FREE TRADE AND PROTECTION
You will learn about:
• Australia’s policies regarding free trade and protection
• Australia’s multilateral and bilateral free trade agreements – (overview of two examples of each type of agreement)
• the implications of Australia’s policies for individuals, firms and governments
• implications for Australia of protectionist policies of other countries and trading blocs.
You will learn to:
• discuss the impact of free trade and protection policies on the quality of life in Australia
• propose likely changes to the structure of industry within Australia as a result of current trends in the global economy
Typical HSC questions include:
2020 HSC:
Question 23 (c)
Discuss Australia’s involvement in ONE bilateral trade agreement. 6 marks
Bilateral trade agreement: ...............................................................................
Sample answer:
The China−Australia Free Trade Agreement (ChAFTA), in operation since 2015, was completed to promote further trade with China. This agreement should increase the number of tariff-free goods exported to China. This should directly improve the competitiveness of Australia’s key agricultural industries such as beef, dairy, wine, fruit and seafood, creating further employment opportunities and lowering costs in these industries. However, this agreement includes an investment facilitation that may allow Chinese companies to bring in Chinese migrant workers to Australia to work on major projects. As a result of this, Australian workers could be offered fewer employment opportunities arising from Chinese investment into the Australian economy.
Answers could include:
• ANZCERTA • SAFTA • TAFTA • ACI–FTA • IA–CEPA • A–HRFTA • MAFTA • PAFTA • JAEPA • AUSFTA • KAFTA.
Question 23 (c)
Discuss Australia’s involvement in ONE bilateral trade agreement. 6 marks
Bilateral trade agreement: ...............................................................................
Sample answer:
The China−Australia Free Trade Agreement (ChAFTA), in operation since 2015, was completed to promote further trade with China. This agreement should increase the number of tariff-free goods exported to China. This should directly improve the competitiveness of Australia’s key agricultural industries such as beef, dairy, wine, fruit and seafood, creating further employment opportunities and lowering costs in these industries. However, this agreement includes an investment facilitation that may allow Chinese companies to bring in Chinese migrant workers to Australia to work on major projects. As a result of this, Australian workers could be offered fewer employment opportunities arising from Chinese investment into the Australian economy.
Answers could include:
• ANZCERTA • SAFTA • TAFTA • ACI–FTA • IA–CEPA • A–HRFTA • MAFTA • PAFTA • JAEPA • AUSFTA • KAFTA.
2019 HSC:
Question 28 (20 marks)
Explain the effects of protectionist policies on both the Australian and the global economy.
Answers could include:
• Basis of free trade (advantages/disadvantages)
– Absolute/comparative advantage – Specialisation, reduced costs, greater output and growth, factor endowment, improved allocation of resources, improved efficiency – Nationalism, isolation
• Protectionist policies/free trade
– Infant industries, domestic employment, dumping, defence – Tariffs, subsidies, quotas, local content rules (use of diagrams) – Trading blocs/free trade agreements – EU, APEC, NAFTA, ASEAN – Bilateral and multilateral agreements
• Effects of global protection on the Australian economy
– Reduced export opportunities – Decline in economic growth – Decrease in income/wealth – Decreased employment – Increased production costs and overall prices – Inefficient allocation of resources
– Structural change
• Effects on the global economy
– Reduced overall growth and stagnant wage growth – Increased global inequality – Misallocation of global resources – Global factor/product market failure
May refer to advanced, developing or emerging economies. Use of contemporary information is encouraged eg, USA/Trump since late 2016. Arguments can refer to specific examples or be theoretical.
Explain the effects of protectionist policies on both the Australian and the global economy.
Answers could include:
• Basis of free trade (advantages/disadvantages)
– Absolute/comparative advantage – Specialisation, reduced costs, greater output and growth, factor endowment, improved allocation of resources, improved efficiency – Nationalism, isolation
• Protectionist policies/free trade
– Infant industries, domestic employment, dumping, defence – Tariffs, subsidies, quotas, local content rules (use of diagrams) – Trading blocs/free trade agreements – EU, APEC, NAFTA, ASEAN – Bilateral and multilateral agreements
• Effects of global protection on the Australian economy
– Reduced export opportunities – Decline in economic growth – Decrease in income/wealth – Decreased employment – Increased production costs and overall prices – Inefficient allocation of resources
– Structural change
• Effects on the global economy
– Reduced overall growth and stagnant wage growth – Increased global inequality – Misallocation of global resources – Global factor/product market failure
May refer to advanced, developing or emerging economies. Use of contemporary information is encouraged eg, USA/Trump since late 2016. Arguments can refer to specific examples or be theoretical.
