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HI5016 International Trade And Enterprise

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HI5016 International Trade And Enterprise

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Course Code: HI5016
University: Holmes Institute

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Country: Australia

Question:

Comment on Australia’s trade policy (both positive and negative impacts on Australian economy,  industries and employment).

Answer:

Introduction
The Australian Government’s make the vision for the industry is to maintain a prosperous, sustainable and innovative trade policy to help customers in trading and manufacturing. They provide an opportunity to everyone to make the industry grow and sustain in future, International trade give assistance to the accomplishment of that vision by enhancing efficiency and international competitiveness, producing a high-skill personnel and maintaining national prosperity (Thow et al., 2015).
With these goals keep in mind, the Government’s trade policy has initiated the declaration stated as trading our way to give employment and improve success, unconfined by the Minister for Trade and Competitiveness Dr. Craig Emerson on 12 April 2011. The Australian Government will continue to follow the market access for Australian exporters in international markets. The number one priority is to accomplish multilateral trade consequences through the World Trade Organization (WTO). At the provincial level, the Australian Management will continue to chase trade liberalization through APEC and other provincial trade agreements. They will also pursue high quality, wide-ranging bilateral free trade agreements, where these will assist both Australia and our trading associates and are helpful to global trade liberalization. Australia’s trade policy goal is to promote open markets, improved trade liberalization, and increased investment. The Government’s objective is to position the economy to be well organized, highly competitive, and concentrated on capturing opportunities accessible in our region. It began to decrease its tariff involving in its major protected industries such as automobiles and textiles in the 1980s. The Australian economy had since gained the rewards of tariff reduction through reduced prices of imported business inputs, improved sustainability and productivity, and enhanced international competitiveness. It has a major stake in preserving a strong and open world trading system. The successful launch of the Doha Development Round was Australia’s top trade policy initiative (Handley, 2014). In the following report and effort has been made to discuss the industries affected by it, positive and negative aspects.
Trade policy affected industries
Trade policy is affecting the automobile industry as it gained the massive support from the Australian government in the form of tariff and non-tariff barriers. The Australian automobile industry has currently undergone substantial tariff reform (Du, Hu, Song, 2016). It has been stated that on 1 January 2005, tariffs on passenger automotive vehicles and modules were diminished from 15 percent to 10 percent. A tariff reduction to 5 percent will further occur in 2010. After that, the tariff on commercial vehicles will remain consistent at the current level of 5 percent. The industry takes specific measures to make the broader impact of government policies, which aim to foster a powerful business. This policy has encouraged the industry to increase its competitiveness and sustainability and there has been a substantial rationalization of production in all sectors of the industry. The policy has introduced foreign investment into the Australian automobile industry. After that, no foreign exchange balance requirements, equity restrictions, limit associated with foreign investment, profit return, and regional content provisions. It immediately abolished tariffs on passenger motor vehicles and attempts to reduce the complexity and level of assistance. The quantitative import constraints and increased level of subsidies and tariffs were taken place to protect the industry from import competition (McGillivray, 2018).
The major industry-specific support measure delivered to this industry is the Automotive Competitiveness and Investment Scheme (ACIS). The main objective of the Australian government is to improve the credibility and international competitiveness of the industry in the respect of decreasing tariffs on PMVs and automated components. It is a traditional assistance scheme, which encourages innovation and new investment through the periodical issue of import duty to the registered participant and assists in adjusting to the lower tariff regime (Conlon and Perkins, 2018). Both affordability and availability of vehicles and cost of capital are critical in developing a healthy demand for vehicles. Australian Government relies extremely on trade policy, which leads to a large reduction in production and sales of vehicles. As they have to control the economy through interest rate mechanism. It enhances greater industrial efficiency, improves the volume of trade, and boost competition. Productivity is also likely to rise because of the implementation of technical innovations and the reorganization of existing components of vehicles. Some economies see taxation to be high within the industry as a means of increasing revenue to meet the needs of the fiscal requirements. Australian Government should enhance the trade policies, which encourage the industry to grow (Findlay and Garnaut, 2017).
