The Economic Impact of Australian Trade Policy: An In-Depth Analysis

This essay examines the impact of Australian trade policy on the country's economy. It begins with an introduction to Australia's role in international trade and the correlation between trade and economic growth. The discussion analyzes the effects of trade policies from theoretical and empirical perspectives, including the impact of liberalization, tariffs, and free trade agreements (FTAs) with various countries like China, Korea, and New Zealand. It explores the historical context of Australian trade, including the evolution of customs unions and the impact of federation on trade flows. The essay also reviews Australia's current trade landscape, including its main exports, imports, and foreign relations. It assesses the effects of FTAs on trade volumes and the domestic economy, concluding with an overview of the benefits and challenges of Australia's trade policies. The essay considers the impacts of trade policy on the country's economic welfare, employment, and the redistribution of resources.

Running head: AUSTRALIAN TRADE POLICY AND ITS IMPACT
Australian Trade Policy and its impact
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1AUSTRALIAN TRADE POLICY AND ITS IMPACT
Introduction
Australia is one of the leading trading organisations in the international market. The
economy of the country is affected on every level by import and export policies of the country.
Some of the empirical study has concluded that there is direct positive correlation between the
economic growth and openness to international trade. The trade policy and growth affects the
competitiveness of the country. Liberalisations of the market and policies of the countries. The
main idea that will be analysed in the text is to check the impact of trade policy of Australia and
its effect on the economy. This essay will mainly deal with the impacts that the Australian trade
policies have on the trade and commerce of Australia. It will mainly be aimed at seeing the
different factors like the population, age, consumption patterns, exports, imports and several
other such factors that influences the formulation of the trade policies.
Discussion
From the theoretical point of view, the impact of policies has affected in the long terms.
The theoretical concepts are based on time factors. The trade and growth theories are
complement to each other. The traditional trade theory does not support the liberalisation
concept. Therefore, it does not support the import policies and it might restrict trade in certain
trade favourable country. It promotes the internal consumption of the indigenous products.
Dynamic trade theory considers the neo classical theories. It draws more attention to indirect
gains of the country in the medium as well as in the long term. The new trade theory takes into
consideration of the position of imperfect conditions and economies of scales as an advantage
(Vernimmen et al. 2018). It also argues that the externalities restrictions to trade might be in the
advantage of the domestic companies in Australia. In the international arena, it can be used to

2AUSTRALIAN TRADE POLICY AND ITS IMPACT
increase market power. It also considers the accumulation of human capital and improvement of
skills, enhancements in the knowledge and production. Though innovators in the economy have
less impact in the prices, they have spill overs in the economy as well as positive externalities.
The impact of trade policy according to growth theories, which is related to neoclassical
theory, is actually based on closed economy. The upgrade version of this theory is based applied
in open economies. It considers that the growth approach by increase in saving after trade
liberalisations translates to growth in investments (Iamsiraroj and Ulubaşoğlu, 2015). Because of
capital market imperfections and expropriation, it becomes bias of the home country. The
endogenous growth theory considers the liberalisation in the country and of the trade policies. It
considers that liberalisation policies have more impact on the technical progress and fuels to the
transfer of foreign direct investments. Trade liberalisation positively influences savings and
externalities in the closed economies and help strengthen in becoming the closed economies.
Trade happens to affect the per capita income and affects the long run growth in the economy as
well as the underlying parameters (Vernimmen et al. 2018). The actual underlying factors of the
transition state in the company is mostly boosts the endogenous growth. According to the cross-
country studies of trade policies World Bank refers to the social indicators of the country. The
indicators for openness measures the shares based on trade shares and price based administrative
measures. The determinants and savings, capital accumulation, TFP growth are factors
influenced by trade liberalisation (Helpman et al. 2017).
Australian colonies joined in a political federations and taxes and duties in the trade had
been abolished since 1901. The economic history of Australian trade policy changes was an
important role. The custom unions have been very important part of the trade. The reduction in
tariff and its affects in the welfare of the trade between the countries have major effects in the

3AUSTRALIAN TRADE POLICY AND ITS IMPACT
economic welfare. Changes in the “border effect” period in Australia as well as the international
and intra-national effects continued to contribute to the country’s welfare before, the federation
(Helpman et al. 2017). The country’s internal and external trade flows changed in the political
and economic union.
The first period in the evolution in the Australian country was when the customs union
was formed by Australian Colonies Government act by British Parliament. The tariffs were set
by the Australian themselves but the British influenced the non-discriminatory and uniformity
among the all trading collaborates of the colonies. As a result of this conflicts arose between the
intra-Australian trade. The conflicts between the New South Wales and Victoria over custom
duties became a problem for the inter country free flow of trade. This also became the foundation
of move towards federation in 1890s and formation of commonwealth was the country’s
participation towards commonwealth. New Zealand became a separate country and six states of
Australia were united under the federal constitution in 1901 (Sena 2016). The six different states
lost control over the tariff autonomy. The free flow of trade and duties were integrated and flow
capital, labour, language and services became essential for the economy. New South Wales
maintained its free trade policy. This state imposed no tariffs on imported manufactured goods
and average tariff on dutiable goods and the revenue of the country grew as they imposed
specific duties in intoxicants and narcotics, ale and beer, tobacco, opium, spirits and wine. These
products also had domestic taxes. Victoria and Tasmania let enter very few goods out of tariff,
whereas Western Australia had tariff rates somewhere between New South Wales and Victoria.
Australia’s imports were mostly on textiles from overseas, manufactured goods from England
and interstate trade consisted of metals, foods, drinks as well as the agricultural products.

