EFF TrendsInTrade

T R E N D S I N

T R A D EAustralia's

FIGURING OUT THE FIGURES

© Commonwealth of Australia 2003

This publication is copyright with all rights reserved. Teachers may reproduce the material contained in thispublication for class use provided such material is not for resale or any form of commercial gain. Apart fromphotocopying by teachers, no part of this book may be reproduced in any form or by any means without thewritten permission of Austrade, except as permitted under the Australian Copyright Act 1968.

Published by Manager Education Programs

AustradeGPO Box 2386Canberra ACT 2601Australia

Fax (02) 6201 7304Email: [email protected]: http://www.austrade.gov.au/studentcentre/

Written by Stephen ChapmanIllustrated by Ed RadclyffeEdited by Leigh Derigo and Anton WassonDesigned by Bytes ‘n ColoursPrinted by Paragon Printers

Acknowledgements:Department of Foreign Affairs and Trade Market Information and Analysis Division, particularly Jane Monico forthe concept of a trade data book for students, and Neil Batty and Sue Begley for providing data and editing. Rob Byrne for his original work on this project.

Contents

Introduction 1

Module 1—The big wide world of international trade 4

Section 1.1 Introduction ................................................................................................4

Section 1.2 Exports ........................................................................................................7

Section 1.3 Imports ........................................................................................................7

Section 1.4 Foreign exchange..........................................................................................7

Section 1.5 Benefits of international trade ......................................................................8

Section 1.6 Module summary ........................................................................................10

Module 2—Analysing Australia’s trade – the tools of the trade 11

Section 2.1 The language of international trade ........................................................11

Section 2.2 Composition and direction of trade ........................................................14

Section 2.3 Percentage changes ................................................................................15

Section 2.4 Interpreting tables ..................................................................................18

Section 2.5 Interpreting graphs ................................................................................20

Section 2.6 Calculating the balance of merchandise trade ..........................................22

Module 3—One hundred years of trade 25

Section 3.1 Direction of trade: exports ......................................................................25

Section 3.2 Direction of trade: imports ....................................................................32

Module 4—Australia’s emerging trade patterns—through the Nineties and into the New Millennium. Entry level analysis 34

Section 4.1 What does Australia export? ....................................................................34

Section 4.2 Principal merchandise exports ................................................................36

Section 4.3 Principal service exports ..........................................................................39

Section 4.4 What does Australia import? ..................................................................42

Section 4.5 Principal merchandise imports ................................................................44

Section 4.6 Who are Australia’s main customers? ......................................................46

Section 4.7 Australia’s principal exports by geographic region ..................................48

Section 4.8 Who are Australia’s principal suppliers? ..................................................50

Section 4.9 Balance of merchandise trade ..................................................................52

Section 4.10 Trade statistics at a glance ....................................................................54

Section 4.11 Module summary..................................................................................58

Section 4.12 Revision exercise ..................................................................................59

Module 5—Australia’s emerging trade patterns—through the Nineties and into the New Millennium. Extension level analysis 62

Section 5.1 Australia’s rank in world exports ............................................................62

Section 5.2 Individual country investigation ..............................................................65

Section 5.3 Australia’s major merchandise exports: rank, value and growth................66

Section 5.4 Australia’s trade by merchandise commodity ..........................................68

Section 5.5 Australia’s export of services ..................................................................70

Section 5.6 Reflection ..............................................................................................73

Appendix 1—Glossary 74

Appendix 2—Answers 76

Appendix 3—World map outline 101

INTRODUCTION

TRENDS IN AUSTRALIA’S TRADE: FIGURING OUT THE FIGURES 1

Trends in Australia’s Trade: figuring out the figures

Introduction

The Exporting for the Future program aims to raise awareness among young Australians of the importance ofexports to Australia.

Trends in Australia’s Trade: figuring out the figures is the fifth in the Exporting for the Future series. It has beendesigned to engage and challenge students by providing a range of skills–based activities examining Australia’s‘Composition of Trade’. The activities are intended for use with students in Years 9–12 and will assist users to:

• examine the nature and importance of trade to the Australian economy

• investigate and discuss Australia’s composition and direction of trade

• analyse the changes in Australia’s trading patterns

• describe in general terms the benefits from trade

• communicate trade information, ideas and issues, using relevant international trade terminology and concepts in appropriate forms.

Many of the activities have the potential for deeper discussion and further investigation. Other books in this serieswill provide valuable field knowledge in the area of international trade and will complement and enrich material inthis publication. Other titles in this series include:

• Exporting for the Future Resources for Years 9 and 10

• Exporting for the Future Resources for Years 11 and 12

• Going Global—An Export Strategy Game

• Export Plan Competition as a unit of study.

A thorough understanding of Australia’s place in international trade is imperative if today’s students are toparticipate in the global community. The activities in this book are designed to contribute to the realisation of thisimportant goal.

For a more detailed discussion of Australia’s Composition of Trade (COT) it is recommended that

students access the Department of Foreign Affairs and Trade web site at www.dfat.gov.au/publications/statistics.html

TRENDS IN AUSTRALIA’S TRADE: FIGURING OUT THE FIGURES2

Structure

Trends in Australia’s Trade: figuring out the figures is divided into five modules. Teachers may wish to havestudents complete entire modules or they may wish to select specific activities as required.

• Module 1—The big wide world of international trade. This module begins with a pre–test (QuickQuiz) designed to engage students in the topic. A brief overview of exports, imports, foreign exchangeand benefits of international trade then follow in which the main terms, concepts and issues areintroduced. A structure, which can be used to complete a module summary, is then presented. Thecorrect answers accompanied by a brief explanation are provided in appendix 2.

• Module 2—Analysing Australia’s trade—the tools of the trade. This module provides students withthe necessary skills required to analyse the statistical data used to measure Australia’s trading patterns.After an introduction to the main terms used in international trade students are introduced to theconcepts of composition and direction of trade. Instruction on how to calculate percentage changes thenfollows. Advice on table and graph interpretation is then presented and the module concludes with abrief explanation of the balance of merchandise trade.

• Module 3—One hundred years of trade. This module provides students with a long–term perspectiveof Australia’s direction of trade. (An appreciation of the past is necessary to understand the present.)Changes to Australia’s direction of trade over the last century are investigated.

• Module 4—Australia’s emerging trade patterns–through the Nineties and into the NewMillennium—Entry level analysis. This module examines Australia’s composition and direction oftrade over the last decade. It commences with an overview of Australia’s exports and then a detailedexamination of Australia’s principal merchandise and service exports. This is followed by an overview ofAustralia’s imports and then a detailed examination of Australia’s principal merchandise imports.Australia’s main customers and suppliers on a country and regional basis are then examined. Australia’sbalance of merchandise trade with selected countries is then inspected which is followed by a structurethat can be used to complete a module summary of Australia’s composition and direction of trade. Themodule concludes with a revision exercise.

• Module 5—Australia’s emerging trade patterns–through the Nineties and into the NewMillennium—Extension level analysis. This module is intended for those students who wish toinvestigate the topic at a deeper level. It commences with an analysis of Australia’s rank in world exports.This leads to students selecting a country and undertaking an investigation of its trade with Australia. Adetailed examination of the rank, value and growth of Australia’s merchandise exports is then undertakenwhich is followed by an examination of Australia’s merchandise exports by commodity. The importanceof and growth in Australia’s exports of services is then presented and the module concludes with astructure that can be used to complete a module summary.

Answers are provided for all activities in appendix 2

INTRODUCTION


Activities

The activities test a range of abilities and intelligences and are arranged under the following headings:

Remember—recall information

Understand—be familiar with an idea, term or concept

Interpret—draw meaning from

Create—make a model, poster etc.

Communicate—undertake group work, pair work or class presentation

Participate—conduct a role–play, class discussion, debate etc.

Investigate—plan, inquire into and draw conclusions about

Analyse—identify components and the relationship between them

Predict—Suggest what may happen based on available evidence

Connect—use of the Internet to research information.


