Qu 5: How do trade blocs affect the export from Australia of your Business products or services?

What global trade initiatives might affect these firms in their export activities? . World Bank, Trade Blocs, 2000, Oxford University Press, New York. Winters, L.A. and Soloaga, I., Regionalism in the Nineties: What effect on trade? 1999, retrieved from http://www.worldbank.org/html/dec/Publications/Workpapers/wps1999series/wps 2156/wps2156.pdf Viner, J., The Customs Union Issue, 1950, Carnegie Endowment for International Peace, New York. Manzano, G. and Mortel, K., ASEAN free trade area: making trade or breaking it? Recent Economic Indicators, 2003, University of Asia and the Pacific, retrieved from http://www.tesda.gov.ph/services1/IS_mar2003.asp. Adams, P.D. and Horridge, J. M., Long-run effects of AFTA Trade Liberalization, with special reference to the Thailand Economy, 2000, Center of Policy Studies, Monash University, Melbourne, retrieved from US tarrifs http://www.usaexportimport.com/usa-tariffs-duty-rates.php http://www.monash.edu.au/policy/ftp/report/rp0009.pdf. (To clarify: trade blocs exist to liberalise trade between member countries, in order to generate wealth for all. For example APEC, of which Australia is a member, has a number of free trade initiatives. Other (non-member) trade blocs will affect the tradability of Australian products into their member countries show how, with examples. Global trade initiatives such as the Doha Round of the WTO impact on Australian exporting companies in a number of ways, including TRIPS (Google this). Find other global organisations concerned with freeing world trade and evaluate them from an Australian companys perspective. Relate all these to your type of business products. Your answer to this question should evaluate to a reasonable depth the effect of trade blocs and global trade initiatives on the exports from Australia of your Business). an Australian manufacturer of automative steering equipment for the after-market may consider that the demand in Malaysia would not warrant manufacture in Malaysia. ASEAN Free Trade Area means that poriducts the Australian firm might manufacture in Maaysia would receive either preferential or duty-free entry into Indonesia, Singapore, Brunie, the Philippines, Thailand and Vietnam. trade blocs have a nature of transparency between member state and as a result exporters that sell to one member of the bloc will be forced to keep prices reasonable in another due to the fact that consumers will be aware of prices across all member states.

channels are characteristically longer for consumer goods and include more intermediaries due to the lower unit value of sale. In the fashion market for example differences in import regulations and legislation in other countries, sizing and seasons add to complications for Australian businesses, the EU due to its economic union would have similar if not identical import regulations and legislation posing a problem, if not a barrier for Australian exporters within the fashion industry "Export a Foreign Affair" Adeline Teoh Dynamic Export May 2010 Trade blocs favour the member states of a particular bloc, or trade agreement. They reduce or remove barriers for members and increase barriers for those outside this bloc in a discriminatory fashion. These trade blocs are described as preferential trade arrangements or a natural trade bloc due to the fact that they are usually engaged by countries of close regional and geographical proximity (Sanoussi Bilal, Trade blocs, in R. Jones ed., Routledge Encyclopedia of International Political Economy, Routledge, forthcoming (2001).). This poses a problem for Australian exports as a whole due to the nations geographic location, excluding it from a number of important trade blocs and effectively offering barriers to export. Trade blocs are increasing in number and approximatley 40% of the worlds trade is being conducted within these preferential economic arrangements (Fletcher, Brown International Marketing- An Asia-Pacific perspective 2008). Australian exports are hindered by trade blocs for several reasons: as trade is liberalised within the bloc, it remains protected outisde, causing member nations to buy more from those within the bloc and less from those outside, therefore it can be deduced that Australian exports would suffer accordingly (Does AFTA create of divert trade? Helen Cabalu, Cristina Alfonso ) ; furthermore a trade bloc such as NAFTA affects the prices at which consumer goods can be sold, as a result of demand for, and effectively price of, non-member exports decreasing. This in turn negatively affects Australia's terms of trade which can lead to higher tariffs from preferential trade arrangements (Viner, J., The Customs Union Issue, 1950, Carnegie Endowment for International Peace, New York). Despite the apparent barriers to exports as a result of being a non-member the opposite holds true for being a member of a trade bloc, that is, the liberalistation and preference of trade between Australia and its affiliate member states, examples of such agreements are APEC and the Australia-US Free Trade Agreement ( Fletcher & Brown) which benefited Australian exporters by: eliminating duties on over 97% of US tariff items for Australian non-agricultural products and enhancing legal protections that gaurantee market access and non-discriminatory treatment for Australian providers of services The industry of food and beverage can be constituted as a consumer good, Australian wine is a higly coveted beverage product around the world, despite this fact it is still subject to the whims of trade blocs. One such Australian exporter of wine is Yellow Tail pty. ltd. which has a dominant presence in the US market and a fledgling presence in the

