International Trade and Business Enterprise

This report discusses the impact of trade policy on the automobile and textile industries in Australia, including positive and negative effects.

Running Head: International Trade and Business Enterprise
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International Trade and Business Enterprise
9/20/2018

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Executive Summary
Australian Trade policy is very important to the Australian economy, stimulate the
competitiveness, and continue to improve the wellbeing of Australians by supporting
economic development and innovation in the future. They implement certain agreements that
remove tariff and non-tariff barriers and facilitate stronger connection with industries such as
automobile and textile. The provisions in trade agreements provide a mechanism for foreign
investors to reduce and eliminate trade barriers and enhance the economy. It will bring
certain positive and negative impacts by which these industries are affected. Further points
have been discussed as to how trade policy has affected companies and their positive and
negative effects.

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Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
Trade policy affected industries.................................................................................................3
Positive aspects.......................................................................................................................5
Negative aspects.....................................................................................................................7
Conclusion..................................................................................................................................9

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Introduction
The Australian Government's make the vision for the industry is to maintain a prosperous,
sustainable and innovative trade policy to help customers in trading and manufacturing.
They provide an opportunity to everyone to make the industry grow and sustain in future,
International trade give assistance to the accomplishment of that vision by enhancing
efficiency and international competitiveness, producing a high-skill personnel and
maintaining national prosperity (Thow et al., 2015).
With these goals keep in mind, the Government's trade policy has initiated the declaration
stated as trading our way to give employment and improve success, unconfined by the
Minister for Trade and Competitiveness Dr. Craig Emerson on 12 April 2011. The
Australian Government will continue to follow the market access for Australian exporters
in international markets. The number one priority is to accomplish multilateral trade
consequences through the World Trade Organization (WTO). At the provincial level, the
Australian Management will continue to chase trade liberalization through APEC and other
provincial trade agreements. They will also pursue high quality, wide-ranging bilateral free
trade agreements, where these will assist both Australia and our trading associates and are
helpful to global trade liberalization. Australia's trade policy goal is to promote open
markets, improved trade liberalization, and increased investment. The Government's
objective is to position the economy to be well organized, highly competitive, and
concentrated on capturing opportunities accessible in our region. It began to decrease its tariff
involving in its major protected industries such as automobiles and textiles in the 1980s. The
Australian economy had since gained the rewards of tariff reduction through reduced prices
of imported business inputs, improved sustainability and productivity, and enhanced
international competitiveness. It has a major stake in preserving a strong and open world
trading system. The successful launch of the Doha Development Round was Australia’s top
trade policy initiative (Handley, 2014). In the following report and effort has been made to
discuss the industries affected by it, positive and negative aspects.
Trade policy affected industries
Trade policy is affecting the automobile industry as it gained the massive support from the
Australian government in the form of tariff and non-tariff barriers. The Australian automobile
industry has currently undergone substantial tariff reform (Du, Hu, Song, 2016). It has been

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stated that on 1 January 2005, tariffs on passenger automotive vehicles and modules were
diminished from 15 percent to 10 percent. A tariff reduction to 5 percent will further occur in
2010. After that, the tariff on commercial vehicles will remain consistent at the current level
of 5 percent. The industry takes specific measures to make the broader impact of government
policies, which aim to foster a powerful business. This policy has encouraged the industry to
increase its competitiveness and sustainability and there has been a substantial rationalization
of production in all sectors of the industry. The policy has introduced foreign investment into
the Australian automobile industry. After that, no foreign exchange balance requirements,
equity restrictions, limit associated with foreign investment, profit return, and regional
content provisions. It immediately abolished tariffs on passenger motor vehicles and attempts
to reduce the complexity and level of assistance. The quantitative import constraints and
increased level of subsidies and tariffs were taken place to protect the industry from import
competition (McGillivray, 2018).
The major industry-specific support measure delivered to this industry is the Automotive
Competitiveness and Investment Scheme (ACIS). The main objective of the Australian
government is to improve the credibility and international competitiveness of the industry in
the respect of decreasing tariffs on PMVs and automated components. It is a traditional
assistance scheme, which encourages innovation and new investment through the periodical
issue of import duty to the registered participant and assists in adjusting to the lower tariff
regime (Conlon and Perkins, 2018). Both affordability and availability of vehicles and cost of
capital are critical in developing a healthy demand for vehicles. Australian Government relies
extremely on trade policy, which leads to a large reduction in production and sales of
vehicles. As they have to control the economy through interest rate mechanism. It enhances
greater industrial efficiency, improves the volume of trade, and boost competition.
Productivity is also likely to rise because of the implementation of technical innovations and
the reorganization of existing components of vehicles. Some economies see taxation to be
high within the industry as a means of increasing revenue to meet the needs of the fiscal
requirements. Australian Government should enhance the trade policies, which encourage the
industry to grow (Findlay and Garnaut, 2017).
Trade policy also affecting the textile industry Australia is one of the major economies in the
world, having made much development in withdrawing the preventive trade regime once
considered by significant tariff reduction for textile industries. They have reaped towards
tariff reduction through lower prices of business imports, gained productivity, and enhanced