Module 1 The big wide world of international trade

Section 1.1 Introduction

Although we live in a large, wealthy country we are not able to produce all the goods and services required byAustralian consumers. Also, our population and therefore our domestic market is small in comparison with manyother countries. Because of these two factors we need to trade with the rest of the world. International trade, thebuying and selling (exchange) of goods and services between countries, has always played an important part inAustralia's economic development.

Australia's international trade: it's a big deal

Activity 1.1—Quick Quiz

Purpose:

The purpose of this quiz is not so much to test your current knowledge of international trade but rather tointroduce you to some important issues, trends and facts regarding Australia's international trade patterns,especially the composition and direction of trade. (Quiz tests like this one, which are given at the beginning of atopic, are called 'pre–tests'.)

You may have studied some of this material in class and can correctly answer most questions. Alternatively, muchof this information may be new to you. Either way by completing the activities contained in this book you willgain a deeper understanding and appreciation of:

• what goods and services Australia exports

• what goods and services Australia imports

• which countries are Australia's main customers

• which countries are Australia's main suppliers.

You might like to complete this quiz again once you havecompleted all the activities in this book. Compare your results to determine the improvement inyour knowledge and understanding.

Instructions:

1. You can work singularly or in pairs.

2. For each question, choose the best alternative.

3. The correct answers accompanied by a briefexplanation are provided in appendix 2.

1: THE BIG WIDE WORLD OF INTERNATIONAL TRADE


Quiz questions

1. In 2001–02 the value of Australia's exports of goods and services was:

(a) $108.3 billion

(b) $152.2 billion

(c) $198.6 billion.

2. What were Australia's three principal merchandise exports by value for 2001–02?

(a) coal, crude petroleum, iron ore

(b) wheat, gold, aluminium

(c) wool, bovine meat, aluminium.

3. Since 1996–97, Australia's exports have increased by an annual average of:

(a) 9 per cent

(b) 5 per cent

(c) 12 per cent.

4. Total Australian merchandise exports comprise mainly:

(a) elaborately transformed manufactures (ETMs)

(b) simply transformed manufactures (STMs)

(c) primary products.

5. In 2001–02 the value of Australia's imports of goods and services was:

(a) $97.5 billion

(b) $151.9 billion

(c) $215.6 billion.

6. What were Australia's three principal merchandise imports for 2001–02?

(a) telecommunications equipment, medicaments, aircraft and parts

(b) vehicles for transporting goods, computer parts, motor vehicle parts

(c) passenger motor vehicles, crude petroleum, computers.

7. Since 1996–97 Australia's imports have increased by an annual average of:

(a) 5 per cent

(b) 8 per cent

(c) 11 per cent.


8. Total Australian merchandise imports comprise mainly:

(a) ETMs

(b) STMs

(c) primary products.

9. Considering that in 2001–02 the value of exports of goods and services was $152.2 billion and the valueof imports of goods and services was $151.9 billion, Australia therefore recorded a:

(a) trade constant of $300 million

(b) trade deficit of $300 million

(c) trade surplus of $300 million.

10. In 2001–02 Australia's share of global merchandise trade stood at:

(a) 1.0 per cent

(b) 5.0 per cent

(c) 3.0 per cent.

11. In 2001–02 Australia's largest individual export market was:

(a) United States

(b) Japan

(c) Republic of Korea.

12. In 2001–02 Australia's largest individual import supplier was:

(a) United States

(b) Japan

(c) China.

13. In 2001–02 Australia's largest export market in terms of country groups was:

(a) the European Union (EU)

(b) Asia Pacific Economic Cooperation (APEC)

(c) Association of South–East Asian Nations (ASEAN).

14. Which Australian major export item has been the fastest growing over the 1990s with about a 790 percent growth?

(a) wine

(b) tourism

(c) educational services.

15. In 2001–02 which country did Australia have a bilateral merchandise trade surplus with?

(a) United States

(b) Japan

(c) China.



Section 1.2 Exports

What one thing do the following Australian businesses have in common–Mambo, GM–Holden and MenindeeFruits? They all sell their products on the world market, that is, they export to overseas countries. An export is agood or service we sell to another country. Australian businesses now export a huge variety of goods and servicesincluding, coal, wool, foodstuffs, passenger motor vehicles, crude petroleum, education services and tourism.

Even though Australia is not one of the world's main trading nations, trade is crucial to the Australian economyand the wealth of the Australian people. Our exports sales have grown rapidly over the last twenty years as shownin graph 1.1. Australian businesses are able to sell to a global market of over 5 billion people.

Graph 1.1: Australia's exports 1981–82 to 2001–02

SOURCE: ABS TRADE DATA ON DFAT STARS DATABASE

Section 1.3 Imports

Imagine all the Honda cars, LG televisions and IBM computers sold in Australia during the past year. They are justa small part of all the imports which Australian consumers and businesses buy. An import is a good or service webuy from another country. We import goods and services because we prefer foreign versions, can purchase themmore cheaply from overseas or we cannot produce them ourselves.

Section 1.4 Foreign exchange

Increased export sales generate foreign exchange earnings. Foreign exchange is money from other countries thatflows back into the Australian economy. Some of this money can be used to buy imports. Of course, it is better forour economy when export sales are greater than the amount of imports purchased. This avoids the problem ofoverspending and creating a foreign debt. Over time, foreign debt can become a serious economic problembecause, as a country, we live beyond our means.

0

20

40

60

80

100

120

140

1981

-82

1982

-83

1983

-84

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

Years

A$

Bill

ion


Section 1.5 Benefits of international trade

Exports are important to Australia in terms of the benefits to our economy and to our community.

Economic benefits

• More job opportunities. Approximately 1.7 million jobs directly or indirectly connected to theproduction of exports.

• 1 in 5 Australian jobs rely on exports, 1 in 4 jobs in regional Australia.

• Exporters tend to pay higher wages, employ a higher proportion of full time permanent staff and aremore likely to provide training for their staff than non–exporters.

• A 10 per cent increase in exports could create 70,000 new Australian jobs.

• Foreign exchange earnings allow Australians to import a wider range of products.

• More open trade has increased average annual family income by $1000 each year since 1986.

Business benefits

• International competition encourages businesses to be more innovative, efficient and use new technology.

• Exporting businesses generate growth in infrastructure, production facilities and research and design.

• Opportunities for Australians to live and work overseas.

• Development of personal and business relationshipswith people overseas.

• Development of closer links with the rest ofthe world.

National benefits

• Business and international relationships areimproved through exporting.

• Exports and investment provide almost aquarter of Australia's total income.

• Exports add diversity to Australia's nationalincome sources, providing wider markets andless vulnerability to global economical downturns.



Activity 1.2

Remember

1. List three goods or services that Australia exports.

2. List three goods or services that Australia imports.

3. Why does Australia need to trade with the rest of the world?

4. Why does Australia import some goods and services?

Understand

5. Use the following terms in a sentence to explain their meaning:

• exports

• imports

• foreign exchange

• foreign debt.

Predict

6. What would eventually happen to:

(a) the Australian economy if Australia continually bought more imports and sold less exports

(b) to Australia's standard of living if export sales declined over a long period of time.

Interpret

7. Examine graph 1.1 and then answer the following questions:

(a) What was the approximate value of Australia's exports in:

(i) 1981–82?

(ii) 1991–92?

(iii) 2001–02?

(b) Between which two years did exports increase the most?

(c) Between which years did exports decrease slightly?

(d) Describe the trend in Australia's exports over this twenty–year period.

Create

8. Design an A–3 size poster that could be used to publicise either the main economic, business or nationalbenefits of international trade. Display your poster in your classroom.


Connect

9. Imagine you are the business reporter for the daily newspaper. Your editor has asked you to write a storyabout Australia's future exports. In your article refer to the emerging exports such as services,biotechnology and information communication technology (ICT). To help you, go to Austrade's website at www.austrade.gov.au or the Department of Foreign Affairs and Trade's (DFAT) web site atwww.dfat.gov.au.

Section 1.6 Module summary

This module has introduced you to some of the main terms, concepts and issues related to Australia's composition of trade.

Activity 1.3

Create

1. Construct a mind map summary of the main concepts of international trade. Copy and complete theexample which has been started for you.

