Implications of trade liberalization in Australia and government protectionism Essay

Australia is a worldwide trading nation with different range of trading partners. About 20 of the top export items for the country come from a range of commodity, resource and service industries. The leading exports from the country are iron ore, coal as well as educational services. Access to fair as well as free international shipping is basically important to Australia. Considerable drive for the ongoing development in international commerce in Australia emanates from trade liberalization. The fact that the country has lowered the trade barriers and improved in international transportation, communication and technology, this has led to an increased trade exposed as well as interdependent economies. The government has realized the opportunities that are underlined in the competitive global marketplace for the service providers, consumers as well as producers and this has pushed the government to seek for trade liberalization. The country seeks to reduce and if possible remove all barriers so as to open future commercial opportunities (Gruen, 2010). Policies assumed by the government Australia launched the internal structural reforms as well as measures for unilateral trade liberalization in the early 1990s and since then there have been high productivity, lower unemployment and high growth of GDP. The economic reforms entailing tariff reform, privatization and deregulation of many service sectors and reduction of subsidiaries have led to increased competitiveness of Australian stimulated exports along with business. The internal structural reforms in Australia have been evidenced to implement the process of trade liberalization. The commitment by the government to minimize the budget deficit has spurred the reduction of subsidies (Chand, 1999). Australia has already endorsed a new competitive policy which needs inter alia. This is an evaluation of all legislation that may enforce costs on business and consist of anti-competitive elements. Furthermore, government enterprises which were previously exempted from competition rules are currently subjected to similar rules just like private business. Privatization and deregulation are also being experienced in majority of the services sectors. A comprehensive internal deregulation and policy reforms for competition accompanied by a continuation of trade reforms is the central key increasing the ability for the country to compete effectively on the international market. Consequently, this leads to improved competitiveness in the country. The high degree of precision concerning the effects and nature of particular twist to competition has tremendously facilitated the trade and structural reform process (Sharma, 2004). The reform process can be linked positively to the Australia’s rates of GDP. Moreover, the reform process can be associated to the effect factor for productivity growth in Australia which has been described to be the highest among the industrialized countries in the OECD group. The Australian economy has gone through a period of strong growth along with low rates of inflation since 1994. A stable macroeconomic environment geared upon the Australian industry has been facilitated by the prudent monetary policies. On the other hand the fiscal policy has determined to consolidate privatization and budget deficit to decrease the savings investment gap which has led to persistent present account deficits (Gruen, 2010). Australia has adopted the method of elimination of barriers of trade in goods as well as services and this has led to securing improved and new market access chances. This has been a key focus for bilateral, multilateral as well as regional agreements. The agreements offer a framework that is legally binding and this helps in the advancement of the market access objectives in Australia. The country has been involved in major negotiating rounds under the General Agreement on Tariffs and Trade (GATT). This has been in Kennedy, Dillon, Uruguay and Tokyo Rounds. The agreement came with lots of trade liberalization at a worldwide level though the success has been limited especially in the agricultural sector (Sharma, 2004). The country launched the Doha Development Agenda in 2001 and includes a wide range of matters such as industrial products, agriculture and other World Trade Organization rules issues, some trade and environment issues and all these are entailed in the present WTO negotiating. Negotiations The negotiations provide to the country a foundation for further trade liberalization and consequently address the removal of subsidies on agricultural export. An example of a negotiation is the one the country entered with Singapore in 2002 and the agreement was to cover various chapters such as investment, telecommunication services, electronic commerce and educational cooperation among others. The country’s current trade liberalization commitments are protected by the dispute settlement mechanism and rule-based trade as provided by the WTO. Because of the negotiations Australia made with Uruguay, the processes for dispute settlement mechanism have been strengthened and this has increased its use since the establishment of WTO in 1994. The regional as well as bilateral agreements on free trade have been based on elimination of discrimination and tariffs against service suppliers for trade between Australia and any other country (Gruen, 2010). The rules from the WTO have been hard to implement effectively in Australia because of their ambiguity though they are aimed at upholding comprehensive agreements that reduce distortions in trade. Agreements The country has adopted the bilateral trade agreements and this has been effective in looking onto matters that are linked to bilateral interest like professional qualifications and recognition of conformity assessments. Free trade agreements in Australia institute a framework for current cooperation on policy and regulatory actions that influence trade and investment. The country has already concluded free trade agreements with countries such as United States, Thailand, Singapore and New Zealand. Currently, negotiations are going on with China, Malaysia, Japan and Chile. The country in addition is carrying out feasible studies concerning possible free trade agreements in India, Republic of Korea and Indonesia. The impediments on the investment and trade in Australia have been addressed by the Asia-Pacific Economic Cooperation Forum (APEC). Areas of interest have been on customs procedures, business mobility, competitive policy, standards and rights to intellectual property. APEC adopted an action program in 2007 to give strength to regional economic integration in the country and this included the assessment of the prospects and options for a Free Trade Area of the Asia-Pacific (Sharma, 2004). The country has adopted the method of complying with the WTO