Trade as a global link for Australia what are the advantages and disadvantages?
Advantages of trade
o Local businesses can grow and create more jobs through
exporting
o There becomes a wider choice of imported goods and
services, often at cheaper prices for the consumer and
producers
o Increased economic growth for Australia leading to an
increased standard of living (measured by GDP)
o It leads to strengthened strategic and political ties
between nations, that is geopolitical ties (e.g. through
agreements and blocs such as AUSFTA and APEC)
o Exports such as tourism encourage a greater cultural
understanding
o Exports mean a wider market potential for Australian
businesses (e.g. China has over 1 billion people)
o Increased competition promotes innovative production
methods, the use of new technology, marketing and
distribution methods.
o FTAs mean increased investment in Australia by overseas
companies
Disadvantages of trade
o Being located in the Asia-Pacific region, international
trade has meant that some industries in Australia have
had to cease operations as they were not able to
compete with cheap imported goods
o Australian businesses, employees and consumers are
more vulnerable to downturns in the economies of our
trading partners, e.g. Recession in the USA leads to
decreased demand for Australian exports, leading to
falling export incomes, lower GDP, lower incomes, lower
domestic demand and rising unemployment
o Developing or new industries may find it difficult to
become established in such a competitive environment
o Free trade can lead to pollution and other environmental
problems as companies fail to include these costs in the
price of goods in trying to compete with companies
operating under weaker environmental legislation in
some countries
o There may be an exhaustion of natural resources