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Australia and regional trade

Australia and regional trade. Mark Thirlwell Program Director, International Economy January 2005. Presentation themes. Australia’s trade profile Why East Asian trade matters for Australia Basic features of East Asian trade Recent trends in regional trade Policy debates.

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Australia and regional trade

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  1. Australia and regional trade Mark ThirlwellProgram Director, International EconomyJanuary 2005

  2. Presentation themes • Australia’s trade profile • Why East Asian trade matters for Australia • Basic features of East Asian trade • Recent trends in regional trade • Policy debates

  3. 1. Australia’s trade profile

  4. Key developments in Australian trade policy

  5. Continued . . .

  6. Continued (2) . . .

  7. Australia’s move to a more liberal trading regime Effective rates of assistance, % Source: Productivity Commission and WTO

  8. Australian tariff barriers in perspective MFN applied tariff rates, simple average, % Source: WTO web site. Data are for latest available year (generally 2002-03)

  9. Tracking Australian international integration Australian exports of goods and services, % of GDP Source: RBA and ABS

  10. The changing composition of Australian trade Composition of Australian merchandise exports, % Source: RBA for 1953/4: DFAT for 1983 and 2003

  11. The changing direction of Australian trade Destination of Australian merchandise exports, % Source: DFAT, One hundred years of Australian trade

  12. Australian exports in 2003 Composition of exports Direction of exports Source: DFAT Trade 2004

  13. 2. Why East Asia matters for Australia

  14. Major export markets for Australia Top ten merchandise exports markets in 2003, A$b 18% of total exports 9% 7.5% Source: DFAT web site.

  15. A key growth market & a dynamic one Compound growth rate, % pa Change in market share, % points Source: IMF Direction of Trade Statistics CD ROM

  16. 3. Basic features of East Asian trade

  17. Regional exports dominated by manufacturing Share of total goods exports, % Source: World Bank Development Indicators. Date for 2002 where available, otherwise 2001.

  18. Significant role for ‘hi tech’ exports ‘Hi tech’ as share of total manufacturing exports, % Source: World Bank Development Indicators. Data for 2002 where available, otherwise 2001.

  19. Imports slightly more balanced Share of total merchandise imports, % Source: World Bank Development Indicators. Data for 2002 where available, otherwise 2001.

  20. 3. Recent trends in regional trade

  21. East Asia is growing its share of world trade Share of world goods trade, % Share of world goods exports, % Source: IMF Direction of Trade Statistics CD ROM

  22. Aggregate numbers don’t tell the full story Change in share, % points Share of world goods exports, % Source: IMF Direction of Trade Statistics CD ROM

  23. Growing role for intra-regional trade Intra-regional exports as share of total, % Source: IMF Direction of Trade Statistics CD ROM and Lowy Institute calculations

  24. China an increasingly important market . . . Change in share of goods exports to China, % points Source: IMF Direction of Trade Statistics CD ROM and Lowy Institute calculations

  25. . . . for most of region Share of China in total goods exports, % Source: IMF Direction of Trade Statistics CD ROM. Data are for 2003.

  26. But extra-regional demand is still dominant East Asia ex Japan exports 100% Rest of World 64% East Asia ex Japan 36% 14% Domestic demand 7% 15% Production 29% Source: Monetary Authority of Singapore: data are for 2001.

  27. 5. Policy debates

  28. China: comrade or competitor? Share of net exports, % Source: DFAT Economic Analytical Unit (2003).

  29. The export boomerang: the case of Japan Source: Tim Harcourt (2004) "Global Challenges for the Australian Economy" .

  30. Surfing Asia’s development wave? Source: Tim Harcourt (2004) "Global Challenges for the Australian Economy" .

  31. Terms of trade turnaround Terms of trade, index 2002/03=100 Source: RBA

  32. Living in a world of preferential trade agreements Cumulative number of PTAs, by date entered into force Source: WTO web site.

  33. Asia been slow to join the PTA bandwagon . . . Share of preferential trade in merchandise imports, % Source: WTO World Trade Report 2003.

  34. ASEAN / AFTA ASEAN – China ASEAN – India ASEAN – Japan ASEAN - Korea China - Australia China – HK China – Macao China – New Zealand Japan – Indonesia Japan – Mexico Japan – Philippines Japan – Korea Japan-Singapore Korea – Chile Korea – Mexico Malaysia-Australia? Singapore – Australia Singapore – Canada Singapore – Chile Singapore – EFTA Singapore – Mexico Singapore – US Thailand – Australia Thailand – US But is now well on the way Selected regional PTAs, actual and proposed

  35. The case for joining a PTA . . . • Trade creation outweighs trade diversion • A response to the log-jam in the multilateral system . . . and a spur to it (‘competitive liberalization’) • Prospect of going faster and deeper than multilateral negotiations • Insurance against policy shifts in key trading partners • Insurance against being frozen out by other PTAs (‘domino regionalism’) • Lock in domestic liberalization at home (Mexico and NAFTA) • Political / strategic objectives (the EU, AUSFTA?)

  36. . . . and the case against • Trade diversion exceeds trade creation • Diverts scarce negotiation resources from multilateral negotiations • Distortions and transactions costs created by rules of origin required to make PTAs work, leading to . . . • . . . the creation of a ‘spaghetti bowl’ of complex arrangements that stifle, rather than support, trade • Risk of creating protectionist forces (to retain preferential access created by PTAs) • Serious issues (e.g. agriculture) only dealt with in WTO • Trade may complicate political / strategic alliance

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