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international competitiveness (Cox, 2015). The textile industry has received both tariff and
non-tariff barriers. The introduction of these import restrictions has increased the level of the
tariff to protect them from import competition. The move to eliminate tariff and non-tariff
barriers has described a major breakthrough in bringing sustainability and greater
effectiveness. Trade policy has reformed the textile industry by the elimination of quotas and
tariff reductions. It has undergone substantial changes over the past decade; as a result, the
technology became upgraded (Blanchard, Bown and Johnson, 2016). These factors associated
with the progressive reduction of import quotas as decided in the URUGUAY Round
Agreement along with a regular reduction in both the barriers, which enforced rationalization
in the production of textile and apparel. It would maintain substantial opportunities by
opening up of new markets for cotton, wool, and other fibers. It is to be keeping in mind that
overall effect of reducing tariff and other assistance on textile industry would be depending
upon the nature and extent of non-tariff measures such as import licensing and intellectual
property rights. These issues are significant to the Australian government and fiber/wool
manufacturers and importers. Any further trade negotiations under the WTO framework need
to identify these issues (Bown and Crowley, 2016).
Australia’s trade policy tends to concentrate on developing import activities behind high trade
barriers, relatively than on a market-driven approach towards monetary diversification.
Because of liberalization of the economy and increasing international competition, the textile
industry and employment are continued to decline. Imports have increased speedily over
recent years and now have more than 5o percent of the domestic market for textile. Tariffs in
Australia have reduced over a two to three decade. It is lagging behind most of the aspects in
the early stages of this procedure but has now tariff barriers have increased largely which
needs to be reduced. Trade policy also influences the automobile and textile industry
positively and negatively which is discussed further (Fenna, 2016).
Positive aspects
It has created a positive impact on supporting and creating Australian employment in
connection with exporting which helps in lifting the real income of Australian households
and increase the GDP of the economy. The automobile industry exchange and produces extra
gain from international trade over and then associate with comparative advantages
(Sierzchula et al., 2014). It separately reduces its PMV tariff rate. This is because it makes
little sense to encourage funds from a high return industry to low return industries, as this will

