Part Two: Australia's Place in the Global Economy

Question 1

KAFTA

Answer 1

• Since late 2014
• 4th largest trading partner
• Tariff-free exports rising from 84% to 99% in the next 20 years
• Two-way trade has increased more than 50% in 3 yrs
• KAFTA will boost Australia’s economic output by $5 billion by 2030

Question 2

CHAFTA

Answer 2

• Since 2015

- Currently, 86% of Australian exports are tariff-free

Question 3

AANZFTA

Answer 3

• 2009
• Free Trade agreement between 12 member nations
• Complementary economies
• 20% of Australia’s trade in goods and services
• By 2020 96% will be tariff-free

Question 4

What is the impact of protection on Firms in the Short and Long Term

Answer 4

Short Term:

1) Import-competing firms close (PMV - 50,000 jobs)
2) Decreased tariffs = cheaper capital = cheaper inputs

Long Term:
1) Efficient restructure operations to compete on a global stage - forced to become more competitive

Question 5

What is the impact of protection on Individuals in the Short and Long Term

Answer 5

Short Term:

1) Structural unemployment
2) Wider range of goods and services & decreased prices

Long Term:

1) Increased job opportunities in internationally competitive sectors
2) improved QOL
3) higher employment levels

Question 6

What is the impact of protection on Governments in the Short and Long Term

Answer 6

Short Term:

1) Decreased tariffs = decreased revenue
2) Increased spending on structural adjustment programs

Long Term:
1) Sustained economic growth may occur —> increased revenue later on

Question 7

What is the impact of international protection on the Australian Economy

Answer 7

International protection lowers the output of the Australian economy
AGRICULTURE:
Highly Protected, CAP
MINING AND RESOURCES:
face very few barriers to trade are in high demand globally
MANUFACTURING:
low manufacturing tariffs because Australia isn’t very competitive in that industry anyway
SERVICES:
Less than 1/4 of export income = most barriers to trade
But they are like natural barriers

• Lower inflation
• obtain G&S we cant produce or satisfy domestic demand

Question 8

What is the future of Australian industry in the global economy?

Answer 8

a) Thought it was going to shift to services & manufacturing but China & other economies had a rapid industrialisation phase —> increased prices for commodities —> Australia stayed to those commodities

b) Globalisation has increased the importance of resources industries
Australia should play to its strengths, i.e. resources, even if it is at the expense of other sectors.

c) At the moment mining and energy industries are the most important and the peaking mining investment associated with the boom time has passed BUT Australia’s mining output and exports will continue to grow in coming years.

Question 9

JAEPA

Answer 9

• 2014
• 2nd largest export market
• 4th largest source of foreign investment
• create jobs and promote job certainty

Question 10

Benefits of free trade

Answer 10

• lower import prices and domestic prices
• greater choice of G&S
• access to new technology
• higher rate of economic growth
• improved per capita income and living standards
• improved trade performance
• improved allocation of economy’s resources

Question 11

Rise in US protection

Answer 11

• USA increased tariffs on imported solar panels and washing machines and announced 25% tariff on steel, 10% tariff on aluminium.
• leads to lower global productivity and investment