Trade policy also affecting the textile industry Australia is one of the major economies in the world, having made much development in withdrawing the preventive trade regime once considered by significant tariff reduction for textile industries. They have reaped towards tariff reduction through lower prices of business imports, gained productivity, and enhanced international competitiveness (Cox, 2015). The textile industry has received both tariff and non-tariff barriers. The introduction of these import restrictions has increased the level of the tariff to protect them from import competition. The move to eliminate tariff and non-tariff barriers has described a major breakthrough in bringing sustainability and greater effectiveness.  Trade policy has reformed the textile industry by the elimination of quotas and tariff reductions. It has undergone substantial changes over the past decade; as a result, the technology became upgraded (Blanchard, Bown and Johnson, 2016). These factors associated with the progressive reduction of import quotas as decided in the URUGUAY Round Agreement along with a regular reduction in both the barriers, which enforced rationalization in the production of textile and apparel. It would maintain substantial opportunities by opening up of new markets for cotton, wool, and other fibers. It is to be keeping in mind that overall effect of reducing tariff and other assistance on textile industry would be depending upon the nature and extent of non-tariff measures such as import licensing and intellectual property rights. These issues are significant to the Australian government and fiber/wool manufacturers and importers. Any further trade negotiations under the WTO framework need to identify these issues (Bown and Crowley, 2016). 
Australia’s trade policy tends to concentrate on developing import activities behind high trade barriers, relatively than on a market-driven approach towards monetary diversification. Because of liberalization of the economy and increasing international competition, the textile industry and employment are continued to decline. Imports have increased speedily over recent years and now have more than 5o percent of the domestic market for textile. Tariffs in Australia have reduced over a two to three decade. It is lagging behind most of the aspects in the early stages of this procedure but has now tariff barriers have increased largely which needs to be reduced. Trade policy also influences the automobile and textile industry positively and negatively which is discussed further (Fenna, 2016).  
Positive aspects
It has created a positive impact on supporting and creating Australian employment in connection with exporting which helps in lifting the real income of Australian households and increase the GDP of the economy. The automobile industry exchange and produces extra gain from international trade over and then associate with comparative advantages (Sierzchula et al., 2014). It separately reduces its PMV tariff rate. This is because it makes little sense to encourage funds from a high return industry to low return industries, as this will give effect to total output to fall. The net impact of Australian government trade policy is to deliver benefits to the automobile industry so that it helps the customers and provides support to them. It helps in imposing a higher rate of PMV tariff in reaction to encourage resources in producing greater returns (Dechezleprêtre, Neumayer and Perkins, 2015). The removal of tariffs from an automobile industry helps in encouraging efficiency and this appears to hold the productivity. It helps in increasing competition for investment within companies as government support has been increased. As investment is necessary to build a competitive business environment to give, emphasize on the need for consistent, long-term support, and commitment for the automotive industry to boost further investment in Australia. Toyota has been increasing at a rapid pace, lowering down costs and boosting client services. It has increased the skilled workforce, as now they are more conscious about hiring the highly skilled managers and experts. This builds long-term sustainability with substantial competence in management, innovation, and business practice. As Ford, considerably build a customer base to enhance productivity. It has permitted to access new markets, which prompted an increase in manufacturing and employment. It nurtures international trade and aid in an expansion of GDP. For example, Holden, Ford, and Toyota involved in significant services, which trades through their design capability. With the implementation of trade policy, it prioritizes the use of provincial agreements that work directly towards providing equal benefits to customers. They also promoted the use of specific agreements negotiated in the respect of the tariff regimes. It has adopted better consultation in negotiating trade agreements. It also enhances the economic growth and removing tariffs and other barriers to trade would increase the living standard in Australia. It decreases the burden through utilizing preferential trade agreements and regulatory compliance costs, which helps in maintaining their development and prosperity of the industry. It also gained unilaterally to reduce the tariff barriers and associated compliance costs (Weller, Kleer and Piller, 2015).
