Case Study of Australian Companies
The economic decision making is actually a technical act of deciding the matters of any economy. In this study we have considered two trading partners of Australia and these are India and China. So we are going to analyze the decision makers of these two countries, India and China along with their common trading partner Australia. We will critically evaluate their behavior and decisions and its impact on their economic condition as well as in the global economic scenario. The economic decision makers of a country are the business tycoons, the exchange board, the finance minister, economic advisor and head of the central bank etc.
The largest two way trading partner of Australia is China by some margin. Australia meets the strong demand of Iron core, liquefied natural gas and coal as a trading partner. So the biggest trading partner of Australia is China. The effect of global economic meltdown can be seen in most of the trading countries of the world in the recent past (Chapman, 2013). Australia succeeded to escape from this with the help of exporting culture to China in the past two years. The consumption of natural gas, coal etc. in China is really huge. So the major mining companies in Australia rely on this huge demand of China. The exporting compositions from China to Australia are prams and sporting equipments, telecommunication equipments, clothing, toys, computers etc. The amount of bilateral trade between China and Australia is worth A$ 105 billion in the period 2010 – 11 (Cheung, 2015). In this total Australia exports the major portion of the bilateral trade and China exports the minor part. The amount of export from Australia to China is worth A$ 64.8 billion in total but the export amount from China to Australia is worth just A$ 41.2 billion in the period 2010 – 11. The export – import relation between Australia and China was not so good in the past (Wu and Lam, 2011). After the trade liberalization and also the globalization the trade relationship between Australia and China developed. In 2012, the import of Australia from China was worth A$ 50 billion (approx.) and the export of Australia to China was worth A$ 85 billion (approx.) (Lu, et al, 2015). This statistics shows the increments in total export – import composition in amount. The export of Australia to China is much more than the export of Australia to India. If we do a compartmental analysis of total export and import dividing into export-import of products and services, the vision will be clearer. The import of products of Australia from China is worth A$ 35 billion and in case of services this amount is worth A$ 15 billion (Mandal, 2014).
A Comprehensive Economic Cooperation Agreement is negotiated and signed between Australia and India and it is launched in May. 2011 (Strba, 2012). Already six rounds of negotiations have done under this agreement and the most recent negotiation was held in December 2014.
The key internal issues faced by the company are –
1. This comprehensive agreement assists behind the broader restrictions on trade in goods and broadens the base of merchandise trade by affecting the tariff barriers.
2. This agreement reduces the barriers of foreign trade and also encourages and facilitates the foreign investment. In this way the transparency has increased and investment protection is enhanced.
3. This FTA has influenced the potential to expand the trade in services between the two countries by reducing the barriers faced by the service suppliers of Australia.
Classical economics discovered that trade can be treated as the engine of growth of any economy and it is also implemented by the neo classical and the modern economists. After the modernization and globalization India has seen a very good growth and development scenario. Now trade can act as a catalyst in the development process of India. As because Australia takes a major potion in trade composition of India so expansion of trade with Australia can improve GDP condition of India. It is also applicable for China as well and the trading partner Australia.
According to Bandyopadhyay et al (2012) the eighth largest trading partner of India is Australia and India takes the fifth position in trading with Australia. Australia is one of the biggest exporting countries of the world. India takes part as the export destination of Australia. In the period of 2009 – 10, India takes the fourth place among the export destinations of Australia (Calo, 2014). Australia has revealed a good trading country in the recent decade and achieved an exponential growth rate in trade with India. The trade amount of goods and services between India and Australia was near about A$ 6.55 Billion (Pittock, et al, 2015) in 2003 -04 but it rises in leaps and bounds with in the period of 2009 – 10 in a more than triple amount (A$ 21.05 billion). India exports in a much lesser amount to Australia than Australia exports to India. The export amount from India to Australia is A$ 2.80 billion (approx.) where as the export amount from Australia to India is A$ 18.9 billion in 2010 – 11. A clear analysis can be made if we can recognize the amount of total goods export – import and services export – import between two countries. In 2010 – 11 periods India exported goods of A$ 2.1 billion to Australia and imported goods of A$ 15.75 billion from Australia (Rafiqul et al, 2012). The amount of services export from India to Australia is A$ 0.70 billion and the amount of services import from India to Australia is A$ 2.5 billion.
We can also analyze the import – export composition between two countries. The largest export of India to Australia is pearls and gems, jewelers, medicaments and passenger motor vehicles in 2010 - 11. The export composition of services from India to Australia is computer and information services and tourism and the export composition of services from Australia to India are education, education related travel and tourism (Strba, 2012).
The trading relationship between Australia and India has seen a remarkable growth in the recent past. It is already discussed in the previous analysis. There are many complementarities between the two countries and the economic decision makers take the much effective fuels from this and Australia is also in a advantageous condition for this. The trade influencing government policies of both of the countries has influenced the Trade amount as well as the trade relationship after the financial year (FY) 2003 – 04 (Bandyopadhyay, et al, 2012). The value of the two way trade of goods and services was worth of A$ 8.2 billion in FY 2003 – 04 and it increased up to worth A$ 15.3 billion in FY 2013 – 14.
Australia gets a huge market in India because of its 1.2 billion populations and India is also the largest democracy. There are several positive points that are utilized by Australia for trading purpose. The positive points are the youthful population of India, the diversified economic environment of India, the well growth trajectory of India etc. (Rafiqul et al, 2012). All these matters influence the Australian business houses to grab a very good and significant business opportunity. The different sectors to business are manufacturing, mining and services, agriculture, energy etc.
The China-Australia Free Trade Agreement (ChAFTA) is signed between the two governments of China and Australia. It is a bilateral Free Trade Agreement (FTA) in recent past (17th November, 2014).
After the implementation of this agreement fully between these two countries the 95% of the total trade between Australia and China will be free of tariff (Pittock, 2012). This tariff policy includes several agricultural products basically and it should be noted that beef and dairy are also included under this agreement. The service sector of Australia is liberalized to market access after this agreement. The investments of the private companies of China in Australia will not remain subject to FIRB approval. There is a Work and Holiday Agreement too for work and holiday makers of China in Australia. Up to 5000 visas will be granted by Australia to Chinese nationals (Pittock et al, 2015)
In the above analysis the trade condition between the countries Australia and China and also Australia and India is analyzed firstly. Then the economies of global decision makers are tried to be cruised. Their decisions are so vital to develop the trade condition of the economy and also the existing trade relations. Under these circumstances it is clear that the free trade agreement between two countries results very much positively in the trade situation between two countries.
There are two trading partners of Australia in this analysis. So a comparative study can provide a better conclusion regarding this matter. it is clear that the trading position of Australia is better with China than India. But the economic thinking of current government of India can improve the trade relationship between Australia and India. It is noted that the 95 percent of goods and services are tariff free in between Australia and India. It is also possible in between India and Australia.
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