Australias Trade With China Economics Essay

Trade is the exchange of goods and services between two or more parties. Trade can occur internationally or at a domestic level, either between different countries, different states or just interstate businesses. With relation to China, Australia tends to export a lot of wool, along with iron and coal. Australia tends to import a lot of computer accessories from China, along with industrial machinery.

Treaties and Agreements:

The Australia China Business Council (ACBC) is the premier business organisation in Australia dedicated to promoting business and trade with the People’s Republic of China.

ACBC is a membership-based organisation, with Branches in New South Wales, Northern Territory, Queensland, South Australia, Western Australia and Victoria providing business-focused information and events for members in all industries.

With China’s continuing strong economic growth and the World Expo Shanghai 2010 set to follow on from the success of the Beijing Olympics, there are many significant opportunities for Australian and Chinese business to create lasting and highly valuable commercial partnerships.

On 18 April 2005, Australia and China agreed to commence negotiations on a Free Trade Agreement (FTA) following consideration of a joint FTA Feasibility Study. The study was completed in March 2005, and concluded that there would be significant economic benefits for both Australia and China through the negotiation of an FTA. The Australia-China Free Trade Agreement is a proposed bilateral Free Trade Agreement (FTA) between the governments of Australia and China.

Roles of the government:

Australia and China have been trading goods to each other for years. The government plays a big role in this link between these two countries as the government of Australia decides on what is being traded and how much is being traded. The Australian government and China’s government have had many discussions about the trade link and are even considering free trade to each other.

The Australia China Business Council (ACBC) is an Australian business organisation which is influencing and attempting to improve the trade between the two nations. The ACBC organisation are located all around Australia, they have braches/industries in every state in Australia which provide information about events and economy.

The Australian embassy also plays a role in trading with China. In 2009 Australia exported $21.7 billion AUD worth of iron ore. Both Australia and China have a strong economy which makes trade and investments stable.

Advantages of trade between Australia and China:

Due to the fact that China and Australia have a free trade agreement, the flow of goods and services between the two countries is not restricted. This leads to some very key advantages to Australia’s economy and culture.

Free trade allows countries to mass produce, mainly because the products are constantly being traded. This is excellent for the economy because it increases the GDP and leads to a wealthier economy. When you increase the productivity, you are increasing production which leads to more vacancies for employment and possibly more businesses.

The consumer is also extremely advantaged with Australia’s trade agreements with China. The consumer is now eligible to purchase various types of goods and services which primarily have been imported from outside. This allows a wide range of purchase and customer satisfaction is ensured. This also leads to goods and services being supplied for the lowest price because of the competition coming from outside the country.

Rising living standards are at higher rates when Australia is constantly trading with its outside parties such as China. This is created mainly due to increased efficiency of production levels by TNC’s and various companies.

There was also a newspaper article which investigated in social impacts relating to Australia’s free trade with China. The newspaper concluded that due to Australia’s free trade agreement with China, Australian households receive over $3000 each year. This report was investigated by the (ACBC) Australia China Business council. The Chairman of the ACBC, Frank Tudor was quoted saying, “This report confirms the council’s position that increased bilateral trade between Australia and China is good for jobs, good for working families and good for the Australian economy,”.

Disadvantages of trade with China:

The most noticeable disadvantage when it comes to trading with China is that their economy highly fluctuates. This means that they do not have a stable currency, and often this leads to slight conflict or confusion. The following disadvantages extremely affect the economy and cultural aspects.

Due to our free trade agreement with China, the economy tends to be unstable depending on how much trade is occurring between Australia and China. This is mainly because the economy becomes extremely dependant on the global market. This means that businesses and employees along with the consumers have a higher chance of down turning the economy. This could lead to lower GDP, lower domestic pay and less demand for Australian exports.

Australia’s trade with China is very powerful. As a matter of fact, China is Australia’s 2nd biggest trader. However, because labour comes some cheap in china, materials and products might not be as reliable if they were produced locally.

Even with the poorer quality goods imported or traded from China, small businesses in Australia still struggle to sell their products. Generally Australian labour is much more expensive then labour in China, nevertheless the quality is usually much better. Due to the difference in price, Australian citizens often prefer to buy Chinese products. This leads to the shutting down of small businesses and the movement of big Australian companies to area with cheaper Labor. Bonds are a key example, when they moved their company outside Australia due to the cheaper labour elsewhere.

So as you can see there are many advantages and disadvantages of trading with China. There are many people who benefit from our trading partnership yet there are many protesters who wish that the agreement is down-turned.

Equity issues in Australia:

Australia has had a long issue with equity towards aboriginals. Rights towards aboriginal people are constantly being improved however there is still a major difference in the life expectancy, education and employment. Another equity issue in Australia is the availability of technology in certain states. States such as Western Australia and the Northern Territory do not have the same access to advanced technology as states like New South Wales and Victoria do.

However there isn’t much inequity when it comes to our trade with China. Possibly the only social injustice is that due to cheaper prices coming in from China, local businesses in Australia might have to shut down due to the inability to compete.