Trade Policy_US & Aus_Team _Final

8/16/2019 Trade Policy_US & Aus_Team _Final

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Trade policy


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Executive SummaryThe Trade policy also refers to commercial policy and international trade policy. Trade policy is

the set of rules and regulations which are intended to change the international trade flows and

particularly to restrict the reports. The trade policy defines the goals, regulations, standards, and

rules that relates and applicable to trade relations between the countries. The document discusses

about all the trade policies in Australia and United States. The introduction makes clear to

understand the topic. The topic is mainly focuses on Tariff of both the United States and

Australia. The features of tariff in Australia and US, applied MFN tariffs, structure of the tariff,

bound tariffs, and tariff concessions were clearly eplains in this document. The aggregate

supply and aggregate demand are taken to eplain in the document. The description consists of

all about the supply and demand of the products and resources with graphs and diagrams. The

trade and tariffs polices eplains by comparing and contrasting the policies in both the countries

Australia and United States. !y comparing all the policies of trades, it tells which is more

effecti"e and eclusi"e among both the countries. The United States tariff maintains and follows

the strict rules and regulations while dealing with other countries. #elati"ely the policies of tariff

in US are increasing and impro"ing year by year.


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Table of ContentsExecutive Summary....................................................................................................2

1. Introduction..........................................................................................................3

2. Trade Policy of Australia.......................................................................................4

3. Trade Policy of US................................................................................................. 6

4. Areate demand and Areate su!!ly..........................................................."

#. $om!are and contrast t%e trade !olicy of Australia and America......................11

6. $onclusion..........................................................................................................12

&eferences................................................................................................................14

1. Introduction

Trade policy plays an important role in international eports and imports of $oods and ser"ices.

A set of rules and regulations that are intended to change the international flow of trade flows

particularly to restrict the imports is known as trade policy. $oods, ser"ices, dispute settlements,

intellectual property and trade monitoring are topics of world trade organisation. %n Australia

trade policy tariff is the main de"ice, albeit is the negligible source of tariff re"enue. The


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introduction of &S'()' has decreased tariff rate *.)+ to *+ from '()' to '() -Australian

$o"ernment epartment of Foreign Affairs and Trade, n.d/. %n America trade, policy chemical

manufacturers are main eports in American trade market. The gross domestic product of US is

)0.11 trillion US per capita is 2*,().34 in '()*. Australia offers concessions to support the

local eisting industry -5ashington 6, '()0/. The structure of customs tariff remains

unchanged but in '(). Aggregate demand or domestic demand is the total demand for $oods

and ser"ices in the economy in gi"en time. %t specifies the amount of goods and ser"ices that will

be purchased at all possible price le"els. Aggregate supply or final total supply is the total supply

of $oods and ser"ices in the national economy plan during a time period. %t is the total amount of

goods and ser"ices that company are willing and able to sell at a gi"en price in an economy.

Aggregate demands are used to increase the eports and decrease the imports of particular

country $oods. 7ach and e"ery country tries to increase the eports and decrease imports.

Australian trade policy has restriction and prohibitions in import to protect human, plant and

animal life and en"ironmental securities. The aims and ob8ecti"es of present document are to

study the trade policy of Australia and America and compare both countries tariff rates, import

and eport process, rate of ta, bindings, features and ecise taes.

2. Trade Policy of Australia

The Trade policy in Australia defines as, the collection of all rules and regulations which are

related to trade. Sometimes the safety makes issues in trade policy. %n many group of nations and

regions people work together for creating mutual benefits in trade policies. The main purpose of

dealing with trade policy was to help the nations and international trade that should be run more

smoothly. Security also makes an issue in maintaining relation with foreign fre9uent trading

partners. The things like eport taes and import taes inspection regulations, 9uotas, and tariffs

these all are a part of nation:s trade policy -McMahon ; 5allace, '()0/.

Tariffs

The Tariffs refers to paying the ta on a particular set of imports and eports. The applied MFN

tariffs in Australia remain relati"ely low. The rate of customs duty does not change in re"iew


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period. 5hen nomenclature &S'()' was introduced, the MFN tariff rate was drop down slightly,

from *.)+ in '()( to *+ in '(). This is due to combining and splitting of tariff lines.

Features of Tariffs

Up to


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eports and imports. The trade policy of United States has widely "aried through the "arious

American industrial and historical periods.

