Impacts of globalisation on an external economy Flashcards
Intro
Compare the 2 economies
China
* Planned economy → cn can enforce policies easier than aus
* 5 year term, but president can stay in power indefinitely
* The effects of globalisation may be reacted to differently
Aus
* Australia is one of the least protected economies in the world, government aims to move away from industries and firms that cannot improve their competitiveness compared to those that can become more competitive (focus on competitive advantage)
* Mixed market economy
* 3 year term, prime minister cannot stay in power
P1 (China trade in G+S)
Diversified export base → lead to an increase in Chinese exports
China is the world’s largest exporter, 2nd largest importer
2017: total volume of imports/exports exceeded USD 4 trillion
1980: total volume of imports/exports below 40 billion
P2 (Aus trade in G+S)
Minerals and energy
Largest exporter of coal and iron ore
One of largest exporters of LNG
Top 10 agricultural exporters
Growing services exports
Low cost manufactured goods (import)
Exports imports both increase
But focus on different industries
P3 (China investment and TNCs)
Attracted foreign investment into the domestic economy → intensified the pressure of cross border capital flows
Over USD 1.7 trillion foreign investment
Attracted a number of TNCs due to it’s larger labour size and lower wages
KFC, McDonalds, Starbucks have been expanding
KFC sells 3mil vehicles in China each year
Alibaba (ASEANs largest e-commerce platform) expanding
China TNCs expanding
Entering the automobile industry through ASEAN, attempting to take monopoly away from Japan through differentiating through electric vehicles
P4 (Aus investment and TNCs)
Attracted foreign investment → strong geographic, trade and cultural links with fast Indo-pacific region, provide 24 hour connectivity between major time zones in Europe, Asia and America, consistent economic growth makes Aus attractive for investment
$4.5 trillion USD 2022
Attracted TNCs
* Google
* Reddit
* Airbnb
* Dropbox
Australian TNCS
* BHP group - in more than 90 countries
* Global leader in minerals and mining sector
* Produce Al, Cr, Mn ores and alloys
* 94% foreign owned, 82% american owned
* 6% Australian owned
P5 (China technology)
Encouraged technology → increase in productive capacity
More efficient
More competitive products
More innovation
Reforms were made to markets which lead to
Increased resource efficiency
Increased economic growth
Increase in legal principles due to WTO requirements
P6 (Aus technology)
Increase in technology from trade agreements
Eg. RCEP includes commitments to ensure that parties do not prevent business data and information from being transferred
Targeted coordination on research, training, capacity building and technical assistance
P7 (China labour)
Shifted China’s labour structure from primary to secondary sector
The percentage of workers employed in agriculture decreased from 50% in 2001 to 11.2% in 2010 (World Bank, 2011).
Due to the first point, there has been an increase in other industries (e.g. manufacturing) , maybe a proportion of change in industries. From 2001 to 2006 real annual wages across industries doubled from 12,000 yuan on average to 24,000
P8 (Aus labour)
Increased wage stagnation for low-skilled workers (decline in wages)
Low cost imports increase, outsourcing of jobs to countries with lower labor costs have put pressure on wages for low skilled workers eg. manufacturing
For example, estimated 60,000 people lost their jobs when aus decided to outsource car industry
Benefitting skilled workers
In sectors that have expanded (finance, technology, professional services) experienced growth and can attract high skilled workers leading to higher incomes
P9 (China distribution of Y)
Globalisation boosted national income, but also increased the domestic income gap - large disparities
Rural population decreased from 98.99 mil 2012 to 43.35 mil 2016
Quality of life has improved
Gini coefficient rose from 0.292 1981 to the peak of 0.491 in 2008
0.466 2021
Wealth gaps still exist between urban and rural area
P10 (Aus distribution of Y)
Gini coefficient 0.33
Rising income inequality
Wealth concentration
Expansion of global markets and investment opportunities allowed wealthier individuals to diversify investments and benefit
Facilitated movement of capital, enables the accumulation of wealth
P11 (China trade agreements)
Increase in low cost manufactured products
Electrical machinery and equipment makeup 26.6% exports from China
APEC
* Reduced tariffs from 17% (1989) to 5.6% (2014), encouraging trade
* 44% cn technology imports came from other APEc countries (1992)
* 76% cn exports taken by APEC countries, 68% imports provided
CHAFTA
* Imported over 85 billion worth of resources, energy, manufactured products (barley, seafood, iron ore, pharmaceuticals)
* China is Aus largest market for dairy exports $905 million in 2017
RCEP
* Aims to reduce tariffs on around 90% of goods traded between countries
* Increased trade revenue by 6.9% in 1st quarter of 2022 by trading
* China began free trade with Japan, increasing China’s trade revenue by $89.6 billion
* Will make new services and investment commitments in architecture, engineering, integrating engineering, urban planning, education, maritime, auxiliary and road transport industries
* Investment in industries: grain processing (soybean, rice, flour), exploitation of Au, Ag, Pt, Li
* Support on the supply of health services
*
P12 (Aus trade agreements)
Australia increase in commodity exports (eg. iron ore, coal, natural gas) (specialised)
Import machinery → reliance on other countries as we specialise in commodity exports
Australia outsourced low cost manufacturing to China and other countries where it was cheaper to manufacture goods
APEC
* 75% of Australia’s total trade in G/S
* Average tariff rates reduced from 10.2% 1999 to 5.2% 2020
CHAFTA
* Aus eliminated tariffs on around 82% of merchandise imports, removed 5% tariffs on cn manufacturing exports and electronics
* Aus total investment in China 77.1 billion (2017)
* 93% of Australian exports to China are tariff free
RCEP
* Increase opportunities for trade
* Improved mechanisms for tackling non-tariff barriers
* 94% of Australian exports will benefit from duty free access
* 59% of Australia’s 2 way trade
* 17% of 2 way investment
* 73% G+S exports
* Provide suppliers with new opportunities for
* Construction: Indo, Thailand, Malaysia
* Tourism: Thailand, Malaysia
* Transport: China, “”
* Wholesale trade services: “”
*
P13 (China environment)
Increase in coal plant and fossil fuel usage after the increase in electricity demand
* In 2020, China commissioned 38.4 Gigawatts of coal plants (over 3 times the 11.9 gigawatts commissioned in the rest of the world
* China is the largest consumer of coal
* Coal covers 60% of electricity demand
* 48% of CO2 emissions come from industrial sector
* 40% from power (coal)
* 8% from transport industry
Paris agreement
* Agreed to phase out 65% of coal power plants by 2021
* Agreed to have ⅕ of energy be renewable
* Agreed to have 40-45% reduction of 2005 levels by 2020
* Decreased CO2 emissions by 48.4% in 2020 but increased in 2021
* China’s climate targets rated highly inefficient
* Will lead to a plateau of high rather than falling emissions
* China’s emissions would reach an increase of 29% from 2010 levels
Government policy as of Jan 2015
* Seizure of property by illegal polluters
* Unlimited fines for pollution
* More freedom of independent environmental groups to operate in the country
P14 (Aus Environment)
Paris agreement
Agreed to have 43% reduction of 2005 levels by 2030
Agreed to net zero by 2050
Government policy
Environment protection and biodiversity conservation act
Heritage land
Lack of progress = carbon tax
