In order to indulge the development of temporary entry because of the fact that in order to
implement terms of trade will automatically increase the information in the sense that it will
increase the resource distribution. Throughout the resource, utilization and setting up the trade
entry barriers will obviously allow the incorporation of competition. Trade barriers in the form of
labor market testing, testing of economic zones will obviously not help the country in doing
trade. Allowing these kinds of thing will open up the internal economy, will expose the
comparative advantage, and will create problems in the sense that their production factor will be

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International trade and finance
exposed. Most of the countries doing trade is going to allow the companies to indulge the
development of environment that is not going to get full benefits.
Question 6)
Now with the increase in the export from the coal industry will hamper the agro based
product output and this is true in the sense that the price in the economy is going to increase. As
the export of coal will be having an effect on the exchange rate as the export will definitely allow
the economy to improve the decision-making systems in the form of better involvement. On the
contrary, the increased in the export of coal is directly related with export of gold and energy into
other economy. This is important in the sense that coal industry will definitely attract many other
industries into that economy. Through the indulgement in the improvement of terms and trade
will definitely increase the resource development and creation of manufacturing unit will hamper
the output of agro-based products.

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International trade and finance
Reference list
Deloitte Australia. (2019). Impact of the China-Australia Free Trade Agreement on Australian
agribusiness | Deloitte Australia | Consumer Business, Agribusiness. [online] Available at:
https://www2.deloitte.com/au/en/pages/consumer-business/articles/impact-china-australia-free-
trade-agreement.html# [Accessed 30 Apr. 2019].
Mla.com.au. (2018). Beef trade expansion not immune to risk | Meat & Livestock Australia .
[online] Available at: https://www.mla.com.au/prices-markets/market-news/beef-trade-
expansion-not-immune-to-risk/ [Accessed 30 Apr. 2019].