Taris

The United States published the tariff schedule as &armoni?ed Tariff schedule -&TSUS/ and was

maintained by the United States %nternational Trade 6ommission -US%T6/. #egularly the US%T6

update the &TSUS to reflect the changes in tariff rates or some other pro"isions. A latest "ersion

of &TSUS is issued in rgani?ation, '()/.

$eatures of free trade %olicies


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$enerally the free trade policies promote the following features@

Unregulated market access

Unregulated market information access

Free trade encourages the trade agreements

The trade without ser"ice taes and other trade barriers The goods can be traded without taes -6ouncil Foreign #elations, '()2/.

&. A##re#ate demand and A##re#ate su%%ly

Aggregate demand is the amount of goods and ser"ices -net $/ purchased at each possible

price le"el by the domestic customers, business, go"ernment and foreign buyers. Aggregate

supply is the le"el of domestic output generated by the country at the possible price le"el. The

aggregate demand cur"e is affected by many factors such as changes in consumer spending,changes in in"estment spending, changes in go"ernment spending and changes in net eport

spending.

The increase in eports or imports has a multiple effect on the country:s economy this can be

understand from aggregate demand and supply diagram if the eports increases demand cur"e

will shift from A to ! shown in the below figure and at the same time $ and price le"el

increases, suppose if the Australian products costs less epensi"e than US products then

Australian and US people will show interest to buy Australian products as a result Australia

eports will raise and imports will fall adding to aggregate demand.


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%nternational trade policies are made that pro"ides e9ual income gains to all the nations through

efficient allocation of production across the world. &owe"er the policies made by the

international trade ha"e ma8or effect on the particular domestic industries and the employment,

the openness to international trade in the Australia has made the imports to increase by reducing

the barriers to other countries. Actually the main aim of trade is to transfer the goods and ser"ices

from one country to another country where the opportunity costs are lower which pro"ides

benefits to both the countries because each country has capacity or speciali?ed in one area means

they are producing more so they are more capable to supply for the demand that may not be

a"ailable in another countries and at the same time consumers can purchase the goods at the

lowest prices so it is understand that through efficient implementation of trade policies e"ery

country will sustain economically. Australia:s trading system after the post Second 5orld 5ar

was one of the highest regulation in"ol"es policy tools such as tariffs, 9uotas, price controls and

production subsidies to protect the Australian producers from import competing firms from

international competition -Bippoldt, '()'/.


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Aggregate demand of Australia -!aumol ; !linder, '((3/

Through Australia:s recent epansion in mining acti"ity has brought a large rise in Australia

terms of trade which is not happened in the past Australian history by dri"ing increase in demand

for eports and decreasing import prices, so the Australian market seen sustained increase in

prices in minerals. %n addition to this 6hina 7ffect made the combined increase in demand for theAustralian eports and decrease in the cost of Australian imports which changed the structure of

prices of Australian producers and consumers resulting to price of eports increased nearly '(+

and the price of imports fell by )(+.

%n United States while preparing the budget the federal analysis estimated the potential output of

the US for the purpose of federal budget analysis so while e"aluating shown US potential output

is steadily increased from )33( to '((1 but after '((1 its potential output is drastically reduced

which can be obser"ed from the below shown graph -!aumol ; !linder, '((3/.


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Aggregate demand and supply of US -Crugman ; 5ells, '()'/

%n the abo"e graph orange line is the estimated US potential output by the Federal budget office

and blue line actual aggregate output generated by the US from )33( to '()). US obser"ed a

huge short fall from '((1 due to the recession. %t is obser"ed that as the US potential output is

steadily rises then that country epects long run aggregate supply cur"e is shifted to right wards

this shift is may be due to the change in commodity prices, change in normal wages and the

changes in the producti"ity for the longer run growth and other factors such as increase in human

capital, physical capital and technology progress. uring the long run aggregate supply the si?eof the labor, producti"ity of the labor will also rise so the le"el of the $ that the economy is

capable of producing also increases.

From the economist !log it is obser"ed that the higher unemployment that US is eperiencing

causes se"ere shortfall of aggregate demand, the ma8or cause for this unemployment is the

economy is producing below its capacity, so the federal reser"e is continuously stri"ing to

impro"e the aggregate demand by pro"iding more employment opportunities to the people by

directly employing them by pro"iding 8ob oriented skills and undertaking in the public works pro8ects. Since the rise in aggregate demand will depend on the consumer:s potentiality of

spending but it is difficult as long as the unemployment remains high because during this period

households sa"e hea"ily to rebuild their wealth so the sa"ing by the house holds during this

recession period directly affects the country:s aggregate demand -!artlett/.


