Modern Methods of International Trade Analysis

This presentation provides an overview of modern methods of international trade analysis. It covers theories of international trade, GDP calculations, trade forecasts, Australia's trade, and factors influencing Australia's trade. The presentation aims to enhance understanding of the subject and its relevance in the global market.

Modern methods
of international
trade analysis

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International Trade
Analysis
• International Trade is referred as the exchange of
goods and services between one and more countries
(Feenstra, 2015)
• Allows the trade to flow in and expand the market for
products and services
• Provides opportunities to consumers and countries
to avail the products and services not available in
their home country
• Export and import the two concepts of International
trade
• Improves the potential of a country to produce and
acquire goods

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Theories of
International Trade
There are many theories starting from the Classical theories to Modern
theories to explain about the International trade (Gilpin, 2016).
Traditional
Country-based
theories
• Comparative Advantage
• Mercantilism
• Heckscher-Ohlin
• Absolute Advantage
Modern Firm-based
theories
• Product Life Cycle
• Country Similarity
• Global strategic Rivalry
• Porter’s National
Competitive Advantage

4
GDP- Gross
Domestic
Product
• Gross Domestic Product is the overall economic activity
of a country (Scholl & Schermuly, 2018)
• It derives the value of finished products and services in
terms of it monetary value produced by a country within
a specific time period
• GDP is calculated both quarterly and annually basis
(Coyle, 2015)
• Can be calculated in terms of expenditures, incomes
and production by a country
• Helps policy makers and businesses to make decisions
strategically
• Helps businesses to analyze the market changes

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GDP-
Calculations
• The value of finished produced products and services are calculated
by-
• GDP= Private Consumption + Gross Investment + Government
Investment + Government Spending + (exports – imports) (Lepenies,
2016).

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Forecast of trade
in goods and
services• The projected value of trade value of resources and services between two
countries
• The projections depend on the economic conditions of the countries along
with the world economy
• Net trade, exports and imports are the key indicators of market growth
Source: (OECD Data, 2019)

7
Australia’s
Trade
• Australia is known for its free trade
and depends on the exports made
by the country
• The Free Trade Policy of Australia
supports its international trade
negotiations
• The Australian export highlights a
positive change in the recent
years
• Australia competes with Asian
countries in terms of its exports
and forecasts a potential growth
from the exporting into the PAN
Asian markets
• The expansion of Australian
market is dependent upon its free
trade.
Source: (Workman, 2019)

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Australia’s
Exports
• The total exports of Australia accounted to 21.5% including the
exported goods and services of the total GDP
• The total exports amounted to $253.8 billion in 2018 (Workman,
2019)
• Mineral fuels, Meat, gem, precious metals, machinery, inorganic
chemicals, cereals, aluminum, electrical equipment and medical
apparatus contributes to the top 10 exports of Australia which
accounts to 79.5% of the overall global shipments value of
Australia
• Inorganic chemicals account to the highest exported product
followed by Mineral fuels and aluminum (Pines, 2019)
• International deficits are cars and automobile accessories

Top export markets
of Australia
9
Source: (Australian Government, 2019)

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Australia’
imports
• In the 2017-18, the imports of Australia rose 9% to $403.2 billion
• Australia’s imports comprise of Capital goods, Intermediate & other
goods, and consumption goods
• The import value of capital goods increased to 10.6%
• The import value of intermediate & other goods rose to 6.2%
• The import value of consumption goods increased to 5.6%
• The import prices also rose to 1.8% in 2017-18

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Australia’s
composition of
trade
• In 2017-18, Iron Ore, Natural gas, travel services involving
education and personal travel constituted to highest number of
exports
• The combined efforts of both exports and imports contributed
hugely to the GDP
• Australia has a highly competitive financial system making its
exports and import conduct smoothly