2018 HSC:
Question 23 (b)
Explain how Australia has contributed to the process of globalisation. 6 marks
Sample answer:
Globalisation involves the increased integration of national economies into the global marketplace. Australia has contributed to this process by following a free trade agenda with other countries including unilaterally reducing its own import tariffs as well as establishing free trade agreements with countries such as China and the US. This has resulted in increased bilateral trade flows between Australia and its trading partners. Australia has also contributed to increased financial flows around the world by deregulating financial markets and permitting foreign banks to operate in the domestic market.
Answers could include:
• Commitment to international organisations such as WTO, IMF, World Bank, OECD
• Encouraging TNCs to use Australia as a gateway to doing business in Asia
• Large migration program contributes to increased international mobility of labour
• Investment in communications infrastructure (eg NBN)
• Floating the exchange rate has linked Australia’s economy more closely to the international business cycle
• International environmental agreements.
Explain how Australia has contributed to the process of globalisation. 6 marks
Sample answer:
Globalisation involves the increased integration of national economies into the global marketplace. Australia has contributed to this process by following a free trade agenda with other countries including unilaterally reducing its own import tariffs as well as establishing free trade agreements with countries such as China and the US. This has resulted in increased bilateral trade flows between Australia and its trading partners. Australia has also contributed to increased financial flows around the world by deregulating financial markets and permitting foreign banks to operate in the domestic market.
Answers could include:
• Commitment to international organisations such as WTO, IMF, World Bank, OECD
• Encouraging TNCs to use Australia as a gateway to doing business in Asia
• Large migration program contributes to increased international mobility of labour
• Investment in communications infrastructure (eg NBN)
• Floating the exchange rate has linked Australia’s economy more closely to the international business cycle
• International environmental agreements.
Read the following, then write a response to:
Explain how the short-term problems associated with a reduction in protection might be outweighed by the long-term benefits.
Aim for 5-10 sentences using the ALARM scaffold.
| alarm-writing_scaffold.docx |
What is Protectionism?
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Rising Protectionism
Protectionism means the use of measures that restrict trade, like tariffs that raise the price of imports. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs.' Stock of new trade restrictions has quadrupled: 324 in 2010 and 1263 in 2015.
Australia should resist the urge to follow suit. In the event of a serious global increase in protectionist measures… What could the costs be for Australians?
Nearly half over 10 years. Australia should remain open to remain prosperous. But how?
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Read the following, then write a response to:
Describe the factors that have influenced government policies to reduce protection in Australia in recent decades.
Aim for 5-10 sentences using the ALARM scaffold.
| alarm-writing_scaffold.docx |
Ref: PC Productivity Insights (2020)
- Australia has entered its worst recession since the Great Depression because of the COVID‑19 pandemic.
- Australia’s future prosperity will be affected by the severity and length of the downturn, but also by the growth rate of productivity once the economy has recovered.
- The policy challenge is to support a strong and rapid recovery, consistent with policy settings that can also drive faster productivity growth in the medium and long term.
- Despite a 28‑year recession‑free streak, this country is no stranger to recessions.
- In the past 250 years, Australia has weathered severe recessions and recovery has usually been swift.
- However, labour markets are often weak long after the recession has ended. In some cases, unemployment has remained high for over a decade after the initial downturn, and ‘hidden unemployment’ (from lower participation rates) can further exacerbate this.
- Almost all of Australia’s longer-term growth in incomes and wages is attributable to labour productivity growth, with policy playing a key role in driving this growth.
- Australia’s economic fortunes have waxed and waned over time.
- At the turn of the Twentieth Century, Australia had the highest GDP per capita of any country in the world (including the United States of America).
- For much of the next century, Australia’s relative standing slipped, despite some periods of strong absolute productivity growth.
- And although Australia has always been a high income country, it is only in the last three decades that our relative income has improved against the frontier, due to growth in GDP per capita outpacing all of the G7 countries.
- Australian policymaking has both shaped, and been shaped by, our economic environment.
- In the decades following Federation, Australia developed a policy framework that included inward looking and protectionist elements, such as tariffs, import quotas, export controls and a highly regulated labour market.
- This ‘Fortress Australia’ policy was designed to boost population growth, maintain stable economic growth, and achieve an equitable distribution of incomes. But over time the weaknesses of this model became evident and started to undermine its very purposes
- A series of macro and microeconomic reforms dismantled Fortress Australia, gradually exposed the economy to competition and allowed resources to be allocated more efficiently.