commitments that entails tariffication of enduring quantitative restrictions basically in agriculture and making adjustments to farm legislation to abide to the WTO Agreement concerning agriculture. The country’s preferences for developing nations as offered through the ASTP is gradually decreasing as the country continue to reduce the import tariffs. Besides the bilateral agreement with New Zealand, Canada and Papua New Guinea, Australia has been involved with limited regional trade agreements. The participation it has with the APEC is executed basing on the objective of sustaining an open regionalism in the multilateral rules. The country is highly committed to the system of multilateral trading and it is through the Cairns Group that the significance for extent multilateral reforms particularly in agriculture is emphasized. The country looks forward in placing agriculture in the same level with industrial products. In addition there is much emphasis on removal of export subsidies as well as intense cuts in domestic subsidies and considerably improved access to market through exclusion of non-tariff barriers along with deep reductions in tariffs. There has been an increase in the emphasis on opening foreign markets by the bilateral efforts to the Australian exports. Measures for giving preference to business by its own nationals Considering that the country is an island nation, it is remote from the key trading partners and hence it highly relies on foreign shipping services for the purpose of practicing the majority of its trade. The Australian government abides with the OECD Maritime Transport Committee policy of enhancing fair and free shipping markets. The country also pursues this same policy in the World Trade Organization. The country offers support to the policy initiatives as imposed by the international organizations like the OECD, to come against the trade distortion that emanates from the international employment of sub-standard shipping. Within the maritime transport sector for Australia, international trade is highly unrestricted and relatively open by world standards (Asia-Pacific Economic Cooperation). The government of Australia is aimed at giving Australian industry the best of the opportunities for winning new work both in the private and public sectors. It is particularly significant that local firms in Australia have the chance to bid for infrastructure contracts and Commonwealth procurement. The Australian Government is known to be a big customer and hence since 2008, the government has invested almost $77 billion to prevent the country from global recession and 70% of the money is in infrastructure. In 2009, an estimated amount of $230 billion was to be involved in major investment projects. The government goal is to see the Australian services, manufacturing and construction firms participate fully in work. With that in consideration, the government has introduced measures that guarantee that local companies, particularly those that are small, get fair, full as well as reasonable opportunities of competing for major projects and tenders (Australian Government, 2009). The first focus for the measures taken by the government is based on increasing awareness. This entails offering to the Australian suppliers the best information regarding the work available and providing the procurement managers and project proponents with the best information concerning the capabilities of the Australian industry. The second focus entails making the local firms a bit more competitive (Perkins & Conlon, 1999). This is accomplished if the firms improve their skills which lift productivity and consequently increasing innovation. Through the Supplier Access to Major Projects (SAMP) program, the Industry Capability Network (ICN) has the responsibilities of matching the companies in Australia with the supply opportunities. The network has offices in New Zealand and Australia and applies technical experts to look into the needs of specific industries. ICN offers professional advice to the procurement managers and project proponents concerning Australian industry capabilities. It assists them to create Australian Industry Participation Plans and tender packages along with identifying and short-listing potential suppliers. Moreover, the network assist the local suppliers locate and track project opportunities and in an addition connect them with government services like Enterprise Connect (Australian Government, 2009). Measures of restricting access to its own markets The priority for the Australian Government policy is for a maritime industry that is competitive internationally and which abides to the international standards of environmental and safety protection. The government established the Shipping Reform Working group (SRWG) that considers alternatives for obtaining maritime industry that is more competitive internationally. In the process the SRWG considers ways upon which Australian flagged ships are encouraged to stay registered in Australia. The Australian government is dedicated to reform based on micro-economic of the marine sector. The review of the regulation in the coastal trade resulted to introduction of new rules to streamline the license or permit system for coastal trade. The Australian Maritime Safety Authority that was formed in 1990 to carry out marine environment protection and marine safety regulation from shipping operations (Asia-Pacific Economic Cooperation). A review carried out in 1997 on the Australian Maritime Safety Authority revealed that the authority was providing an accountable and cost effective means for offering environment protection as well as maritime safety services to industry (Asia-Pacific Economic Cooperation, 2008). The government of Australia sustains a inflexible regime for the use of sanitary and phytosanitary measures whose main responsibility is restricting imports of different agricultural products. The quarantine policies in Australia in addition efficiently forbid the importation of whole grain. The country has a detailed regulatory framework for risk assessment for looking into biotechnology problems (International Labor Office, 2008). Conclusion The structural as well as reform process in Australia ought to progress and be completed to make sure that there is strong growth ultimately. This would lead to increased growth in international trade and a further decrease in unemployment in the country. Australia appears to hesitate on pushing on reforms particularly for industries that are often heavily protected like the automotive sector, textiles and clothing industries. According to a report released by the WTO Secretariat regarding Australia’s trade practices and policies, the report suggested that the country ought to continue with its reforms and look on the needless regulatory measures along with rigid structural factors that result to the impairment of the competitiveness of its economy.