LECTURE NOTES
AUSTRALIA’S MERCHANDISE TRADE WITH THE REST OF THE WORLD
COMPARATIVE TRADE INDICATORS
AUSTRALIA’S POSITION IN THE SERVICES TRADE
AUSTRALIA AS A DESTINATION OF FDI
AUSTRALIA’S DIRECT INVESTMENT ABROAD
TUTORIAL EXERCISES
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NAFTAMERCOSUREU (15) A F T AAustralia-New ZealandAPEC F T A AChapter 8:Regional Economic Integration TOPIC PLANLECTURE NOTESAUSTRALIA’S MERCHANDISE TRADE WITH THE REST OF THE WORLDCOMPARATIVE TRADE INDICATORSAUSTRALIA’S POSITION IN THE SERVICES TRADEAUSTRALIA AS A DESTINATION OF FDIAUSTRALIA’S DIRECT INVESTMENT ABROADTUTORIAL EXERCISESRegional Economic IntegrationAgreements among countries in a geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services and factors of production among each other.It is estimated that currently there are about 220 regional trade arrangements! REGIONAL TRADE ARRANGEMENTSException to MFN RuleFive levels of regional economic integration:Industrial free trade areaFull free trade areaCustoms UnionCommon Market Economic UnionRegional Economic IntegrationFREE TRADE AREA(FTA)NO Tariffs and quotas among membersNational tariffs against non-membersPartial(Industrial)FTA and Full FTABilateral FTA:Australia-New ZealandPlurilateral FTA: EFTA, NAFTA, AFTA.Free TradeArea NO Tariffs and quotas among members COMMON TARRIFF against non-membersExamples: European community (1968) MERCOSURRegional Economic IntegrationCustoms UnionFree TradeAreaCustoms Union•Abolition of restrictions on factor movementsExample:The European “Single Market”(1992)Regional Economic IntegrationCommon MarketCustoms UnionFree TradeAreaCommon MarketRegional Economic IntegrationEconomic UnionFree TradeAreaCustoms UnionCommon MarketEconomic UnionHarmonisation and Unification of Economic Policies Example:European UnionTrade Effects of IntegrationTrade creationTrade up through lower cost goods and servicesTrade diversionLess efficient producers inside the area replace more efficient external producersRegional versus Global integrationEuropean Economic Integration1950: European Coal and Steel Community (6)France,Western Germany,Italy, Belgium,Luxemburg,the Netherlands1957: The European Communities (6)Customs union (July 1,1968)1973:UK,Ireland,DenmarkGreece (1981),Spain and Portugal (1986)1992:The European Single Market 1996: Austria, Finland and SwedenEuropean Monetary Union (2002)1997: Invitation to Hungary, Poland, the Czech Rep., Estonia, SloveniaMerchandise trade of the EU(15),1990-2000(US$B. and %)Based on WTO 2001Intra-Imports as a % of total merchandise imports of selected regional trading blocs North American Free Trade Agreement(NAFTA)US,Canada,MexicoBecame law: January 1,1994Over 15 year period:tariffs reduced (99% of goods traded)Non-Tariff barriers reducedinvestment opportunities increasedProtects intellectual property3 side agreements:Environmental ProtocolLabour ProtocolThe Snap-back provisionSpecial treatment for many industriesMerchandise trade of the NAFTA(3),1990-2000,US$B. and %Based on WTO 2001MERCOSUR(Southern Common Market)Originated in 1988 as a free trade pact between Brazil and Argentina.Expanded in March 1990 to include Paraguay and UruguayCombined population of 200 million1995: 5 year plan to move to a full customs unionObjective:The South American Free Trade Area(SAFTA)Merchandise trade of the MERCOSUR(4),1999(Billion US dollars and percentage)The Free Trade Area of the Americas (FTAA)Old plan of ex-US president George Bush, pursued now by his son.FTAA=34 nations(including NAFTA and MERCOSUR members) with a population of 880 million. The world’s largest free trade area.The Quebec 34-country Summit of March 2001has agreed on an FTAA to be launched in 2005President Bush will need fast-track authority(now renamed Trade promotion Authority) APEC=ASIA PACIFIC ECONOMIC COOPERATIONRussian FederationChinaCanadaUnited StatesChileAustraliaNew ZealandJapanS.KoreaPeruHong.KongVietnamThailandSingaporeBruneiMalaysiaMexicoPhilippinesIndonesiaPapuaNGChinese TaipeiMembers of APECMajor APEC activities for the promotion of regional trade&business APEC’s Three Pillars :Trade and investment liberalisationby 2010 for industrialised economies,and no later than 2020 for developing economiesBusiness facilitationEconomic and technical co-operationASEAN (10)Singapore, Indonesia, Thailand, Malaysia, PhilippinesBrunei, Vietnam, Burma, Laos, Cambodia (550 million)On the Common Effective Preferential Tariff (CEPT) of AFTA,the 6 founding members agreed (individually) to achieve a minimum of 85% of the tariff lines on their inclusion lists in the 0-5 % range by 2000, covering 90 % of intra-ASEAN tradeThey also brought forward from 2003 to 2002 the date of implementation of the CEPTASEAN + 3 Merchandise trade of ASEAN 1990-2000(US$Billion, and %)Based on WTO 2001MFN Simple Mean tariffs 1999 versus CEP tariff rates 1999,2003,% in selected ASEAN countriesMFNCEPT1999CEPT2003Indonesia10.95.853.71Malaysia7.13.172.06Philippines104.452.06Thailand21.69.754.64 Three-way Balance(E.Asia,EU,US)Output,Trade with the ROW,ReservesBased on Fred Bergsten’s Economist article The share of Regional Trading Blocs in Australia’s merchandise exports,1974, 1989, 2000-01Regional Bloc197419892000/01European Union16.514.411.7NAFTA12.412.511.5ASEAN8.09.613.3MERCOSUR0.20.50.6SAARC3.41.83.1APEC65.870.673.0