4AUSTRALIAN TRADE POLICY AND ITS IMPACT
The impact of federation was different in different Australian state based upon the initial
tariff level and percentage of Tax levied on the products. The Lynn Tariff rates increased the
amount of tariff and duties in the country. Trade protection was also adopted in those years.
Average Australian tariff on manufactured goods were between 6% to 16% in 1900’s
(Bruneidarussalam.embassy.gov.au 2018). After becoming an active member of Commonwealth
and United Nations in the country, their contribution to multilateralism, bilateral relations and
regionalism is backed by strong trade policies. It majorly imports weapons and became the sixth
largest importer in the country.
This continent takes active part in UN council initiatives and supports peacekeeping,
negotiation, narcotics control and disarmaments. They also keep a well-equipped army and US
supplies 68% of its equipments and 19% from Spain. This contribution puts the countries in a
safer position in the international context as well as the safety contributes to the internal growth
of the economy. The foreign relations of the country are significantly growing with unilateral,
bilateral and multilateral agreements. The collaboration reduces the chances of elimination risks
of the global economy. It also plays an active role in the WTO, G20 and APEC. Their focus is in
the bilateral trade relations to invest more on the country. The investment flows are also focus of
the Australian federation government. As a major rich fresh produce exporter in the international
trade the country is known as to feed more than 60 million people around the globe in a year.
More than 51000 business exports goods and services around the world. GDP growth of
Australia is 3.1 % and actual Growth Domestic Products is 1359.7 billion Australian Dollar. The
inflation rate is near 2.0% as of 2016. Unemployment rate in the country is 5.2 %
(Bruneidarussalam.embassy.gov.au 2018).

5AUSTRALIAN TRADE POLICY AND ITS IMPACT
Australia’s main exports come from mainly China, Korea, United States, Japan and India,
Thailand, Germany. The exports in services cost around 71,248 million Australian dollars. The
imports of services nearly about 75,511 Australian dollars, which contributes to the 38% of the
GDP. Australia’s investments abroad amount to 2,170,810 AUD and level of foreign investments
in Australia amounts to 3,192,422 AUD in 2016(Bruneidarussalam.embassy.gov.au 2018). These
amounts reflect a healthy relationship between the Continent as well as the countries they are in
relationship with. The most of the five imports are personal travel services, passengers vehicle
and refined petroleum and telecom equipments and parts. Australia has Free Trade Agreements
with neighbouring country New Zealand. The two neighbouring islands are very close in
personal and trade relationship. Free trade agreements(FTA) with China, Korea, Chille, New
Zealand and other countries.
The impact of Free Trade Agreements in the country influences are mostly based on the
size of the barriers. The removal of barriers leads to decrease in the price paid for the importers
and increase in the price that are received in the exporters end. Therefore, it can be said that this
step increases the demand of those products, which have lesser tariff rates. The Korea-US
(KORUS) has a very negative impact of the agreements. The Korea US FTA led to lesser
imports of Australian products, as they were expensive compared with USA’s. The agricultural
food products were major part of the US exports. EU-Korea FTA has smaller effect in the
Australian food industry. The dairy products sale declined because of this Agreement marginally
(Gandolfo, 2014).
The free trade agreements between Australia and New Zealand, Japan and Korea’s
outcome were very important to be noted. The China mainly contributed to wool export and
wearing apparel in the country. Japan mainly contributed to the mining and related

6AUSTRALIAN TRADE POLICY AND ITS IMPACT
manufacturing exports in Australia. Japan also doubled its exports from Australia after the FTA
agreements in Beef, rice or wheat. The significance reduction in the Australian dairy products in
Korea was around 40% as result Australian exports to Korea increased 270 %. Bovine meat
products exports of Australia to Korea have increased in volume after the agreement was
signed(Bruneidarussalam.embassy.gov.au 2018). The only barrier in the export of the Australian
country to Asian countries are in the products where Asians are stronger in the production like
Rice, wheat, Chemicals, Rubber plastics and textiles sector. Though the GDP has declined, the
percentage of exports has increased in the recent years. The
Figure: Destination of Australian Exports
Source: Gandolfo 2014
Australia has been a major part of the general shift of bilateral trade agreements, these
agreements were with the major trading partners of the country. The country did not secure any
agreements and wit the competitor’s economy has. Therefore, there is a high chance that the
competitors may surpass this economy in competition. The main criteria for Australia remained