UK (http://www.yellowtailwine.com/read-our-story). In order to access the American market Yellow Tail took advantage of the Australia-United States Free Trade Agreement (AUSTFA) which allows for reduced tariffs on wine imports, an increase in qouta, an easier investment process and the reduction of market restrictions. (http://www.austrade.gov.au/Food-and-beverage/default.aspx) It can be construed from this information that being a member of a trade bloc will increase Australian exporters chances of success in a market. As a counter-point to being a member state of AUSTFA the exportation of clothing for design company Collette Dinnigan (http://www.collettedinnigan.com.au/) to the UK is governed by the fact that it is exporting from a non-EU (European Union) nation and as a result is subject to the Common Customs Tariff under the harmonised trade system of the EU. The Value added tax (VAT) are levied on all clothing and textiles at 17.5%; furthermore all textile products made in non-member countries are possibly subject to qouta, for which a licence must be gained. Finally in exporting textile and clothing goods to the UK from Australia requires obtaining a written customs duty ruling from UK customs service, an import license and finally must undergo testing before it can be sold in the UK. This process is in contrast top the relatively easier process of wine exportation due to the member and nonmember status respectively.(Clothing and fashion to the United Kingdom http://www.austrade.gov.au/Textiles-and-clothing-to-the-United-Kingdom/default.aspx) The World Trade Organisation (WTO), the International Monetary Fund (IMF), and their respective initiatives have a myriad of implications for Australian exports. The aforementioned organisations have the ultimate goal of trade liberalisation, that is essentially, the reduction of protectionism in order to encourage trade. From a reduction of economic protection it follows that an Australian exporter of goods would be more inclined to export as costs have been siginificantly reduced, for example, the UK currently levies a tax on clothing and textiles to a rate of 17.5% (dfat) if this was to be reduced along with a number of other protectionist policies more exporters of Australian consumer goods would be able to participate in the market. One such initiative is the Trade-Related Aspectsof Intellectual Property Rights (TRIPS) (http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm) which is an attempt by the WTO to introduce a common standard of intellectual property laws to its member countries. This effectively offers Australian exporters of high-technology consumer goods such as films, and graphics and the like greater protection in those countries which were lacking in intellectual property enforcement and abundant in informal markets. As a result of this protection more Australian exporters can consider a greater variety of markets as feasible for entry. This will benefit Australian companies such as Yellow Tail who rely on their cultural grounding, brand development and promotion for success, and as a result, issues such as similar names and logos can be avoided, for example, cheddar refers to a particular type of cheese not necessarily made in Cheddar, UK. The Doha round is designed to align the member countries of the WTO and negotiate the terms of their membership, with the ultimate goal of trade liberalisation and facilitation. It has allowed Australian exporters to pursue trade in a greater amount of markets with increased protection. These trade initiatives and bodies have been criticised extensively due to their skewed sense of decision making, that is, their decisions favour and satisfy the Advanced

economies before the needs of the developing economies; therefore in a relative sense an Australian company reaps many benefits from said organisations. However despite Australias position as an advanced economy, geographically it is at a disadvantage and as a result it cannot participate in many of the trade blocs currently active, this in turn puts Australias exporters at a disadvantage making it hard for them to compete with excessive tariffs, duties and processes upon exportation.