INTERNATIONAL TRADE

IMPORTS

BENEFITS OF TRADE FOREIGN EXCHANGE

EXPORTS

REASONS FOR TRADE

• Australia cannot produce all the goods and services required by consumers.

• Small domestic market

2: ANALYSING AUSTRALIA'S TRADE


Module 2 Analysing Australia's trade—the tools of the trade

Section 2.1 The language of international trade

The language of international trade can be quite confusing at first. This is why you need to refer to the glossarywhenever you come across an unfamiliar term. (Bolded words in the text are explained in the glossary located atthe back of the book). To be able to discuss and write about trade–related issues it is important to know themeaning of these specialist words.

Of all the technical terms used in international trade, merchandise trade is very important. Merchandise traderefers to the buying and selling of items that can be seen and touched: a tangible (physical) product. These arecollectively referred to as goods. For example, a computer, wheat, coal or crude petroleum are all goods.Consequently, merchandise exports refers to the goods Australia sells to other countries and merchandise importsare those goods Australia buys from other nations.

Merchandise exports are different to services, another important trade term. Services are intangible. They cannotbe seen but are provided by other people. For example, when an Australian business provides investment advice tooverseas companies or individuals, this is known as a financial service. When overseas tourists fly Qantas this is atransportation service.


Activity 2.1

Understand

1. Using examples, explain the difference between merchandise and services trade.

2. Write the letter 'M' next to those statements that refer to merchandise and 'S' next to services purchases.

(a) A Japanese tourist visits the Great Barrier Reef.

(b) Australia sells wool to China.

(c) Australia buys computer parts from the United States.

(d) An Australian bank provides foreign exchange facilities to a South Korean exporter.

(e) An Australian consumer uses the Internet to purchase a book from England.

(f) A Chinese student pays to enrol in an Australian university course.

(g) A Californian restaurant purchases a case of wine from an Australian vineyard.

(h) An Australian graphic design firm creates digital layout for European magazines.

Create

3. Using newspapers and magazines create an A3–sized collage poster showing examples of merchandiseand services trade. Display your posters in the classroom.

Remember

4. International trade has its own terminology. This activity will help you assess your understanding of themost important terms. Match the term with the correct definition.

2: ANALYSING AUSTRALIA’S TRADE


TERMS DEFINITIONS

(a) goods 1. Established in 1989 in order to promote open trade and economic

cooperation among Asia-Pacific economies.

(b) exports 2. Any articles exchanged but usually used to refer to raw materials.

(c) direction of trade 3. A group of nations formerly known as the EEC. Since 1 January 1999, the 'euro' has become the

official currency of a number of these member states.

(d) European Union (EU) 4. Goods and services sold to foreign consumers, regardless of where the transaction takes place.

These sales earn foreign exchange.

(e) foreign debt 5. The sale and purchase of foreign currencies.

(f) ETMs 6. Collection of tangible items - also called merchandise.

(g) bilateral 7. Goods and services bought from a seller overseas.

(h) commodities 8. Goods that are changed from raw commodities through processes. They are classified as simply

transformed, and elaborately transformed manufactures.

(i) STMs 9. Physical goods such as raw materials, semi-manufactures and manufactures.

(j) consumer 10. Activities done by people rather than production of physical goods. It is generally any activity

except agriculture, mining and manufacturing.

(k) imports 11. International buying and selling of goods and services and making investments in foreign countries.

(l) medicaments 12. The total level of private and government overseas borrowings.

(m) trade deficit 13. Someone who purchases goods and services to satisfy needs and wants.

(n) primary products 14. Goods that involve high levels of processing. Much value has been added to them.

(o) international trade 15. The 'type' of goods and services exported and imported.

(p) ASEAN 16. When the total value of export merchandise (goods) is greater than the total value

of import merchandise.

(q) composition of trade 17. Products that have been provided by nature such as wheat, coal, crude petroleum.

(r) APEC 18. Sellers of goods and services who have no power to influence the prices they receive.

(s) price taker 19. The countries with which Australia trades.

(t) foreign exchange 20. When the total value of export merchandise (goods) is less than the total value of

import merchandise.

(u) merchandise trade 21. Goods that involve low levels of processing. Little value has been added to them.

(v) trade surplus 22. A group of nations including Indonesia, Malaysia, Philippines, Singapore and Thailand

established to promote political, economic and social aims.

(w) merchandise 23. Trade between two countries.

(x) services 24. Substances used in treating disease; medicines.

(y) manufactures 25. The buying and selling of items that can be seen and touched.


Section 2.2 Composition and direction of trade

To analyse a country's pattern of trade over time it is necessary to measure changes in the composition anddirection of trade.

The type of goods and services exported and imported can be classified in three different ways as shown in Table 2.1.

Table 2.1: The composition of trade classification.

The countries the goods and services are exported to and imported from can be classified in three different ways asshown in Table 2.2.

Table 2.2: The direction of trade classification.

It is important that you understand these different classifications as they are used throughout the book.

COMPOSITIONOF TRADE

The type of goods and services exported and imported

DIRECTIONOF TRADE The countries with which Australia trades

CLASSIFICATION EXAMPLES

1. Broad category Primary products, manufactures, services

2. Commodity (goods) Coal, wool, crude petroleum, natural gas

3. Type of activity (services) Transportation services, financial services

CLASSIFICATION EXAMPLES

1. Country Japan, Singapore, France, United States

2. Country Groups APEC, EU, ASEAN, Cairns Group

3. Geographic regions Africa, Americas, Asia



Activity 2.2

Remember

1. Using a diagram, distinguish between 'composition of trade' and 'direction of trade'.

Understand

2. List the three different classifications used for:

(a) composition of trade

(b) direction of trade.

Section 2.3 Percentage changes

When dealing with changes to the composition and direction of trade it is important tounderstand that we are analysing in terms of percentage (relative) changes. The totalvolume of world trade is increasing each year. Consequently it is not enough toexamine only money values of exports and imports because these will generallybe increasing with the overall increase in world trade as living standards rise.

Using percentage changes also makes it easier to observe trends and makecomparisons. For example, from 2000–01 to 2001–02 the value of Australia'sexports declined $0.5 billion. By itself this figure does not provide a lot ofinformation. Especially, it does not give any indication as to how largeor small a fall of $0.5 billion is. The use of percentage changesovercomes this shortcoming.

Calculating percentages–a simplified explanation

To calculate the percentage change from one year to another use the following steps:

Example:

STEP 1 Calculate the difference between the two figures.


Table 2.3: Australia's total exports

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P. 20.

(NOTE: THE MINUS FIGURE INDICATES A DECREASE OR FALL. ALTERNATIVELY A POSITIVE FIGURE INDICATES AN INCREASE OR RISE.)

Once this figure has been calculated it is possible to clearly see the relative size of the decrease: in 2001–02 thevalue of Australia's exports of goods and services had decreased 0.3% compared to the previous year.

Percentage annual changes are therefore useful for indicating both the size (large or small) and direction (rise orfall) of a change over a period of time.

STEP 2 Divide the difference by the first year's total

-0.5 = 0.003152.7

EXAMPLE

STEP 3 Multiply this figure by 100 to convert it to a percentage 0.003 x 100 = 0.3%

EXAMPLE

GENERAL FORMULA FOR CALCULATING PERCENTAGES

Exports Year 2 - Exports Year 1

Exports Year 1

x 100

1

VALUE OF EXPORTS OF GOODS AND SERVICES - AUSTRALIA

Year $ billion

2000-01 152.7

2001-02 152.2

Difference = -0.5



Activity 2.3

Examine the following table and then answer the questions.

Calculate

1. Complete the following table by calculating the annual percentage change in Australia's merchandiseexports. The first one has been done for you.

Table 2.4: Australia's merchandise exports

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 4, P. 23

Interpret

2. Between which years did Australia's merchandise exports experience the largest percentage:

(a) increase

(b) decrease?

Understand

3. If you were told Australia's merchandise exports had increased by $1,350 million would this tell youwhether our merchandise exports had risen by a lot, a little or a reasonable amount? Explain youranswer.

