3012GIR Lecture Notes - Lecture 5: Trade Diversion, Regional Comprehensive Economic Partnership, Multilateralism
22 May 2018
School
Department
Course
Professor
L5. Australia's Foreign Economic Relations
Themes
• Shift in economic relations
o From protection to openness
• Distinctions between trade and investment
• Investment
o From Britain to United States
• Trade
o From Britain to Japan to China (and Asia generally)
The Vulnerabilities/Opportunities
• Vulnerability to/opportunity for changes in foreign demand for exports
o Increased dependence on China
• Vulnerability to/opportunity for changes in foreign supply of finance
o High levels of foreign (private) debt
• Unprecedented
• Can't use this to spur economy in next 10 years
• Continuing reliance on resources
o Increased supply
o Climate change
• The multi-speed economy
o Decline of manufacturing
• Continuing need for a diversified economy?
o Mining
o Manufacturing
o Services
• Need for government intervention
o But what sort
find more resources at oneclass.com
find more resources at oneclass.com
Australia in the World Economy
• A history of boom and gloom
• Economic vulnerability and opportunity
• The dominance of the protectionist policy structure and its decline
• Growing importance of Asia
• Embrace of globalism
• Transformation, but continuities
The Protectionist Policy Structure
• Industry protection
• Arbitration and the living wage
• White Australia Policy
• Residual welfare - "working man's welfare state"
• Imperial benevolence
Pre-World War II
• Importance of Britain
o Trade dominated by Britain
o Little Asian trade
• 1890: Asian trade 1.6%
• 1913: 5.6%
• Australia as a functional component of the British Empire economy
• British foreign investment, markets and immigration - "men, money, markets"
• Gradual decline of Britain over 20th century
o Still dominant partner until early 1960s
• Rise of Japan as major trading partner stillborn in the 1930s
o Trade diversion
o Descent into war
o Also, offended the United States
Post-War
• Long boom in developed world
• Maintenance of protectionist policy structure
• Continuing belief in potential of China
• US direct investment
• 1970s economic crisis
o Australia 3 recessions (and 2 other downturns) in 20 years
1980s Choices
• A structural and cyclical crisis
o The terms of trade
• Prices of exports declining, prices of imports increasing
• The Banana Republic
• Australia needed to globalise and liberalise
Terms of Trade: 1974-1986 (2006-07=100)
find more resources at oneclass.com
find more resources at oneclass.com
Hawke-Keating Transformation
• Globalisation and economic liberalism
• Global adjustment
• Integrate with Asia
• Increased trade, but not investment
• Multilateral trade deals
o Cairns Group
o Free Trade advocacy
Howard Government
• Consolidation of the globalisation project
• Shift to bilateralism in trade
• Free trade deals with Singapore, Thailand, United States
• 1997/98 Asian Financial Crisis
• The tech boom (not really in Australia)
• From 2000, China the main story
• Housing boom
• Massive increase in private debt
• Luckiest government in Australian history?
Rudd/Gillard
• Everything subsumed under the weight of the global recession
find more resources at oneclass.com
find more resources at oneclass.com
