Australia and Free trade

Essay by sianzhangHigh School, 12th gradeA, October 2014

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Australia and a future in preferential trade

By Sian Zhang

The common belief among economists is that the liberalization of global trade markets through the removal of trade barriers yields greater efficiency in the use and allocation of resources, and therefore improved living standards. Australia is a nation that has gone to great lengths to promote trade liberalization, evidenced by the country's unilateral reduction of trade barriers since the 1980's, and the negotiation of free trade agreements (FTAs), or more precisely, preferential trade agreements (PTAs). FTAs are multilateral in nature, encompassing majority of global nations. Such agreements are mediated through the World Trade Organization and negotiated at the Doha round. Current negotiations have been broken down since 2008, when constituents were unable to reach a compromise on agricultural trade-barriers. PTAs are distinct from FTAs, in that they are bilateral and regional in nature. (Brownsell , Liz, and Allen Overy , 2014) This means trade concessions reached in these agreements apply only to participating nations; hence, they operate on a preferential basis.

This also means they are negotiated relatively easily due to having fewer participants, and given that multilateral trade negotiations have been stalled, the trend of PTA proliferation may continue into the future in Australia. However, trade agreements aim for the mutual benefit of its signatories. Australia must concede trade barriers in order to benefit from export concessions. Therefore it is important to consider the relative merits of PTAs to Australia, and the impacts previously enforced PTAs have had, when pursuing PTAs in the future.

PTA Benefits/Demerits - Trade Balances, Capital flows and Comparative Advantage

PTAs achieve the removal of trade and capital flow distorting factors such as tariffs and quotas, causing affected trade goods to become more competitive in foreign markets, creating a degree of 'free trade'. From a...