Australian trade policy has created a positive impact on the textile industry in the form of privatization and liberalization and specific assistance is provided to enhance the international competitiveness towards the international market. The major focus is towards a number of economic indicators including investment expenditure, labour productivity, research & development, and changes in the quality of output (O’Neill, Sohal and Teng, 2016). This is turning to protect the commitment of the Australian government towards the progress of trade liberalization in the extent of managing the tariff and non-tariff barriers. It discloses the critical importance of the step towards free trade in stimulating productivity growth in producing trade liberalization activities. Investment expenditure also affects positively by reducing the cost of funds.  However, a tariff barrier to increasing level of investment expenditure is needed to expand the capital stock, which dominates to gain access to the domestic capital market. The strong R&D is probably reflecting the trade liberalization which promoting textile industry and import competition to increase their effort to add value to products and enhance quality. The trade liberalization streamlines the textile industry towards higher-value-added products, which has made it easier for firms to specialize in niche areas. As it is showing that, it is utilizing more high-tech products and capital-intensive production techniques. It indicates that in order to increase the number of employment, the industry has to focus on the skilled labour force and free trade to facilitate the expanding production and enhanced capability to use innovative technology (Lueg, Pedersen and Clemmensen, 2015).  
These policies have been implemented to promote the employment growth and a decrease in unemployment in the end. They have attempted to contribute to the Australian market economies on a global scale. The main reason for the deregulation of the economy was the political instability over the past few years. Australia’s involvement places a major role in regional trade initiatives and multilateral agreed trade rules and disciplines. It has remained one of the strongest supports of the multilateral trading system and liberalization activities (Shafiq, Lasrado and Hafeez, 2017). It has unilaterally liberalized its external trade regime in the comprehensive tariff reduction programme. Tariff liberalization aims at enhancing the efficiency of resource apportionment, enabling the company to react more rapidly to changing market conditions and take benefit of new growth opportunities. It helps the textile industry to develop the relations with other industries and collaborate to provide customers with the best products. It explores other remedies, which involves the acceptance of a common external tariff, burden of import or export charges, and termination of concessional tariff (Dong et al., 2016).
Negative aspects 
With the positive impacts, trade policy also created a negative impact on automobile industry as by imposing tariff duties on imported cars and their parts will decline the Australian economy and cause serious damage to the whole industry. Because of the tariff, the industry has to pay thousands of dollars for new cars and trucks and employees could lose their employment, which leads to a very serious downturn for the whole industry (Epstein, 2018). For this industry, zero tariffs would be best possible approaches, which can be, prevail in the future. It is also stated that imposing a tariff on automobile parts is also a threat to national security. In the industry, a 25 percent tariff has been imposed on cars and parts, which in turn lead to 5 percent, drop in employment as losing more than 600000 jobs. When used strategically, the tariff can be a very important and useful factor to address unfair trade practices such as intellectual property theft, regulation of the economy, and manipulation of the currency. On the other hand, sometimes it is not beneficial to the industry, businesses, and farmers (Baccini and Dür, 2015). Toyota and Ford have to terminate its automotive operations as it is dealing with and struggling with inefficient scale and competition from low-cost operations. It also affects the sales of these cars, export volume has been declined drastically, and industry has suffered from huge losses. The automobile industry is facing significant challenges in terms of uncertainty, labour markets, productivity, sustainability, and sales growth. As it is covering, an entire supply chain as when the industry is not getting a sale too much high then they need to subsidize sales to offset the tariffs during the near term, which eventually passes on the higher costs to consumers (Singh et al., 2018). Therefore, it is disrupting the whole economy, which is inevitable and challenging for the industry. This disruption is leading to huge commitment of losing a large number of dollars as it particularly a big problem, which needs to be solved and with this industry cannot be sustained in terms of long-term perspective. High-tariff barriers should be removed from the economy particularly in the automobile industry. This will benefit the whole industry and by producing more and more cars, it will achieve economies of scale and grow internationally. As they need to focus on boosting the performance of the business and desperately holds, the market forces to achieve competitive advantage (Fontagné, Fouré and Keck, 2017).