Balance of
Trade
• Balance of Trade refers to the monetary value of the imports and
exports of a country calculated within a specifies time period
(Dogru, Isik & Sirakaya-Turk, 2019).
• Balance of Trade helps in measuring a country’s economic
strength
• Balance of Trades can be calculated by deducting the total
exports of a country from the total imports
• Higher import and less export indicate a trade deficit
• Higher export and less import indicate a trade surplus
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Trade in goods and
services relative to its
GDP (Australia)
Source: (Kennedy, 2016)
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Trade in goods and
services relative to its
GDP (Australia)
• There was a rise in
Australia’s trade in goods
from approximately 19%
to 31% of GDP
• The services however
increased from 5% to 9%
of GDP
• The shares of goods and
services have
considerably fallen since
GFC
Source: (Kennedy, 2016)
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Balance of Trade of
Australia
• Australia’s Balance of Trade is forecasted to rise by 3100 AUD Million by the end
of 2019’s quarter.
• Currently the Balance of Trade stands at 1600 in 12 months time
• By the year 2020, the Balance of Trade of Australia is expected to be at -500 AUD
Million
Source: (Kennedy, 2016)
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Current Account
in Trade
• Current account is the sum of balance of trade, net income
factors and net transfer payments (McCombie & Thirlwall,
2016).
• The value of current account is calculated by exports minus
the income of goods and services
• The current account of Australia is estimated quarterly
• The current account transactions are generally non-reversible
in nature
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Australia’s Current
Account
• Australia’s current account is shows a deficit balance which is the smallest
account deficit since 2017’s first quarter.
• The deficits are at AUD 7.203 billion in the fourth quarter of 2018 which is lesser
than the previous quarter
• The record low was projected in the year 2015 with a low of -22471 AUD Million
(Trading Economic, 2019)
Source: (Trading Economic, 2019)
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Positive factors
influencing Australia’s
Trade
• Australia is one the most favorable locations for foreign direct
investment
• The Australian economy has been changing in the recent years
indicating that it has been restructured and much of importance
was given to service exports
• Emphasis has been given to organic food products which has
contribute positively to the Australian economy
• The service sector has also improved with areas requiring
technology
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Negative factors
influencing Australia’s
Trade
• Capital flows and trade is slow
• The theory of Global Protectionism has been relatively high even
after the rapid increase in the Bilateral Trade Agreements
• Sustainability is lacking in the policies adopted by the financial
institutions
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References
Australian Government. (2019). Australia's Trade in Goods and Services (a)(b). Retrieved from https://
dfat.gov.au/trade/resources/trade-statistics/trade-in-goods-and-services/Documents/australias-goods-services-by-top-1
5-partners-2017-18.pdf
Coyle, D. (2015). GDP: A Brief but Affectionate History-Revised and expanded Edition. 2nd ed. New Jersey, USA: Princeton
University Press.
Dogru, T., Isik, C., & Sirakaya-Turk, E. (2019). The balance of trade and exchange rates: Theory and contemporary evidence
from tourism. Tourism Management, 74, 12-23.
Feenstra, R. C. (2015). Advanced international trade: theory and evidence. 4th ed. New Jersey, USA: Princeton university
press.
Gilpin, R. (2016). The political economy of international relations. 5th ed. New Jersey, USA: Princeton university press.
Kennedy, P. (2016). The Balance of Payments and Australia’s Trade and Financial Flows. Retrieved from
https://business.uow.edu.au/content/groups/public/@web/@bus/documents/doc/uow237859.pdf
Lepenies, P. (2016). The power of a single number: a political history of GDP. 3rd ed. New York, USA: Columbia University
Press.
McCombie, J., & Thirlwall, A. P. (2016). Economic growth and the balance-of-payments constraint. 3rd ed. Berlin, Germany:
Springer.
OECD Data, (2019). Trade in goods and services forecast. Retrieved from
https://data.oecd.org/trade/trade-in-goods-and-services-forecast.
Pines, L. (2019). Australia’s Top Commodity Imports & Exports. Retrieved from https://commodity.com/australia/
Scholl, W., & Schermuly, C. C. (2018). The Impact of Culture on Corruption, Gross Domestic Product, and Human
Development. Journal of Business Ethics, 1-19.
Trading Economic. (2019). Australia Current Account. Retrieved from https://tradingeconomics.com/australia/current-account
Workman, D. (2019). Australia’s Top 10 Exports. Retrieved from http://www.worldstopexports.com/australias-top-10-exports/
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