7AUSTRALIAN TRADE POLICY AND ITS IMPACT
were to join hands with the competitor’s country in the bilateral free trade agreements. The trade
agreements between the United States, Korea, China, Chilli. The potential benefits of these
agreements were to change the existing agreements where Australia and rip the benefits from the
newer agreements. The size of the barriers isbeing a very important factor for the changes to
occur. The removal of tariff barriers impacted the price paid by the importers and increase or
decrease in the price paid by the exporters. Reduction in tariffs is led to large amount of volume
in sales and import. Though the increase in import affected the foreign reserve, the domestic
production of the companies in Australia affected the internal growth and employment reduced
significantly. The product line is excluded in the agreement. The first round affected the report in
the production. Importance of the partners was a really significant move towards the change in
the relationship of Australia to improve upon. FTA partners affected the change in degree of
exports in Australia. If the share of the trade is low, it will lead to larger tariff reduction in the
initial stage.
The redistribution of resources of the company is one of the main factors that are notable
in an economy. The mix up of the resources from US, Africa, China and Western Asian country
enhanced the availability of the continent. Therefore, it affected the demand growth of the county
and the production increased. But some of the products declined in the production which has less
significance in the export.
Trade liberalisation affects the GDP of the country. There has been significant
increase in the GDP. As the study conducted in the Australian economy, it indicated 2.5 – 3.5 %
increase in the GDP and thus it affected the production in the period over 20 years. The gross
national income. The real GDP is 5.4% in Australia. (Bruneidarussalam.embassy.gov.au 2018)

8AUSTRALIAN TRADE POLICY AND ITS IMPACT
Figure: Australian trade Percentage of GDP in Exports
Source:TheCIE.com.au 2017
The Australian trade of the company is one of the most important essential factors in the
trade communalism. Approximately $2700 per annum is the real average income of the company
(Gandolfo, 2014). The manufacturing sector is one who is more resilient to the export business
after trade liberalisation.
Trade is also important in the Australian labour market. One of the five Australian
workers is export focused or indirectly related with the export industry. The workers in the
Export-oriented and industries like agriculture, energy and mineral. The household income has
increased due to economic labour enhancement in Export business.
The labour market improvement has decreased as the increased tariffs. The trade
liberalisation has also affected the loss some of the local jobs as well as the sovereignty of the
country. The tariff on manufactured imports were raised that the 10% increase in the products. If
all the imports in merchandise category increases by 10 percent, Australia’s GDP would lower
itself by 2.2 %v (Bruneidarussalam.embassy.gov.au 2018). The short term impacts on tariff in

9AUSTRALIAN TRADE POLICY AND ITS IMPACT
Australian labour would be lower. Moreover, the household consumption of the company in the
Australian countries and their living standards would reach its heights. The effect of raising tariff
and liberalising global merchandise trade affected the labour market lowering the number of
workers and cutting households workers. The real wages decreased. The GDP in Australia
ishigher by 0.6%, when it is 1.1% higher globally (Sena 2016).
Figure: the trend in the falling Australian tariff rates in Merchandise exports and Imports
Source: TheCIE.com.au 2017
The merchandise in the exports and imports and the situation of decline is coincidence
with increase in exports. In the global crisis in the year 2008-2009, trade in the Australia has
shown significant increase (Gandolfo 2014). This can be said to be a drawback of being a part of
liberalisation of trade. In the global crisis, as related with the whole economy Australian industry
was also affected. The trade declined over that period. Volatility is present in the agricultural and

10AUSTRALIAN TRADE POLICY AND ITS IMPACT
mineral markets.
Figure: Increase in trade integration with the world statistics liberalisation.
Source:TheCIE.com.au, 2017
Increased in the trade volumes is a contributing factor in the exports and imports. Total trade was
useful and increased from 17.6% to 23.5% (Bruneidarussalam.embassy.gov.au 2018).

11AUSTRALIAN TRADE POLICY AND ITS IMPACT
Figure: Australia’s import rated tariff rates
Source:TheCIE.com.au 2017
The estimated import weighted tariff rate in Australia.The tariff cut in the liberalisation
efforts has unilateral efforts in the whole economy. Tariff reform affects the microeconomic
factor in the economy. It also affects the business environment in the company. Improvement in
the dynamic nature of productivity affects the tariff rates (Gandolfo 2014). It affects the labour
market and this is one of the most affected sectors because of import. Unemployment effects
have a great reduction, through a more competitive labour market (Whalley 2012). A
competitive labour market is a solution to the talent acquisition without being searching for it.
There is also reduction in the tariff related administrative cost and managing to avoid
administrative cost.