Create

4. Construct a column graph to show the percentage changes in Australia's merchandise exports from1996–97 to 2001–02. Use a horizontal scale of 2 cm equals 1 year and a vertical scale of 1 cm equals 5percentage points. The graph has been started for you.

YEAR MERCHANDISE DIFFERENCE CHANGE PERCENTAGE EXPORTS CHANGE

(A$ million)

1996-97 78,932

1997-98 87,768 8,836 0.101 10.1

1998-99 85,991

1999-00 97,286

2000-01 119,539

2001-02 121,200

C O L U M N 1 C O L U M N 2 C O L U M N 3 C O L U M N 4

Column 2Column 1

Year 2 - Year 1 Column 3 X 1001


Graph 2.1: Australia's merchandise exports, annual percentage change 1997–98 to 2001–02

Participate

5. In pairs clarify when it is better to analyse Australia's merchandise exports using:

(a) dollar amounts

(b) annual percentage changes.

Share your answer with the rest of the class.

Section 2.4 Interpreting tables

Tables can show large amounts of data for comparison in a way that is easy to understand. When interpreting atable you are looking for similarities and differences in an attempt to identify any trends.

To interpret a table you need to:

• Read the title

• Examine the unit of measurement

• Look at each column heading

• Read any headings and sub–headings usually listed on theleft–hand side

• Scan the figures in each column

• Look for the high and low numbers

• Look for unusual data

• Scan across the rows and look for large changes.

-10

-5

0

5

10

15

20

25

1997-98 1998-99 1999-00 2000-01 2001-02



Activity 2.4


Table 2.5: Australia's merchandise exports to Japan (A$ '000)

SOURCE: EXPORTS OF MAJOR COMMODITIES TIME SERIES 1984 TO 2001, DFAT, TABLE 4, PP.24––25.

Interpret

1. What is the title of this table?

2. Explain, in your own words, what this table measures.

3. What is the unit of measurement?

4. Which country's exports are being measured?

5. Which country are these exports being sold to?

6. What was the value of 'Total Exports' from Australia to Japan in:

(a) 1986

(b) 2001?

7. Between which two time periods did the value of:

(a) unprocessed primary products fall?

(b) ETMs rise the most?

DESCRIPTION 1986 1991 1996 2001

Primary Products 6,917,912 11,030,490 10,333,926 15,739,610

• Unprocessed 6,123,291 8,475,443 7,653,470 11,573,340

• Processed 794,621 2,555,047 2,680,456 4,166,270

Manufactured Products 816,860 2067,281 2,060,017 3,055,463

• STMs 661,977 1,505,189 1,302,691 2,236,361

• ETMs 154,883 562,092 757,326 819,102

Miscellaneous Products 1,310,308 1,722,174 3,171,326 4,924,413

Total Exports 9,045,080 14,819,945 15,562,269 23,719,486


8. Determine whether the following statements are true 'T' or false 'F'.

(a) The value of ETMs exported to Japan is always larger than the value of STMs.

(b) The value of Australia's total merchandise exports to Japan increased between 1986 and 2001.

(c) Unprocessed primary products are the most valuable exports to Japan.

(d) The values of 'Manufactured Products' for 1991 and 1996 are about the same.

(e) The value of 'Total Exports' in 2001 was $15,739,610.

9. Describe the trend in Australia's total merchandise exports to Japan between 1986 and 2001.

Understand

10. What is the advantage of having more than one year's measurements displayed in this table?

Predict

11. Based on the information shown in this table suggest what may happen to the level of total merchandiseexports over the next five year period. (Hint: Base your prediction on past trends.)

Section 2.5 Interpreting graphs

When the data contained in tables are also graphed, the data and their relationships are further simplified. Tablesallow comparisons to be made but graphs (diagrams and charts) simplify and emphasise data, highlight trends andshow important relationships even further.

To interpret a graph you need to:

• Read the title

• Examine the unit of measurement

• Examine the time period

• Look for unusual changes such as a steep rise or fall

• Examine the overall trends.



Activity 2.5

Examine the following graph and then answer the questions.

Graph 2.2: Australia's trade with Japan and United States 1991–92 to 2001–02

SOURCE: COMPOSITION OF TRADE AUSTRALIA 2002, DFAT, P.16.

Interpret


2. Between which year(s) did Australia's exports to Japan:

(a) fall?

(b) rise sharply?

3. Between which year(s) did Australia's imports from the United States fall?

4. Describe the trend of:

(a) imports from the United States

(b) exports to the United States.

Calculate

5. What was the approximate value of:

(a) Japanese exports in (i) 1997, (ii) 2001, (iii) 2002?

(b) Japanese imports in (i) 1997, (ii) 2001, (iii) 2002?

(c) United States exports in (i) 1995, (ii) 2001, (iii) 2002?

(d) United States imports in (i) 1995, (ii) 2001, (iii) 2002?

25,000

20,000

15,000

10,000

5,000

0 0

4,000

8,000

12,000

16,000

20,000

24,000

A$m A$m

Japan U.S.A

EXPORTS

EXPORTSIMPORTS

IMPORTS

91-92 93-94 95-96 97-98 99-00 01-02 91-92 93-94 95-96 97-98 99-00 01-02


Communicate

6. Work in groups of 2 or 3. After comparing the two graphs what conclusions can you make concerningthe value of Australia's:

(a) Exports to Japan?

(b) Imports from Japan?

(c) Exports to the United States?

(d) Imports from the United States?

How is what the graphs reveal similar or different to what you first thought about Australia's trade with Japan andthe United States? Share your answers with the rest of the class.

Predict

7. Imagine the Japanese economy enters a period of sustained economic growth. What impact could thishave on Australia's:

(a) export businesses?

(b) employment level?

(c) standard of living?

(d) economic growth?

Section 2.6 Calculating the balance of merchandise trade

The difference between the value of a country's merchandise exports and imports is referred to as the balance ofmerchandise trade. If the value of exports is greater than the value of imports a trade surplus exists. However if thevalue of exports is less than the value of imports a trade deficit occurs. Consider the following example.

Table 2.6: Australia's merchandise trade with Japan and the United States 2001–02

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, PP.209 AND 296.

Table 2.6 shows that in 2001–02 Australia had a trade surplus of approximately $7.4 billion with Japan and a $–9.5 billion trade deficit with the United States.

A$'000 JAPAN UNITED STATES

Total exports 22,827,021 12,015,700

Total imports 15,463,183 21,490,648

Balance of merchandise trade 7,363,838 -9,474,948



Activity 2.6

Examine the following tables and then answer the questions.

Table 2.7: Australia's merchandise trade with Japan

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.209.

Table 2.8: Australia's merchandise trade with the United States

SOURCE: SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.296.

Remember

1. How can you determine whether the balance of merchandise trade is a deficit or surplus figure?

Calculate

2. Complete the 'Balance of merchandise trade' for both tables. The last one has been done for you.

A$'000 1997-98 1998-99 1999-00 2000-01 2001-02

Total exports 17,580,431 16,566,022 18,822,161 23,494,946 22,827,021

Total imports 12,660,370 13,587,465 14,109,834 15,369,531 15,463,183

Balance of merchandise trade 7,363,838

A$'000 1997-98 1998-99 1999-20 2000-01 2001-02

Total exports 7,794,223 7,983,545 9,602,395 11,652,048 12,015,700

Total imports 19,834,401 20,893,267 23,134,601 22,350,729 21,490,648

Balance of merchandise trade -9,474,948


3. A trade deficit or surplus can be shown graphically. Examine Graph 2.2 again.

(a) On the graph for Japan, shade in blue the area between the exports line and imports line. (Thisrepresents the trade surplus with Japan.)

(b) On the graph for the United States, shade in red the area between the exports line and the importsline. (This represents the trade deficit with the United States.)

(c) Suggest why using a graph makes it easier to determine the general trend in Australia's balance ofmerchandise trade with individual countries.

Interpret

4. Describe the overall trend of Australia's balance of merchandise trade with:

(a) Japan

(b) United States.

Create

5. In groups of 3 or 4 design a poster or 60 second radio commercial publicising the importance of Japanas an important export market. Your poster or commercial should include some of the main economicand non–economic benefits of this trade.

