Introduction
Define foreign trade as the flow of goods and services. Define globalisation – increasing international economic convergence of countries into a single business cycle. Explain that globalisation has influenced a change in composition and direction of Australian trade flows.
Structural change
• Paragraph 1
Explain the reduction in protectionist policies over time (22% effective rate of protection for manufacturing in 1983→currently around than 4%). This has caused:
Increased competition in domestic market – other countries have comparative advantage
Increased imports and consumers find them cheaper.
• Paragraph 2
Due to reduced market share of some domestic industries, there has been a reallocation of resources from less competitive manufacturing and parts of agricultural industries to primary goods/mining , rising from 2.6% of GDP in 1950 to 8.4% in 2010
• Paragraph 3
Having opened up the economy to international forces, Australia has also become more trade-oriented. In 1966/67, Australian foreign trade totalled $42 billion, contributing to around 11% to our gross domestic product. But by 1996-97 imports and exports totalled $212 billion, or 25% of GDP. Mining made up 48.5% of exports in 2011-12
Changing direction of flow
• Paragraph 4
Explain how Australia’s trade was primarily toward developed economies such as the UK previously. Explain that with the UK joining the EU, they were forced to implement protectionist policies against non-EU members – including Australia, significantly disadvantaging our exports (primarily agriculture) to the UK. Include the Common Agricultural Policy – subsidies to farmers. At implementation it consisted of 71% of the EU budget (1984) – estimated 32% in 2013
• Paragraph 5
Explain the growing demand from emerging economies of SE Asia for Australia’s mining exports (shift in production changes which countries demand out products)
Describe 1 bilateral FTA and 1 multilateral FTA (e.g. SAFTA and AANZFTA) and how they’ve increased trade to those areas.
• Paragraph 6
Explain that in recent years there has been a surge in demand primarily from China and India and how this has led to a ‘mining boom’
Explain the further shift in resources to mining sector
Briefly explain the concept of ‘Dutch Disease’; subsequent need for government to subsidise certain industries (such as domestic automotive industries) in the short term
Conclusion
Conclude, stating how opening up the economy to international forces has caused numerous structural changes in the economy. Explain how subsequent changes in the direction and composition of trade flows has caused further changes in the structure of the Australian economy.
