The paper "Free Trade Agreement Negotiations between Australia and China" is a perfect example of a macro & microeconomics case study. According to Mai et al, (2005) Australia and China have established strong business relations. Both governments are interested in expanding the existing relationship in order to achieve sustainable performance in trade and investments in both countries. The commitment was evident when the two countries signed a Trade and Economic Framework on 24 October 2003. Besides the Framework, Australia and China are negotiating on establishing a Free Trade Agreement (FTA).
Both countries realize that FTA involving the import and export of products will help promote closer relations and their mutual interests. The reason why the two countries are negotiating on an FTA is to liberalize trade and investment between Australia and China. They believe that it is the best mechanism for achieving regional economic development. Australia’ s Merchandise imports from China include clothing, toys, footwear, furniture, computers and telecommunications among others (Antkiewicz and Whalley, 2005). For the purpose of this essay, the focus is on the importation of products from the textile industry. Free Trade Agreement as one of the levels of economic integration leads to differential treatment for the members of the agreement.
When the FTA is implemented between Australia and China, economic changes are expected to take place within the two countries due to the abolition of tariffs imposed on the imports. When the tariffs on the textile products are eliminated, the prices of those particular imports from China will also go down in Australia with almost the same amount of the import duties imposed. Similarly, China will have to import goods from Australia at a considerably low price (Siriwardana, 2006).
Adjustment of prices in both countries as Mai et al, (2005) argues will affect pricing, which eventually enhances resource reallocation. The implication for this agreement is the differential treatment for Australia and China as opposed to non-members. In particular, both Australia and China will be required to remove the bilateral tariffs, and at the same time maintain the tariffs imposed on non-members to FTA, hence discrimination.
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