1

2

3

45

67

8

910

11

12

1. N.Z (7%)

2. STH AMERICA (1%)

3. U.S.A (10%)

4. JAPAN (19%)

5. KOREA (5%)

6. TAIWAN (4%)

7. HONG KONG (3%)

8. CHINA (7%)

9. SOUTH ASIA (3%)

10. ASEAN (12%)

11. EUROPEAN UNION (1%)

12. OTHER (17%)

3: ONE HUNDRED YEARS OF TRADE


Module 3 One hundred years of trade

Section 3.1 Direction of trade: exports

Due to Australia's historical links with the United Kingdom andEurope, the majority of our trade used to be with these regions.However, since the end of the late 1940s:

• as new markets began to emerge, the generalemphasis of Australia's exports trade has shifted to Asiaand the United States

• the relative importance of the United Kingdom hasdiminished

• exports to countries belonging to the EU have declinedrelative to the total

• exports to the United States have grown steadily and isnow Australia's second main customer after Japan.

Direction of Trade 2002


Activity 3.1

Examine the following graphs and then answer the questions.

Graph 3.1: Australia's merchandise exports by top eight countries

SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P.6.

Remember

1. What is meant by the term 'merchandise exports'?

2. Why are the amounts expressed as percentages rather than dollar amounts?

3. What is the advantage of having this information presented in graph form instead of a table?

1901

Other - 8.5%

New Zealand - 2.9%Belguim/Lux - 3.0%

France - 4.6%

Germany - 5.1%

Sri Lanka - 5.5%

USA - 6.8%

South Africa - 12.7%United Kingdom - 50.7%

Other - 21.8%

1950-51

Egypt - 2.3%Germany - 2.8%

Belg/Lux - 4.5%

Italy - 5.0%

Japan - 6.3%

France - 9.1%

U.S.A - 15.2%

United Kingdom - 32.7%

2000-01

Other - 37.6%

United Kingdom - 3.9%Taiwan - 4.9%

Singapore - 5.0% China - 5.7%

New Zealand - 5.8%

Korea - 7.7%

U.S.A - 9.8%

Japan - 19.7%



Interpret

4. Decide which of these statements best summarise the graph:

(a) There has been very little change in the direction of Australia's merchandise exports between 1901 to 2000–01.

OR

(b) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is ashift away from the United Kingdom and Europe towards the United States and Asia.

OR

(c) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is ashift away from the United States and Asia towards the United Kingdom and Europe.

5. Select the most appropriate word or figure from the table to complete the following sentences:

(a) Word/figure:

Between 1901 to 1950–51:

(i) the percentage of Australia's merchandise exports to the U.K. ____________ from _______ % to_______ % , a __________ of _______ percentage points.

(ii) the percentage of Australia's merchandise exports to the United States ____________ from_______ % to _______ %, a __________ of ________ percentage points.

(iii) the percentage of Australia's merchandise exports to the European countries shown(Belgium–Luxemburg, France, Germany and the United Kingdom) declinedfrom __________ % to _________ %.

(iv) the major new market to emerge was _________ with _________ % of thetotal of merchandise exports in 1950–51.

Japan 6.8 fall increased 49.5

32.7 rise 8.4 6.3 18

15.2 63.4 decreased 50.7


(b) Word/figure

Between 1950–51 to 2000–01:

(i) the percentage of Australia's merchandise exports to the United Kingdom continued to_____________ from ________ % to ________ %, a fall of _______ percentage points.

(ii) the percentage of Australia's merchandise exports to Japan ____________ from _______ % to_______ %, a __________ of 13.4 percentage points.

(iii) Two major new markets to emerge were _____________ with 4.9% and ______________ with5.7% of total merchandise exports.

Analyse

6. Outline the main changes to Australia's direction of merchandise exports between:

(a) 1901 to 1950–51

(b) 1950–51 to 2000–01

Participate

7. As a class:

(a) discuss what you think has caused the shift in Australia's exports markets during the last century

(b) outline the foreign relations implications of these changes

(c) predict the pattern of Australia'smerchandise exports for the next twenty years.

19.7 China 28.8 32.7 3.9

6.3 Taiwan rise decrease increase



Activity 3.2

The change in the direction of Australia's merchandise exports can be analysed in more detail if the information ispresented as a table. Examine the following table and then answer the questions.

Table 3.1: Direction of Australia's merchandise exports, by country

(a) Based on 2000–01 Total Trade ranking. (b) Special Administrative Region of China.SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P.2.

Calculate

1. (a) List Australia's top eight merchandise export markets for 1901.

(b) List Australia's top eight merchandise export markets for 2000–01.

COUNTRY (a) 1901 1910 1920-21 1930-31 1940-41 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000

Japan 247 1,314 6,235 19,001 10,728 123,100 322,976 1,197,145 5,221,647 14,378,460 23,502,609

United States 6,748 3,198 19,938 5,862 92,938 297,660 144,948 519,424 2,107,002 5,777,911 11,675,278

China 258 228 656 6,702 7,028 1,700 79,714 63,277 670,878 1,347,502 6,842,539

Korea, Rep. of - - 12 3 22 84 3,442 9,685 537,798 3,237,017 9,207,737

New Zealand 2,916 4,686 15,562 5,956 15,386 40,530 123,968 232,231 894,055 2,545,095 6,883,023

United Kingdom 50,390 75,397 135,039 106,965 115,165 641,210 463,182 493,847 700,842 1,796,435 4,645,638

Singapore - - - - - 21,750 24,370 118,397 498,042 2,768,737 5,998,075

Taiwan - - - - - - 4,016 40,009 393,912 1,962,381 5,874,881

Germany 5,105 14,681 2,914 10,623 0 55,476 54,566 147,349 486,975 1,055,632 1,492,975

Malaysia - - 4,242 1,645 8,317 16,428 23,986 66,494 437,177 984,990 2,498,697

Indonesia 409 795 5,137 2,873 6,113 6,486 11,814 39,076 356,158 1,462,287 3,112,125

Italy 278 755 5,096 6,990 21 98,020 95,450 70,897 383,252 923,174 2,101,101

Hong Kong (b) 827 1,388 1,734 765 2,265 11,936 37,578 90,403 306,726 1,559,805 3,910,347

Thailand - - 50 121 386 1,754 3,774 32,290 128,362 665,479 2,221,300

Saudi Arabia - 0 - 0 1 1,926 1,746 14,466 276,250 218,340 2,196,330

Canada 75 201 310 1,926 8,112 34,424 34,054 105,984 433,601 802,111 1,769,882

France 4,618 17,103 12,820 13,496 25 179,640 102,144 103,043 364,923 773,630 1,078,500

Vietnam - - 102 31 281 2 444 15,117 27,782 24,800 498,996

India 1,092 3,071 4,386 6,304 5,750 44,528 28,084 38,031 176,386 667,422 2,086,097

Netherlands 251 743 2,529 775 1 22,480 12,516 47,567 207,769 1,015,684 1,738,511

Papua New Guinea 129 262 586 273 1,135 5,498 35,656 163,369 428,909 778,628 1,050,199

United Arab Emirates - - - - - - 0 4,494 103,137 277,952 1,163,721

South Africa 12,648 3,652 6,099 993 2,918 8,356 14,658 85,947 132,487 178,099 1,300,327

Philippines 604 947 842 666 977 956 7,392 40,935 168,776 436,904 1,500,580

Belgium-Luxembourg 3,011 11,898 13,692 8,390 - 96,490 45,522 42,9781 71,000 447,929 1,003,563


Interpret

2. Compare the two lists from the previous question. Comment on the changes in the direction ofAustralia's merchandise exports.

Communicate

3. In groups of 3 or 4 answer the following questions.

(a) Why was South Africa and India amongst the top eight merchandise exports markets in 1901? (Hint:Examine a map of the world showing the British Commonwealth countries at the beginning of thetwentieth century.)

(b) Why did the value of Australia's merchandise exports to:

(i) the United States, New Zealand and the United Kingdom fall between 1920–21 to 1930–31?(Hint: Examine the economic conditions in these countries during the late 1920s and early1930s.)