The textile industry has faced with an assortment of trade burdens when imports win over locally made products. U.S. negotiators stated the point that the Australian textile industry had endured the most of tariff cuts in the Uruguay Round. In the previous two years, the Australian textile industry has lost more than 100,000 employments in a determination to contend with low-cost imports (Caliendo and Parro, 2015). The industry needs to open up their markets to competition. The loss of local jobs and demand is the cost bear by the employees and producers. Losses extend from everyone involved in disrupting the trades and their employees, to those providing local materials and inputs and other services to all. It does not protect the labours from exploitation while empowering employment opportunities and wage increments among the labours in the middle class and lower-income sets (McNamara and Labonté, 2017).
Australia Government needs to unilaterally lower, and eventually abolished, import tariffs. This step resulted in a period of advanced development in imports, both in real dollar value and as an amount of Australia’s overall consumption. This result has been leading to Australia’s accumulation of a huge foreign debt (McNeill et al., 2018). Textile industry leads to huge net overseas tariff duty, which accumulated mostly in the previous times to the recent boom, which is presently around $600 billion. Zero tariff policy provides a greater support to the economy but on the other hand, it leads to substantial losses to the textile industry. At the same time, it expresses outrage that textile tariffs in Australia remain greater than that for other industrial products. It coupled with sharply declining export sales growth and managing the protection of tariff barriers. Therefore, it has been said that the removal of trade barrier is significant to the Australian economy, employment, and industry (Autor, Dorn and Hanson, 2015).
Conclusion
Trade policies promote economic growth; enhance Australia real GDP and the real income of the Australian industry. It has affected the automobile industry positively and negatively in the respect of productivity, sustainability, and competitiveness. As the implementation of zero tariff policy creates jobs in connection with exporting and importing. It has increased the employment under the free trade agreement and eliminated most of the tariffs by the Australian government. It also strengthens the global trading system and enhances prosperity as well as boosts growth and stability in Australia. It negotiates a trade mechanism and equitable distribution of trade gains. It also affects negatively because of imposing tariff duty as to lose thousands of dollars, which is not beneficial for the automobile industry.
It has also affected the Textile industry in both aspects as trade policies diversify the range of products and a comparative advantage. Tariff barriers were substantially aimed at securing the textile industry and employment and handling the difficulties of the balance of payment. It reasonably maintains the development of trade liberalization and efficient utilization of the investment and employment in the industry. On the other hand, it affects negatively as this industry is declining with, more increase in imports and decrease in exports. It has been said that tariff and non-tariff barriers increase the commitment into the Industries Assistance Commission to assist the Australian Government to all sectors of the economy. Assistance measures should be implemented to promote new investments in export-oriented industries and maintains international competitiveness. The trade policy implementation and undergone specific challenges, and barriers affect both the industries, which should be removed. Trade policy has raised the price of imports, anti-dumping and avail countervailing duties, which may restrict competition, protect industry, and impose higher costs. It can be stated that the removal of the tariff would largely influence the economy. 
References
Autor, D.H., Dorn, D. and Hanson, G.H. (2015) Untangling trade and technology: Evidence from local labour markets. The Economic Journal, 125(584), pp.621-646.
Baccini, L. and Dür, A. (2015) Investment discrimination and the proliferation of preferential trade agreements. Journal of Conflict Resolution, 59(4), pp.617-644.
Blanchard, E.J., Bown, C.P. and Johnson, R.C. (2016) Global supply chains and trade policy. The World Bank.uk
Bown, C.P. and Crowley, M.A. (2016) The empirical landscape of trade policy. U.K: The World Bank.
Caliendo, L. and Parro, F (2015) Estimates of the Trade and Welfare Effects of NAFTA. The Review of Economic Studies, 82(1), pp.1-44.
