WTO Principles: Australian International Trade Policies - Example

WTO Principles: Australian International Trade Policies Name: Course: Professor: Institution: City & State: Date: Australian International Trade Policies International trade involves countries engaging in trade across borders. Such an involvement helps in the attainment of national prosperity, advanced skills and high wage jobs. Australia is one of the countries which engage in international trade. By opening the Australian economy to international trade in early 1980’s, greater competition and increased trade was realized. This has contributed to strong and sustained growth (Baldwin, 1997). Apparently, only Australia has portrayed sustained growth amongst other advanced economies. In Australia, many jobs were created during the recession period, while at the same time many jobs were lost in other European countries (Baldwin, 1997). In addition, the continued growth of China which is a close trading partner of Australia greatly helped in averting recession on the Australian economy. This resilience was as a result of exposure of the Australian economy to global competition and reduction protection offered to local firms. Reduction of government involvement on international trade resulted to a beneficial effects amongst them being exposure of local firms to global competition, thus making the businesses to be increasingly innovative as well as stimulating price controls (Roy, 2003). Reducing barriers in international trade enables productive in puts such as capital, labor and entrepreneurship in Australian market. An argument often arises on suggestion that a country cannot be good at producing everything compared to other countries dealing in the same products. An economy does not necessarily require absolute advantage to have competitive advantage but instead what is needed is the comparative advantage over the other trading partner. However, no one single country can be good in producing all products at a lesser costs compared to similar products and services from other trading partners. Therefore, one country will gain from production of services and commodities which comparatively, it possess lesser disadvantage. In accordance to comparative advantage, specializing leads the two countries producing goods and services in which each can produce cheaply to have mutual benefit. For instance, footwear and clothing are much cheaper nowadays compared to the last prior years when severe quotas and higher tariffs were imposed on imports. This reduction in real price has arisen due to lesser protection while removal of quotas and reduction in tariffs has helped in reduction of prices to consumers for the basic items (Stoler, 2003). The core purpose of policy on cross border trade is to facilitate economic development while others include job creation and value addition. The Australian international trade policies have been reviewed against the WTO principles as follows: Unilateralism Competition leads to innovation and price reduction. Australian government has in essence pursued pro-competitive economic reform which was not really dependent on the other countries. In trade negotiations, Australian governments have been making its offers and where appropriate have encouraged their trading partners to do the same. Australian Government argues that adopting a bargaining approach with other countries leads to damaging of their countries long run prosperity, thus whenever a policy is passed; it is applied unilaterally across all the other concerned parties (Pink & Jamieson, 2000). Non discrimination This is one of the most important WTO foundation stone of the world trading rules as observed by productivity commission, 2010. This rule encourages reduction in protection of some few countries. It proposes that, shielding offered to one economy should also be availed to all other economies within the trading bloc (Garnaut & Bhagwati, 2003). Due to emergence of regional and bilateral trade agreements, where concerned members are accorded preferential treatment over non - members, this principle is seen to incline more to exception than in rule. Trade agreements which are discriminatory in nature tend to cause trade diversion which in turn amounts to loss of jobs and reduced progression rather than more jobs and prosperity progression. Also, trade diversion has negative impact on global job and income. By applying the non- discriminatory principle, the Australian government entered in negotiations with the trading partners thus seeking substantial access to other economies. Trade agreements which are not discriminative in nature proved to help in achieving improved returns in the Australian economy. This encouraged the government to pursue meaningful penetration in other countries’ markets for exports of its products. Australia particularly recognizes non discrimination of foreign suppliers and products thus supporting external competition. Though, Australia does not have general legislative requirement to counter discrimination against foreign trade, this goal is largely achieved through international commitments under WTO (Adams, Dee, Gali, &McGuire, 2003). Despite WTO obligations with respect to non discrimination, there exist instances where discrimination can still be exercised. More so, specific policies consistent with WTO obligations exists that shields small and medium enterprises from being clouded out due to immeasurable competition from foreign giants which are well established operating in the same industry. Separation / measures to avoid unnecessary trade restrictiveness Emergence of trading blocs modeled for geo political purposes has from history proved to result in tragic consequences (Garnaut & Bhagwati, 2003). This is as a result of emergence of the Second World War 2. However, there exists no ultimate assurance that negotiating trade deals following this front can help the concerned parties draw closer politically. The Australian government has continually shown commitment on market openness, thus implementing wide range of measures aimed at liberalizing its economy. A number of provisions aimed at ensuring that government entities apply regulations and practices that do not interfere with free trade have been put in place. To ensure that any impending barrier to international trade is dealt with accordingly, the Australian government has set up productivity commission which provides it with advice on any barrier to economic efficiency. Overtime, history has shown that, even though countries embarked upon trade agreements