(ii) Germany steeply decline between 1910 to 1920–21 and again between 1930–31 to 1940–41? (Hint: examine the major political conditions in Germany during these periods.)

(iii) Japan decline between 1930–31 to 1940–41? (Hint: examine the major political conditions inJapan during these periods.)

(iv) the United States rise rapidly from 1960–61 to 1970–71?

Create4. Produce an A–3 sized poster designed to explain the change in direction of Australia's merchandise

exports during the last century. Your poster must have a short slogan based on the facts and figurespresented in this module and a colourful diagram. Display your poster in the classroom.

Understand

5. Justify the importance to Australia of maintaining beneficial trading relationswith our Asian neighbours. Share your answer with the rest of the class.

6. What evidence can you find to show that the Japaneseeconomy experienced high levels of economic growthduring the 1970s and 1980s? (Hint: As an economyexperiences economic growth it is able to purchasemore imports.)



Calculate

7. Complete the following table. The first one has been done for you.

Table 3.2: Percentage change in Australia's merchandise exports

Analyse

8. Describe the overall trend in the percentage change in Australia's merchandise exports to:

(a) the United States

(b) China

(c) Republic of Korea.

9. Why is it important to examine both the dollar value of and percentage changes to Australia'smerchandise exports when determining the importance of a country's market?

Participate

10. (a) Use the data from this section and additional investigations to prepare arguments for either side of adebate entitled 'That Australia should diversify its export markets'. Debate this topic in class.

(b) According to many trade analysts, by 2030 China will be the world's economic superpower. As aclass discuss the implications such a development will have on Australia's trading pattern andperformance.

COUNTRY 1960-61 TO 1970-71 1970-71 TO 1980-81 1980-81 TO 1990-91 1990-91 TO 2000-2001

Japan 271 336 175 63

U.S.

China

Rep. of Korea

N.Z.

U.K.


Section 3.2 Direction of trade: imports

Changes in the direction of Australia's exports overthe last century have been matched by changes inthe source of our imports. A dramatic decrease inthe importance of the United Kingdom has beenoffset by an increase in the importance of thePacific countries – namely Japan and the UnitedStates – and the growing significance of theSouth–East Asia region.

Activity 3.3

Examine the following graphs and then answer the questions.

Graph 3.2: Australia's merchandise imports by top eight countries

SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P7.

Other - 8.3%

United Kingdom - 59.5%Sri Lanka - 1.2%

Belgium/Lux - 1.3%Indonesia - 2.2%

India - 2.8%NZ - 4.3%

Germany - 6.6%

U.S.A - 13.8%

United Kingdom - 48.0%Other - 26.6%

France - 2.2%Italy - 2.2%Canada - 2.3%Malaysia - 2.8%

Indonesia - 2.9%India - 4.8%

U.S.A - 8.2%

1901 1950-51

Other - 37.8%

Malaysia - 3.5%Korea - 4.0%

New Zealand - 3.9%Germany - 5.2%

United Kingdom - 5.3%

China - 8.4%

Japan - 13.0%

U.S.A - 18.9%

2000-01



Remember

1. What is meant by the term 'merchandise imports'?

Understand

2. (a) In 1901 which geographic region supplied the majority of Australia's merchandise imports?

(i) Americas

(ii) Europe

(iii) Asia

(iv) Oceania

(v) Africa.

(b) In 1950–51 which geographic region supplied the majority of Australia's merchandise imports?

(i) Americas

(ii) Europe

(iii) Asia

(iv) Oceania

(v) Africa.

(c) In 2000–01 which geographic regions supplied the majority of Australia's merchandise imports?

(i) Americas

(ii) Europe

(iii) Asia

(iv) Oceania

(v) Africa.

3. Outline the main changes to Australia's direction of merchandise imports from:

(a) 1901 to 1950–51

(b) 1950–51 to 2000–01

4. Currently, the majority of Australia's merchandise imports are sourced from the nations within APECand ASEAN. Using the outline map of the world at the back of this book shade in blue the countriesthat are members of APEC and red those countries that are members of ASEAN. (Hint: Some countriesare members of both APEC and ASEAN.)


Module 4 Australia's emerging trade patterns–through the Nineties and into the New Millennium

Entry Level Analysis

Section 4.1 What does Australia export?

Australian merchandise exports include bothprimary goods (such as meat, cereal grains andwool) and manufactured goods (such as coal,mineral ores, crude petroleum, machinery andmedicaments). The export of elaboratelytransformed manufactured goods (such aspassenger motor vehicles) and services (such astourism, educational and financial services) havegrown over the last decade.

Activity 4.1


Table 4.1: Australia's export trade by broad category 2001–02

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P.20 AND TABLE 2, P.21.

A$ MILLION % SHARE

Merchandise

Primary Products 71,733 47.1

Manufactures 38,070 25.0

STMs 11,874 7.8ETMs 26,196 17.2

Other 11,397 7.5

Total Merchandise Exports 121,200 79.6

Services

Transportation 7,625 5.0

Travel 14,530 9.5

Other 8,884 5.8

Total Services Exports 31,039 20.4

Total Exports 152,239 100.0

4: AUSTRALIA’S EMERGING TRADE PATTERNS – entry level analysis


Remember

1. Distinguish between and give examples to illustrate:

(a) export of goods

(b) export of services.

2. Explain why:

(a) 'Primary Products' and 'STMs' and 'ETMs' areclassified as 'Merchandise'.

(b) 'Travel' is classified as a 'Service'.

Understand


(a) 'ETMs' have a greater value than 'STMs'.

(b) 'Travel' was the largest 'Services' item.

(c) These figures are for the period 2000–01.

(d) The unit of measurement is $A million.

(e) 'Total Service Exports' was greater than 'Total Merchandise Exports'.

(f) The value of 'Manufactures' equals the combined value of 'STMs' and 'ETMs'.

(g) Primary products account for approximately half of all Australia's exports.

(h) Australia exports a larger percentage of 'STMs' compared to 'ETMs'.

(i) Total merchandise exports account for approximately 60 percent of Australia's total exports.

(j) The largest percentage service item is 'Transportation'.

(k) One quarter of all exports consist of 'STMs' and 'ETMs'.

Create

4. Draw a bar graph to represent Australia's export of goods andservices using a horizontal scale of 1 cm = 10 per cent (thereforethe bar will be 10 cm long). Shade in green the merchandiseitems and yellow the service items. Provide a title and key for thegraph.

5. Work in pairs to create a poster publicising Australia's mainexport items. Find as many pictures, newspaper headlines andbrief articles as you can. Display your poster in the classroom.


Interpret

6. Select the appropriate word to make the statement correct.

(a) Australia is a major exporter of primary products/manufactures.

(b) Transportation/travel is Australia's principal services export.

(c) The value of 'Total Merchandise Exports' is $152,239/$121,200.

(d) Exports of 'STMs' are greater than/less than 'ETMs'.

(e) This table records the value of Australia's exports/imports of goods and services for 2001–02.

7. What generalisation can you make about the composition of Australia's exports? Share your answer withthe rest of the class.

Communicate

8. As a class, discuss whether Australia should be concerned about its reliance on primary products as itsprincipal exports item?

Connect

9. There has been much talk in the media that while opportunities for export continue to grow intraditional commodity–based industries, Australian exporters are increasingly tapping into new areas forexports. Through the library and the use of the Austrade's web site at www.austrade.gov.au and DFATweb site at www.dfat.gov.au, prepare a report onAustralia's emerging markets. Select from one of thefollowing:

(a) Agribusiness and food

(b) Education

(c) Knowledge–based products and services

(d) Environment

(e) Tourism.

Present your report to the rest of the class.

Section 4.2 Principal merchandise exports

In 2001–02, seventeen of Australia's top twenty merchandise exports were 'Primary Products'. The threeexceptions were aluminium (STM), passenger motor vehicles (ETM) and medicaments (ETM). Together, thetwenty commodities accounted for 60 per cent of total exports in 2001–02.



Activity 4.2


Table 4.2: Australia's top twenty merchandise exports 2001–02

f.c.f.: fresh, chilled or frozenSOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 4, P.23 AND TABLE 9, P.28.