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give effect to total output to fall. The net impact of Australian government trade policy is to
deliver benefits to the automobile industry so that it helps the customers and provides support
to them. It helps in imposing a higher rate of PMV tariff in reaction to encourage resources in
producing greater returns (Dechezleprêtre, Neumayer and Perkins, 2015). The removal of
tariffs from an automobile industry helps in encouraging efficiency and this appears to hold
the productivity. It helps in increasing competition for investment within companies as
government support has been increased. As investment is necessary to build a competitive
business environment to give, emphasize on the need for consistent, long-term support, and
commitment for the automotive industry to boost further investment in Australia. Toyota has
been increasing at a rapid pace, lowering down costs and boosting client services. It has
increased the skilled workforce, as now they are more conscious about hiring the highly
skilled managers and experts. This builds long-term sustainability with substantial
competence in management, innovation, and business practice. As Ford, considerably build a
customer base to enhance productivity. It has permitted to access new markets, which
prompted an increase in manufacturing and employment. It nurtures international trade and
aid in an expansion of GDP. For example, Holden, Ford, and Toyota involved in significant
services, which trades through their design capability. With the implementation of trade
policy, it prioritizes the use of provincial agreements that work directly towards providing
equal benefits to customers. They also promoted the use of specific agreements negotiated in
the respect of the tariff regimes. It has adopted better consultation in negotiating trade
agreements. It also enhances the economic growth and removing tariffs and other barriers to
trade would increase the living standard in Australia. It decreases the burden through utilizing
preferential trade agreements and regulatory compliance costs, which helps in maintaining
their development and prosperity of the industry. It also gained unilaterally to reduce the
tariff barriers and associated compliance costs (Weller, Kleer and Piller, 2015).
Australian trade policy has created a positive impact on the textile industry in the form of
privatization and liberalization and specific assistance is provided to enhance the
international competitiveness towards the international market. The major focus is towards a
number of economic indicators including investment expenditure, labour productivity,
research & development, and changes in the quality of output (O’Neill, Sohal and Teng,
2016). This is turning to protect the commitment of the Australian government towards the
progress of trade liberalization in the extent of managing the tariff and non-tariff barriers. It
discloses the critical importance of the step towards free trade in stimulating productivity

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growth in producing trade liberalization activities. Investment expenditure also affects
positively by reducing the cost of funds. However, a tariff barrier to increasing level of
investment expenditure is needed to expand the capital stock, which dominates to gain access
to the domestic capital market. The strong R&D is probably reflecting the trade liberalization
which promoting textile industry and import competition to increase their effort to add value
to products and enhance quality. The trade liberalization streamlines the textile industry
towards higher-value-added products, which has made it easier for firms to specialize in
niche areas. As it is showing that, it is utilizing more high-tech products and capital-intensive
production techniques. It indicates that in order to increase the number of employment, the
industry has to focus on the skilled labour force and free trade to facilitate the expanding
production and enhanced capability to use innovative technology (Lueg, Pedersen and
Clemmensen, 2015).
These policies have been implemented to promote the employment growth and a decrease in
unemployment in the end. They have attempted to contribute to the Australian market
economies on a global scale. The main reason for the deregulation of the economy was the
political instability over the past few years. Australia’s involvement places a major role in
regional trade initiatives and multilateral agreed trade rules and disciplines. It has remained
one of the strongest supports of the multilateral trading system and liberalization activities
(Shafiq, Lasrado and Hafeez, 2017). It has unilaterally liberalized its external trade regime in
the comprehensive tariff reduction programme. Tariff liberalization aims at enhancing the
efficiency of resource apportionment, enabling the company to react more rapidly to
changing market conditions and take benefit of new growth opportunities. It helps the textile
industry to develop the relations with other industries and collaborate to provide customers
with the best products. It explores other remedies, which involves the acceptance of a
common external tariff, burden of import or export charges, and termination of concessional
tariff (Dong et al., 2016).
Negative aspects
With the positive impacts, trade policy also created a negative impact on automobile industry
as by imposing tariff duties on imported cars and their parts will decline the Australian
economy and cause serious damage to the whole industry. Because of the tariff, the industry
has to pay thousands of dollars for new cars and trucks and employees could lose their
employment, which leads to a very serious downturn for the whole industry (Epstein, 2018).
For this industry, zero tariffs would be best possible approaches, which can be, prevail in the

