Government Intervention in Trade. IntroductionEconomic revolution across the world has resulted to an obvious growth in trade among different countries as well as enhancing regional and international trade blocs. It is important to consider here that such growth has been greatly influenced by such factors as political, economic and cultural orientations of the countries involved. Many governments are determined to expand their trading partners in line with the benefits that have been put across in relation to international trade. Australian government has vigorously tried to engage in trade with limitless nations in America, Europe, and Asia as well as in Africa.
This probably explains to some extent the growth and stabilization of the Australian economy (Baucus, 2001). The Australian government has tried to formulate trade policies that maximize the countries trade gains. The policies have enabled Australia to secure markets for its goods and services through its rigorous approach to bilateral, regional and multilateral trade. Australia has done this by signing of free trade agreements with countries such as Singapore, New Zealand, Thailand, USA etc. however, free trade agreements has been crippled more often than not by many governments who certainly think that such agreements do not favor their economies.
This has made such agreements to be preferential whereby the governments will only engage in them when they are favored and will retract when they think the economic benefits are not leaning on their side (Bhagwati & Jadish, 2002). The general agreement on trade and tariffs has set out conditions through which a member of a free trade area can retract from the agreement which is usually a prescribed period of time usually not less than ten years.
This is clearly shown under Article 14 of the GAAT. Member countries however for one reason or another have objected this ruling and this has caused more mayhem in international trade. Economic liberalism that were imposed by GATT and by the WTO has contributed to the course that, many countries have taken where they liberalize more on the easy trade areas and liberalize less on the pressured trade areas (Sexton, 2003). Essentially this makes countries divert trade fares from the undeveloped low-cost countries to the developed higher-cost countries.
This would see replacement of trade involving high-cost producer countries and low-cost import countries. This biased nature delimits the meaning and the general objectives as outlined in the GATT and the WTO making free trade lose it meaning and relevancy. A question of equity among member states of a certain free trade area will certainly be the order of the day for the unstable economies (Stiglitz, 2002). In this regard it will be difficult to rely on free trade areas for any member country. This is because the net gains from diverted trade and trade creation is barely a question of empiric circumstanced rather than factual.
Australian economy can be accounted for from natural trade other than from the preferential trade in free trade areas. For instance, according to Garnaut, (2002) the agreement on free trade between the US and Australian has been depicted to be economically detrimental to Australia. This relationship has been shown not only to affect the economic relationships between these two countries but has also been said to affect the political harmony between them and to the East Asia.