Remember

1. What is meant by the following terms:

(a) merchandise exports

(b) primary products

(c) STMs

(d) ETMs

(e) commodities

RANK 2001-02 COMMODITY A$ MILLION 5 YEAR % TREND GROWTH

1 Coal 13,404 8.6

2 Crude petroleum 5,965 36.8

3 Iron ore 5,162 9.7

4 Non-monetary gold 5,129 -1.2

5 Wheat 4,528 1.9

6 Aluminium 4,411 13.0

7 Bovine meat f.c.f. 4,332 15.2

8 Aluminium ores 4,034 11.5

9 Wool 3,396 -0.1

10 Passenger motor vehicles 2,996 26.8

Sub-total 1-10 53,357

11 Natural gas 2,636 13.9

12 Refined petroleum 2,357 9.7

13 Alcoholic beverages 2,264 26.6

14 Medicaments 1,998 24.3

15 Meat (excl. bovine) f.c.f. 1,827 18.2

16 Milk and cream 1,821 12.8

17 Cotton 1,549 8.1

18 Copper 1,515 22.8

19 Nickel 1,421 32.5

20 Other ores 1,386 5.5

Sub-total 11-20 18,774

Total of top twenty merchandise exports 72,131

Total value of all merchandise exports 121,200 9.6


Understand

2. List the primary products within Australia's top twenty merchandise exports.

3. List the manufactures (i.e. STMs and ETMs) within Australia's top twenty merchandise exports.

4. Indicate one advantage and one disadvantage of only presenting exports data for one year.

5. State one question this table will help you answer and one question it will not help you answer.

6. What is the advantage of presenting the '5 year % trend growth' figures for each item?

Create

7. Construct a column graph to show the value of the top ten merchandise exports. Use a vertical scale of 1cm equals $1000 million and a horizontal scale of 1 cm equals 1 exports item. Shade in orange the threecolumns that represent manufactures.

Calculate

8. What was the value of:

(a) total primary product

(b) total manufactures

within the top twenty merchandise exports?

9. What percentage of Australia's total merchandise export earnings were generated by the top twenty:

(a) primary products?

(b) manufactures?

10. What percentage of Australia's total merchandise export earnings was generated by coal?

Interpret

11. Circle the appropriate word to make the sentence correct.

(a) Products that rank highly in terms of export value are largely unprocessed/processed.

(b) Agricultural products and minerals are the two main categories of manufactured/primary goods.

(c) The top twenty commodities accounted for 60/40 per cent of total exports.

(d) Nickel/crude petroleum experienced the highest five–year percentage trend growth.

(e) Wool/cotton experienced the lowest five–year percentage trend growth.

(f) Australia's merchandise export profile is best described as rural–based/manufacture–based.



Communicate

12. As a class, brainstorm what you think our top ten merchandise exports might be in twenty years time.Suggest reasons for any possible changes.

Predict

13. Indicate the impact each of the following events could have on the value of Australia's top twentymerchandise exports:

(a) Australia's acceptance of a reduction in greenhouse gas emission by 15 per cent over ten years.

(b) A severe drought across the entire nation.

(c) A new mining technique, which can increase production by 25 per cent.

(d) A rare cow disease is detected in most European cattle herds.

(e) An increase in consumer demand for clothing made from natural fibres such as wool and cotton.

Section 4.3 Principal service exports

Services offer further opportunities forexport growth. Australia's totalexports are made up of exports ofmerchandise and exports of services.In 2001–02 exports of servicesaccounted for 20 per cent ofAustralia's total exports. Twenty yearsago they accounted for 16.5 per centof the total. Over that time they havegrown from A$3.8 billion to A$31.6 billion. Tourism is a veryimportant part of services exports,growing from A$6.8 billion in 1992to A$16.3 billion in 2002, an increaseof 140 per cent over the last decade.It was the top Australian export in2002.


Activity 4.3


Table 4.3: Australia's exports of services by type of activity (A$ million)

n.e.i.: not elsewhere indicated.SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 7, P.26.

Understand

1. 'Australia's principal service export is tourism'. Explain the meaning of this statement. (Hint: When an overseas tourist travels to Australia we are in fact exporting a service – tourism).

2. Explain why the government spends money on promoting Australia as a tourist destination.

Calculate

3. What percentage of total services do the following items account for:

(a) 'Personal travel'?

(b) 'Passenger transportation'?

TYPE OF ACTIVITY 2001-02

Services

Travel 14,530

Business 1,121Personal 13,409

Transportation 7,652

Passenger 6,629

Freight 996

Communication 1,017

Computer and information 989

Financial 784

Government n.e.i. 773

Insurance 673

Personal, cultural and recreational 569

Royalties and licence fees 508

Construction 98

Other business services 3,473

Total Services 31,039




(a) Almost half of Australia's export services were travel expenditures by tourists.

(b) Transportation is the second largest service export

(c) Tourism–related expenditure is a major component of Australia's service exports.

Create

5. In groups of 3 or 4, design either a sixty–second commercial or a three–minute PowerPoint presentationfor the Tourism Council of Australia, publicising the importance of overseas tourism to the Australianeconomy. During your commercial or presentation make reference to the income and jobs generated bythis important service export. Present your commercial or presentation to the rest of the class.

Communicate

6. Brainstorm the reasons why tourists want to visit Australia. Present your ideas in a mind map. The firstone has been done for you.

Connect

7. Through the library and the use of the DFAT web site at Austrade'sweb site at www.austrade.gov.au and www.dfat.gov.au, researchtourist data over the last decade. Prepare a brief report outlining:

• tourist numbers

• the trend in tourist numbers

• length of stay

• ten most important countries of origin

• average expenditure per tourist

• ten most popular places visited.

THE REASONS WHY AUSTRALIA IS A

POPULAR TOURIST DESTINATION

NATURAL WONDERS


Section 4.4 What does Australia import?

Only about a tenth of Australia's merchandise imports consist of primary products, such as, food, beverages andcrude petroleum. Much of the remainder was manufactures, mainly ETMs, such as, computers, machinery andtransport equipment, to be used by Australian businesses in the production of goods and services. The mainservice imports consist of transportation, travel, communication and insurance.

Activity 4.4


Table 4.4: Australia's import trade by broad category 2002–02

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P.20.

Remember

1. Distinguish between and give examples to illustrate:

(a) imports of goods

(b) imports of services.

Interpret

2. Select the appropriate word to make the sentence correct.

(a) Most of Australia's imports are primary/manufactured products.

(b) ETMs/STMs make up the largest share of Australia's imported manufactures.

(c) Total merchandise imports account for 78.7/52.5 per cent of total imports.

(d) Travel is Australia's smallest/largest service imports.

$A MILLION 2001-02% SHARE

Merchandise


Manufactures 100,342

STMs 11,157

ETMs 89,185

Other 2,807

Total Merchandise Imports 119,654

Services

Transportation 10,876

Travel 11,043

Other 10,338

Total Service Imports 32,257

Total Imports 151,911 100.0



Calculate

3. Complete the '2001–02 % share' column. The first one has been done for you.

Create

4. Draw a bar chart to represent Australia's imports of goods and services, using a horizontal scale of 1 cmequals 10 per cent (therefore the bar will be 10 cm long). Shade in red the merchandise items and bluethe service items.

Understand

5. What evidence can you find in the goods within your house or school that Australia's main import itemis ETMs? (Hint: Examine the country of origin of selected items.)

Communicate

6. (a) What generalisations can you make about the composition of Australia's main imports? Share youranswer with the rest of the class.

(b) Should Australia be concerned about its reliance on manufactured imports? Explain your view.

Section 4.5 Principal merchandise imports

Eight out of the top ten of Australia'simports were ETMs in 2001–02. Theexceptions were Crude petroleum andNon–monetary gold. In total, the top tenimports accounted for 85 per cent oftotal imports.

Activity 4.5


Table 4.5: Australia's top ten merchandise imports 2001–02

SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 4, P. 23 AND TABLE 11, P.34.