Conlon, R. and Perkins, J. (2018) Wheels and deals: The automotive industry in twentieth-century Australia. U.S.A: Routledge.
Cox, A. (2015) The pressure of wildcat strikes on the transformation of industrial relations in a developing country: The case of the garment and textile industry in Vietnam. Journal of Industrial Relations, 57(2), pp.271-290.
Dechezleprêtre, A., Neumayer, E. and Perkins, R. (2015) Environmental regulation and the cross-border diffusion of new technology: Evidence from automobile patents. Research Policy, 44(1), pp.244-257.
Dong, C., Shen, B., Chow, P.S., Yang, L. and Ng, C.T. (2016) Sustainability investment under cap-and-trade regulation. Annals of Operations Research, 240(2), pp.509-531.
Du, S., Hu, L. and Song, M. (2016) Production optimization considering environmental performance and preference in the cap-and-trade system. Journal of Cleaner Production, 112, pp.1600-1607.
Epstein, M.J. (2018) Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. London: Routledge.
Fenna, A. (2016) Shaping comparative advantage: The evolution of trade and industry policy in Australia. Australian Journal of Political Science, 51(4), pp.618-635.
Findlay, C. and Garnaut, R. (2017) The political economy of manufacturing protection: Experiences of ASEAN and Australia. U.S.A: Routledge.
Fontagné, L., Fouré, J. and Keck, A. (2017) Simulating world trade in the decades ahead: driving forces and policy implications. The World Economy, 40(1), pp.36-55.
Handley, K. (2014) Exporting under trade policy uncertainty: Theory and evidence. Journal of international Economics, 94(1), pp.50-66.
Lueg, R., Pedersen, M.M. and Clemmensen, S.N. (2015) The role of corporate sustainability in a low?cost business model–A case study in the Scandinavian fashion industry. Business Strategy and the Environment, 24(5), pp.344-359.
McGillivray, F. (2018) Privileging industry: The comparative politics of trade and industrial policy. U.K: Princeton University Press.
McNamara, C. and Labonté, R. (2017) Trade, labour markets and health: A prospective policy analysis of the Trans-Pacific Partnership. International Journal of Health Services, 47(2), pp.277-297.
McNeill, D., Barlow, P., Birkbeck, C.D., Fukuda-Parr, S., Grover, A., Schrecker, T. and Stuckler, D. (2017) Trade and investment agreements: implications for health protection. Journal of World Trade, 51(1), pp.159-182.
O’Neill, P., Sohal, A. and Teng, C.W. (2016) Quality management approaches and their impact on firms? financial performance–An Australian study. International Journal of Production Economics, 171, pp.381-393.
Shafiq, M., Lasrado, F. and Hafeez, K. (2017) The effect of TQM on organisational performance: empirical evidence from the textile sector of a developing country using SEM. Total Quality Management & Business Excellence, pp.1-22.
Sierzchula, W., Bakker, S., Maat, K. and Van Wee, B. (2014) The influence of financial incentives and other socio-economic factors on electric vehicle adoption. Energy Policy, 68, pp.183-194.
Singh, D., Pattnaik, C., Gaur, A.S. and Ketencioglu, E. (2018) Corporate expansion during pro-market reforms in emerging markets: The contingent value of group affiliation and diversification. Journal of Business Research, 82, pp.220-229.
Thow, A.M., Snowdon, W., Labonté, R., Gleeson, D., Stuckler, D., Hattersley, L., Schram, A., Kay, A. and Friel, S. (2015) Will the next generation of preferential trade and investment agreements undermine prevention of noncommunicable diseases? A prospective policy analysis of the Trans Pacific Partnership Agreement. Health Policy, 119(1), pp.88-96.
Weller, C., Kleer, R. and Piller, F.T. (2015) Economic implications of 3D printing: Market structure models in light of additive manufacturing revisited. International Journal of Production Economics, 164, pp.43-56.

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