Question

QUESTION 5: INTERNATIONAL TRADE

“Although misguided, fears of an open economy are understandable in the current environment. Open economies have lifted billions of people out of poverty and have immeasurably increased the living standards of Australians. But they also mean that global shocks and even problems in one country can quickly become a problem in ours. This is the downside of openness, and we are currently living it. But while some wariness is understandable, this should not blind us to the long-run benefits of openness, particularly when it will be so vital to our recovery.” (Trigg, April 9 2020)

Discuss the economic basis of international trade and why international trade is considered an important driver to economic recovery for Australia post CoVID-19.

300-400 words please

Answer 1

*Answer

All the activities undertaken by a country encompassing exchange of goods/service amongst 2 or more nations across its national boundaries is known as International Trade. The basis of this international Trade for any country is its specialisation in a product/service. A country is likely to gain from engaging in Trade in which it specialises. This specialisation gives a country a competitive advantage and helps penetrate the international market to reap higher profits. This is also known as having a comparative advantage by the country.   

The aim is to trade goods which are in surplus in the country and procure scarce goods. The nation needs to try and maintain a positive Trade Balance, i.e. the net exports > Net Imports.

After COVID-19 , economic recovery in Australia is pegged on International Trade(apart from other economic initiatives) which has been considered to be one important driver.

The minerals and sources rich Australia is betting on its Trade to lead towards economic recovery. The mining sector is expected to lead this recovery process. With increasing demands from coal and iron ore by countries like China will deem to be helpful in the recovery.

Moreover, the Australian economy is quite dependent on International Trade and therefore it will lead to the economic recovery. Trade will increase the employment opportunities which were hit be reduced demand due to the epidemic.

Australia’s

Regional Comprehensive Economic Partnership (RCEP) agreement is an agreement which is the largest FTA in the world. With signatories from ASEAN member states, China, Japan, New Zealand and South Korea, this will help stimulate trade in the region and hence help in growth.

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