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'. Com%are and contrast t(e trade %olicy of Australia

and America

The Tariff represents the ta on particular import and eports $oods in international trade policy.

Features of Australia tariff are up to rgani?ation, '()/.

Australian MFN tariff remains low and customs duty rate does not change during the re"iew

period. 5hen &S'()' categori?ation is established the MFN tariff rate of Australia slightly

decreased from *.)+ to *+ during the '()( and '() due to a merge of tariff lines and splitting.

American MFN rates are 9uite different *1+ tariff rates are for free duty, 1+ tariff rates for

farming, tetile and tobacco. Abo"e '2+ are for "egetables and footwear. The &TSUS follow

56>Ds categori?ation synchronised system. The United States has different types of tariff rates

such as@ Non=reciprocal preferences, Special rates of duty FATADs, MFN rates of duty, and also

the special programs like ci"il aircraft or pharmaceuticals. The ma8ority of tariffs are

concentrated mainly in agriculture, fishes, foot wares, fuels, and tetile sectors. The United

States also assesses the duties on the basis of f.o.b. The current "ersion of &TSUS contains o"er

)(,((( and the 4 digit tariff lines that are only small percent -).3+/ which is pertained to tariff

rates 9uotas. !oth countries ha"e their own tariff rates and MFN tariff. The structure of

Australian custom tariff remains unaffected during the tariff re"iew period. !ut in '()


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according to 0)04 lines the custom tariff is 33.1+ and sub8ected to (+, +, 2+, and )(+ four

tariff rate. %n '()(, it makes a certain high degree of tariff transparency nearly 4.*+ and tariff

rates are 2+, )(+ and remain at *.1+. The structure of America tariff program according to

years '((, '((1, '((3, '()' and '() the total number of tariff lines are )(*(, )('2*, )(,'2*,

)(2)) and )(2) respecti"ely. uty=free tariff lines are *1.1, *0.2, *0.*, *1.( and *0.4

respecti"ely according to years and a"erage tariff rates are 1.4, 1.0, 1.0, 1.2 and 1.0. both

countries ha"e different duty=free tariff lines, tariff rate remains and re"iew->rganisation, '()2/

%n Australia import $oods ha"e some and limitations to protect the health and life of human

being, animal and plant, the safety and security en"ironment are considered. 5hereas in America

there are three stages in import they are pre=entry, entry and post entry. Undergo following

acti"ities aperwork, screening, documentation, scanning, inspection and trade. !oth countries

ha"e better ob8ecti"es in the import of $oods and ser"ice to protect human, animal and plant life

and the en"ironment. Australia is an obser"er of 5T> committee and works toward acceding of

$o"ernment rocurement -$A/. America trade customs and border protection -6!/ as part of

home security as the main role in trade and enforcement. Australia pro"ides concession in tariff

to support the local industry, sometimes the compleities create a lot of burdens on the business

sectors with costs that pass to customers, and also they may result in the inappropriate usage of

concessions. America pro"ides the concessions for MFN duty=free *1+ tariff rates. The sources

of concession in tariffs are 5T> secretariat, global trade commission, data web and authorities

pro"ide information. !oth countries offer the concession for some sources to impro"e the local

industry. Australia is one of the members of world trade organisation which submit the tariff files

and records to according to agreed deadline. America has the trusted trade policy offers

incenti"es to importers, reduces FA target and decrease the number of o"erseas trade.

). Conclusion

%t is obser"ed that international trade policies are made to promote e9ual opportunities for

economic growth to all the nations in the world these in"ol"es collection of rules and regulations

which are related to the trade such as ecise duties, tariffs, 9uotas, subsidies and import and

eport restrictions. %n this report it is obser"ed that Australia consists of number of tariffs that

supports the local industries and Unit states foreign trade comprises international imports and


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eports it is one of the world:s most significant market in the economy. %t is obser"ed that

aggregate demand and aggregate supply the implicit of trade policy which are continuously

affected by the trade restrictions imposed on the country, it is obser"ed that if the country

economy is performing below its economic standard it directly impacts on the aggregate demand

it is obser"ed from US short fall of aggregate demand during the recession period at that time

people in the country unable to spend the money which adds to the $ since they deser"e more

sa""y during the recession period so stabili?e this situation Federal reser"e of US brought many

changes.


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Trade Policy_US & Aus_Team _Final