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future. It is also stated that imposing a tariff on automobile parts is also a threat to national
security. In the industry, a 25 percent tariff has been imposed on cars and parts, which in turn
lead to 5 percent, drop in employment as losing more than 600000 jobs. When used
strategically, the tariff can be a very important and useful factor to address unfair trade
practices such as intellectual property theft, regulation of the economy, and manipulation of
the currency. On the other hand, sometimes it is not beneficial to the industry, businesses, and
farmers (Baccini and Dür, 2015). Toyota and Ford have to terminate its automotive
operations as it is dealing with and struggling with inefficient scale and competition from
low-cost operations. It also affects the sales of these cars, export volume has been declined
drastically, and industry has suffered from huge losses. The automobile industry is facing
significant challenges in terms of uncertainty, labour markets, productivity, sustainability,
and sales growth. As it is covering, an entire supply chain as when the industry is not getting
a sale too much high then they need to subsidize sales to offset the tariffs during the near
term, which eventually passes on the higher costs to consumers (Singh et al., 2018).
Therefore, it is disrupting the whole economy, which is inevitable and challenging for the
industry. This disruption is leading to huge commitment of losing a large number of dollars
as it particularly a big problem, which needs to be solved and with this industry cannot be
sustained in terms of long-term perspective. High-tariff barriers should be removed from the
economy particularly in the automobile industry. This will benefit the whole industry and by
producing more and more cars, it will achieve economies of scale and grow internationally.
As they need to focus on boosting the performance of the business and desperately holds, the
market forces to achieve competitive advantage (Fontagné, Fouré and Keck, 2017).
The textile industry has faced with an assortment of trade burdens when imports win over
locally made products. U.S. negotiators stated the point that the Australian textile industry
had endured the most of tariff cuts in the Uruguay Round. In the previous two years, the
Australian textile industry has lost more than 100,000 employments in a determination to
contend with low-cost imports (Caliendo and Parro, 2015). The industry needs to open up
their markets to competition. The loss of local jobs and demand is the cost bear by the
employees and producers. Losses extend from everyone involved in disrupting the trades and
their employees, to those providing local materials and inputs and other services to all. It does
not protect the labours from exploitation while empowering employment opportunities and
wage increments among the labours in the middle class and lower-income sets (McNamara
and Labonté, 2017).

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Australia Government needs to unilaterally lower, and eventually abolished, import tariffs.
This step resulted in a period of advanced development in imports, both in real dollar value
and as an amount of Australia’s overall consumption. This result has been leading to
Australia’s accumulation of a huge foreign debt (McNeill et al., 2018). Textile industry leads
to huge net overseas tariff duty, which accumulated mostly in the previous times to the recent
boom, which is presently around $600 billion. Zero tariff policy provides a greater support to
the economy but on the other hand, it leads to substantial losses to the textile industry. At the
same time, it expresses outrage that textile tariffs in Australia remain greater than that for
other industrial products. It coupled with sharply declining export sales growth and managing
the protection of tariff barriers. Therefore, it has been said that the removal of trade barrier is
significant to the Australian economy, employment, and industry (Autor, Dorn and Hanson,
2015).
Conclusion
Trade policies promote economic growth; enhance Australia real GDP and the real income of
the Australian industry. It has affected the automobile industry positively and negatively in
the respect of productivity, sustainability, and competitiveness. As the implementation of
zero tariff policy creates jobs in connection with exporting and importing. It has increased the
employment under the free trade agreement and eliminated most of the tariffs by the
Australian government. It also strengthens the global trading system and enhances prosperity
as well as boosts growth and stability in Australia. It negotiates a trade mechanism and
equitable distribution of trade gains. It also affects negatively because of imposing tariff duty
as to lose thousands of dollars, which is not beneficial for the automobile industry.
It has also affected the Textile industry in both aspects as trade policies diversify the range of
products and a comparative advantage. Tariff barriers were substantially aimed at securing
the textile industry and employment and handling the difficulties of the balance of payment.
It reasonably maintains the development of trade liberalization and efficient utilization of the
investment and employment in the industry. On the other hand, it affects negatively as this
industry is declining with, more increase in imports and decrease in exports. It has been said
that tariff and non-tariff barriers increase the commitment into the Industries Assistance
Commission to assist the Australian Government to all sectors of the economy. Assistance
measures should be implemented to promote new investments in export-oriented industries
and maintains international competitiveness. The trade policy implementation and undergone

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specific challenges, and barriers affect both the industries, which should be removed. Trade
policy has raised the price of imports, anti-dumping and avail countervailing duties, which
may restrict competition, protect industry, and impose higher costs. It can be stated that the
removal of the tariff would largely influence the economy.

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