that gave each other preferential treatment; later on some countries were reluctant on politically sensitive matters. Australia, by no exception has found itself in similar situations, but through application of the non- discrimination principle, it has been able to deal with such situations. Transparency Embarking on trade agreements with economies or trading blocs fully committed to economic liberalization makes the Australian Government to enjoy the benefit of transparency when it comes to government decision making process. When two countries consider entering in free trade negotiations, they justify this through economic modeling which comprises giving an estimate of full economic benefits based on the elimination of the agreed trade barriers (Roy, 2003). Government has also achieved transparency through keeping the general public well informed of the progress on free trade negotiations. In addition, this has been increasingly achieved by regularly consulting the trade unions, community organizations and the business groups. This as a result ensures that impacts that are poised to take place are fully considered. The government assigned this responsibility to the Australian Parliaments’ Joint Standing Committee on Treaties where on completion of the various discrete stages of the trade negotiations, are posted on Government websites for easy access to the members of public. In its report, the WTO indicated that transparency department has in real sense been institutionalized in Australia. Australia unlike other economies tends to be of its own kind in adopting a modern and independent department within the government to pursue this process on continuing basis. Reciprocity This is one of the elements of the negotiating process. It shows the desire of limiting free riding that may arise as a result of most favored nations rule and the desire to attain trade liberalization though meaningful access to foreign economies. As observed by Gordon (2003), cost of attaining liberalization is in certain specific industries which are well grouped and are vehemently opposed to reduction in protection. Binding and enforceable commitments Commitments to achieve trade liberalization must abide to certain rules failure to which they may be of no value. The non discrimination rule being one of the fundamental WTO principles is contained in Articles 1 of Most Favored Nations (MFNs). This principle remains essential in seeing that commitments to market access are honored. The member states are bound by the agreements and cannot adjust the tariffs upwards beyond the agreed levels without reaching in to an agreement with other concerned parties (Gordon, 2003). Safety Values This principle says that governments should be able to restrict trade. This can only be achieved if the government takes the right corrective measures to avert potential threat to domestic firms. (Stoler, 2003). Other measures includes; ability of the government to impose duties on imports and control dumping through introduction of antidumping duties. Overtime, the Australian government has been encouraging reduction of costs brought about by regulatory divergence. One way to solve this is to rely on globally harmonized measures as outlined by the WTO. WTO encourages countries to ensure that their technical requirements are in line with international standards to avoid compliance procedures that are much detailed which may dent the market confidence. The government put in place regulations to check the costs associated with certain standards. Some of the complicated standards imposes unnecessary compliance costs thus limiting the policy effectiveness and should thus be repealed. The regulators should shun from modifying the existing standards particularly if the reason for doing so is to achieve self-interests but should only do this if they can clearly show that modification is necessary to address the intended particular problem. In regard to this, it has been clear that the Australian regulatory policy reflects in a clear way commitment to international harmonization. The body responsible for development, formulation and approval of Australian international standards is a nonprofit making body. Thus this promotes openness and integrity in the process of developing standards. This board responsible for standard setting process is also a signatory of WTO code of practice. Conclusion The Australian global trade policy will continually be guided by the domestic reforms and negotiated access for exporters to international markets. Penetration of global economies will be based on the trading blocs formed with other member countries. Free trade negotiations will continue to seek opening of new markets though not holding back to domestic reforms if other governments decline to open their markets to external competition. Support for multilateral liberalization will be pursued to aid in strengthening the global trading system. The authorities continue to seek a reduction of non-tariff barriers and also behind the border measures that restricts cross border trade in goods and services. Amongst its foreign policy, the government will continue to provide financial support to developing countries willing to undertake domestic economic reforms. These policies will be counter checked regularly against the pre-determined principles and disciplines set out by the government just to ensure that the progress being achieved is in line with that of the previous years and also accommodating the emerging opportunities for further liberalization. References Adams, R., Dee, P., Gali, J. & McGuire, G., 2003. The Trade and Investment Effects of Preferential Trading Arrangements – Old and New Evidence, Productivity Commission Staff Working Paper, Canberra Australia: United States Free Trade Agreement. Baldwin, R., 1997. The Causes of Regionalism. The World Economy, 20, pp. 865 – 888. Garnaut, R. & Bhagwati, J., 2003. Say No to This Trade Deal. The Australian journal, 8, pp. 8- 63. Gordon, B. K., 2003. A High Risk Trade Policy. Foreign Affairs, 82 (4). Pink, B. and Jamieson, C., 2000. A Portrait of Australian Exporters. Canberra and Sydney: Australian Bureau of Statistics, Australian Trade Commission Productivity Commission, 2010. Bilateral and Regional Trade Agreements. Research Report, Canberra, November. Roy, M., 2003. Implications for the GATS of Negotiations on a Multilateral Investment Framework. The Journal of World Investment, 4 (6), pp. 963-986. Stoler, A., 2003. Australia – USA Free Trade: Competitive Liberalisation at Work in 2003. Agenda, 10 (4). Read More