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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. - PowerPoint PPT Presentation
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Australia and regional trade
Mark ThirlwellProgram 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
1. Australia’s trade profile
Key developments in Australian trade policyYear Event
1932 Ottawa Agreement establishing Imperial preference trading system
1938 Embargo on export of iron ore to Japan
1948 Australia becomes one of 23 founding members of the GATT
1956 Ottawa Agreement renegotiated
1957 Commercial Treaty with Japan
1960 Embargo on export of iron ore to Japan lifted
1961 UK announces will seek membership in EC
1963 Australia-Japan Treaty
1967 Japan overtakes UK as largest export market
Continued . . . Year Event
1973 First round of across-the-board tariff cutsUK joins EC
1974 Passenger Motor Vehicles Plan
1983 Australia-New Zealand Closer Economic Relations AgreementFloating of the A$
1986 Cairns Group of agricultural exporters established
1987 Amalgamation of depts of trade and foreign affairs into DFAT
1988 Second round of across-the board tariff cuts
1989 APEC established
1991 Third round of tariff cuts
Continued (2) . . .
Year Event
1992 Establishment of AFTA by ASEAN
1995 APEC announces Bogor Goals: free trade by 2010 / 2020
1997 White Paper on Foreign and Trade Policy: place for bilateralism
2003 SAFTA signedFeasibility study for Australia-China (CAFTA?) deal announced
2004 AUSFTA signedTAFTA signedScoping study for Australia-Malaysia (MAFTA?) deal announcedASEAN-CER economic ministers call for regional negotiations
Australia’s move to a more liberal trading regime
Source: Productivity Commission and WTO
Effective rates of assistance, %
0
10
20
30
40
1970/71 1983/84 1990/91 1996/97 2000/01 2002/03
AgricultureManufacturing
Australian tariff barriers in perspective
Source: WTO web site. Data are for latest available year (generally 2002-03)
MFN applied tariff rates, simple average, %
0
5
10
15
20
25
30
Aus EU Chi Jap Kor US NZ Tai Sing HK India
Tracking Australian international integration
Source: RBA and ABS
Australian exports of goods and services, % of GDP
5
10
15
20
25
30
1949/50 1959/60 1969/70 1979/80 1989/90 1999/00
current pricesconstant prices
The changing composition of Australian trade
Source: RBA for 1953/4: DFAT for 1983 and 2003
Composition of Australian merchandise exports, %
0102030405060708090
Primary Products Manufactures Other
1953 1983 2003
The changing direction of Australian trade
Source: DFAT, One hundred years of Australian trade
Destination of Australian merchandise exports, %
0
10
20
30
40
50
60
Asia Western Europe North America Rest of World
1950 1980 2000
Australian exports in 2003
Source: DFAT Trade 2004
Direction of exportsComposition of exports
Services23%
Manufactures25%
Other6%
Non-monetary gold4%
Rural16%
Resources26%
Other6%
US9%
NZ8%
Other10%
India3%
EU14% SE Asia
11%
North Asia40%
Mid East5%
2. Why East Asia matters for Australia
Major export markets for Australia
Source: DFAT web site.
Top ten merchandise exports markets in 2003, A$b
18% of total exports
9%7.5%
0
5
10
15
20
Japan US China NZ Korea UK Tai Sing India HK
A key growth market & a dynamic one
Source: IMF Direction of Trade Statistics CD ROM
Change in market share, % pointsCompound growth rate, % pa
-5
0
5
10
15
20
China Japan Korea HK Indon Mal Phil Sing Thai India US EU
1980-2003 1999-2003
-8
-6
-4
-2
0
2
4
6
China Japan Korea HK Indon Mal Phil Sing Thai India US EU
1980-2003 1999-2003
3. Basic features of East Asian trade
Regional exports dominated by manufacturing
Source: World Bank Development Indicators. Date for 2002 where available, otherwise 2001.
Share of total goods exports, %
0
20
40
60
80
100
China Japan Korea HK Indon Mal Phil Sing Thai Aus India
Manufactures Primary Products
Significant role for ‘hi tech’ exports
Source: World Bank Development Indicators. Data for 2002 where available, otherwise 2001.
‘Hi tech’ as share of total manufacturing exports, %
0
10
20
30
40
50
60
70
China Japan Korea HK Indon Mal Phil Sing Thai Aus India
Imports slightly more balanced
Source: World Bank Development Indicators. Data for 2002 where available, otherwise 2001.
Share of total merchandise imports, %
0
20
40
60
80
100
China Japan Korea HK Indon Mal Phil Sing Thai Aus India
Manufactures Primary Products
3. Recent trends in regional trade
East Asia is growing its share of world trade
Source: IMF Direction of Trade Statistics CD ROM
Share of world goods exports, %Share of world goods trade, %
12
14
16
18
20
22
24
1980 1983 1986 1989 1992 1995 1998 2001
Exports Imports
0
1
2
3
4
5
6
7
China Japan Korea HK Indon Mal Phil Sing Thai Aus India
Aggregate numbers don’t tell the full story
Source: IMF Direction of Trade Statistics CD ROM
Share of world goods exports, % Change in share, % points
0
2
4
6
8
10
12
14
1980 1983 1986 1989 1992 1995 1998 2001
Japan China Other East Asia
-1
0
1
2
3
4
5
China Japan Korea HK Indon Malay Phil Sing Thai
1980-2003 1999-2003
Growing role for intra-regional trade
Source: IMF Direction of Trade Statistics CD ROM and Lowy Institute calculations
Intra-regional exports as share of total, %
25
30
35
40
45
50
1980 1985 1990 1995 2000 200320
30
40
50
60
70
China Japan Korea HK Indon Mal Phil Sing Thai
1990 2003
China an increasingly important market . . .
Source: IMF Direction of Trade Statistics CD ROM and Lowy Institute calculations
Change in share of goods exports to China, % points
0
5
10
15
20
Japan Korea HK Indon Malay Phil Sing Thai Aus India
1980-2003 1999-2003
HK 36.3
. . . for most of region
Source: IMF Direction of Trade Statistics CD ROM. Data are for 2003.
Share of China in total goods exports, %
0
5
10
15
20
25
Japan Korea HK Indon Malay Phil Sing Thai Aus India
HK 42.5%
But extra-regional demand is still dominant
East Asia ex Japan exports
100%
East Asia ex Japan
36%
Domestic demand7%
Rest of World
64%
Production29%
15%
14%
Source: Monetary Authority of Singapore: data are for 2001.
5. Policy debates
China: comrade or competitor?
Source: DFAT Economic Analytical Unit (2003).
Share of net exports, %
15
25
35
45
55
65
75
Japan Korea HK Indon Mal Phil Sing Thai Tai Aus
Competing Complementing
The export boomerang: the case of Japan
Source: Tim Harcourt (2004) "Global Challenges for the Australian Economy" .
Surfing Asia’s development wave?
Source: Tim Harcourt (2004) "Global Challenges for the Australian Economy" .
Terms of trade turnaround
Source: RBA
80
90
100
110
120
130
140
Sep-59 Sep-69 Sep-79 Sep-89 Sep-99
Terms of trade, index 2002/03=100
Living in a world of preferential trade agreements
Source: WTO web site.
Cumulative number of PTAs, by date entered into force
0
30
60
90
120
150
180
210
1948 1956 1964 1972 1980 1988 1996 2004
Asia been slow to join the PTA bandwagon . . .
Source: WTO World Trade Report 2003.
Share of preferential trade in merchandise imports, %
0
10
20
30
40
50
60
70
W.Europe
Transitionecons
NAmerica
Africa Mid East LatinAmerica
Asia World
2000 2005f
But is now well on the way
ASEAN / AFTAASEAN – ChinaASEAN – IndiaASEAN – JapanASEAN - KoreaChina - AustraliaChina – HKChina – MacaoChina – New ZealandJapan – IndonesiaJapan – MexicoJapan – Philippines
Japan – KoreaJapan-SingaporeKorea – ChileKorea – MexicoMalaysia-Australia?Singapore – Australia Singapore – CanadaSingapore – ChileSingapore – EFTASingapore – MexicoSingapore – USThailand – AustraliaThailand – US
Selected regional PTAs, actual and proposed
The case for joining a PTA . . .1. Trade creation outweighs trade diversion
2. A response to the log-jam in the multilateral system . . . and a spur to it (‘competitive liberalization’)
3. Prospect of going faster and deeper than multilateral negotiations
4. Insurance against policy shifts in key trading partners
5. Insurance against being frozen out by other PTAs (‘domino regionalism’)
6. Lock in domestic liberalization at home (Mexico and NAFTA)
7. Political / strategic objectives (the EU, AUSFTA?)
. . . and the case against
1. Trade diversion exceeds trade creation
2. Diverts scarce negotiation resources from multilateral negotiations
3. Distortions and transactions costs created by rules of origin required to make PTAs work, leading to . . .
4. . . . the creation of a ‘spaghetti bowl’ of complex arrangements that stifle, rather than support, trade
5. Risk of creating protectionist forces (to retain preferential access created by PTAs)
6. Serious issues (e.g. agriculture) only dealt with in WTO
7. Trade may complicate political / strategic alliance