3 Computers 5,028 6.4

4 Telecommunications equipment 4,507 18.2

5 Medicaments 4,002 21.1

6 Aircraft and parts 3,060 15.5

7 Motor vehicles for transporting goods 2,545 6.6

8 Computer parts 2,490 4.9

9 Non-monetary gold 2,218 19.1

10 Motor vehicle parts 2,217 6.8

Total value of all merchandise imports 119,654 8.9



Interpret

1. List the manufactured imports that relate to the motor vehicle.

2. What do the majority of the top ten merchandise imports have in common?

3. Which merchandise import experienced the highest '5 year % trend growth'?

Calculate

4. What percentage of Australia's top ten merchandise imports came from:

(a) primary products?

(b) manufactured products?

Create

5. Construct a column graph to show the value of the top ten merchandise imports. Use a vertical scale of1 cm equals $1000 million and a horizontal scale of 1 cm equals 1 import item. Shade in pink the twocolumns that represent primary products.


(a) Australia imports mainly ETMs.

(b) 'Passenger motor vehicles' accounts for approximately 20 per cent of the top ten merchandise imports.

(c) Many of the top ten merchandise imports are used in Australian businesses.

(d) 'Computers' and 'computer parts' have a combined value of $7,518 million.

Communicate

7. As a class, brainstorm what you think our top ten merchandise imports might be in twenty years time.Suggest reasons for any possible change.

Investigate

8. Why does Australia need to import these goods instead of producing them ourselves? (Hint: In youranswer refer to the reasons for trade, specifically the concept of comparative advantage.)

Predict

9. If Australia could no longer import the three largest merchandise items what would be the likely impact on Australia's:

(a) economic growth?

(b) level of employment?

(c) standard of living?

(d) business profitability?


Section 4.6 Who are Australia's main customers?

Australia's merchandise export markets are diverse. Asian markets account for approximately 60 per cent ofAustralia's merchandise exports in 1992 and 56 per cent in 2002.

Activity 4.6


Table 4.6: Australia's top ten merchandise export markets (A$'000)

(a) Special Administrative Region of the People's Republic of China.SOURCE: ADAPTED FROM DIRECTION OF TRADE TIME SERIES 1981–82 TO 2001–02, DFAT, 'DIRECTION OF AUSTRALIA'S MERCHANDISE EXPORTS,

BY COUNTRY (A$'000)', PP.1–17.

Remember

1. What is meant by the term 'merchandise export market'?

Understand

2. Identify Australia's most important export market for 2001–02. Provide reasons why this country buysso many of Australia's exports.

3. Find one piece of evidence that shows the influence of Australia's history on our main merchandiseexports markets.

COUNTRY 1991-92 2001-02 RANK

World 55,026,910 121,199,793

Japan 14,574,284 22,827,021 1

United States 5,220,017 12,015,700 2

Republic of Korea 3,365,093 9,828,447 3

China 1,458,346 7,811,253 4

New Zealand 2,830,466 7,657,747 5

United Kingdom 1,930,413 5,202,092 6

Singapore 3,189,451 4,940,849 7

Taiwan 2,518,865 4,843,453 8

Hong Kong (a) 2,105,729 4,005,853 9

Indonesia 1,626,697 3,193,675 10

Total of top ten



Calculate

4. Complete the 'Total of top ten' row.

5. (a) What is the percentage of total world merchandise exports sold to the top ten exports markets for:

(i) 1991–92?

(ii) 2001–02?

(b) What generalisation can you make about Australia's main export markets based on these two figures?

6. (a) What is the percentage increase in the total value of merchandise export trade to the top ten exportmarkets from 1991–92 to 2001–02?

(b) What generalisation can you make about the growth in Australia's merchandise exports to the topten export markets based on this figure?

Interpret

7. Rank the countries for the year 1991–92. Comment on the changes in the rank order between 1991–92and 2001–02.

8. (a) Which of the top ten countries changed its rank position the most?

(b) Brainstorm why this country has become an important Australian export market over the last decade.


(a) In 1991–92 most of Australia's merchandise exports were sold to the United States.

(b) Japan's percentage of total Australian merchandise exports decreased between 1991–92 to 2001–02but it still remains Australia's principal export market.

(c) Singapore's rank order has fallen between 1991–92 to 2001–02.

(d) The percentage of total Australian merchandise exports sold to China increased between 1991–92 to 2001–02.

(e) The Asian region is where most of Australia's principal export markets are located.

Create

10. Using an outline map of the world, show with arrows of appropriate size the direction of Australia'smerchandise exports to the top ten export markets for 2001–02.

11. Construct a column graph to show the relative importance of the top ten merchandise export markets.Use a vertical scale of 1 cm equals $2,000 million and a horizontal scale of 1 cm equals 1 country. Shadein blue those countries that are located within the Asian region.


Participate

12. As a class, discuss how you think the rank order of Australia's principal merchandise export markets maychange if the following events occurred:

(a) Australia signs a free trade agreement with the United States.

(b) The Asian economies suffer a prolonged economic recession.

(c) Foreign relations between Indonesia and Australia deteriorate.

(d) The Chinese economy experiences high levels of sustained economic growth.

(e) Australia is admitted as a member of ASEAN.

13. According to many trade analysts, by 2030 China will be the world's economic superpower. As a classdiscuss the implications such a development will have on Australia's trading pattern and performance.

Section 4.7 Australia's principal exports by geographic regions

Another way to analyse Australia's principal export customers is to examine trade patterns with specific geographicregions. The Asia–Pacific region is of utmost importance to Australian exporters.



Activity 4.7

Examine the following graph and then answer the questions.

Graph 4.1: Australia's merchandise exports by geographic regions

SOURCE: DIRECTION OF TRADE TIME SERIES 1981–82 TO 2001–02, DFAT, 'AUSTRALIA'S MERCHANDISE EXPORTS BY GEOGRAPHIC REGIONS', P.23.

Understand

1. What is the advantage of presenting this information as a graph instead of a table?

2. Select the most appropriate word to make the statement correct.

(a) The majority of Australia's merchandise exports markets are located in North America/North Asia.

(b) The percentage of Australia's merchandise exports sold in the Asian region in 2001–02 was 63/57 per cent.

(c) The Middle East has been the fastest/slowest growing regional export market over the past decade.

(d) The percentage of Australia's merchandise exports sold to the Eastern European region hasrisen/fallen over the last decade.

(e) Aside from the Asian regional markets North America/Eastern Europe was Australia's second largestmerchandise export market followed by North America/Western Europe.

Predict

3. How may the direction of Australia's merchandise exports change in the next 20 years? Give reasons foryour predictions. Share your answer with the rest of the class.

1991-92 2001-02

Other - 3%Oceania - 8%

Nth America - 11%

Eastern Europe - 1%

Western Europe - 15%

Middle East - 3%Sth Asia - 2%

Nth Asia - 44%

Sth–East Asia - 13%

Other - 3%Oceania - 8%

Nth America - 11%

Eastern Europe - 0%

Western Europe - 13%

Middle East - 6%

Sth Asia - 3%

Nth Asia - 42%

Sth–East Asia - 12%

Connect

4. Through the library and the use of Austrade's web site at www.austrade.gov.au and the DFAT web siteat www.dfat.gov.au, prepare a report on the opportunities the Asia–Pacific region presents to Australianbusinesses. In your report include one case study of an Australian business that is exporting to thisregion. Present your report to the rest of the class.

Section 4.8 Who are Australia's principal suppliers?

In 2001–02 Australia bought approximately $120 billion worth of merchandise imports from over 200 countries.However, the top twenty suppliers accounted for 87 per cent and the top ten 69 per cent of the total.

As with the direction of merchandise exports Australia relies on an important core of countries for the supply ofmost of its merchandise imports.

Activity 4.8


Table 4.7: Australia's top ten import sources (A$'000)


COUNTRY 2001-02 RANK 5 YEAR TREND

GROWTH

World 119,654,285 8.9

United States 21,490,648 1 4.2

Japan 15,463,183 2 8.0

China 11,275,010 3 22.2

Germany 6,730,297 4 7.1

United Kingdom 6,218,841 5 4.1

New Zealand 4,739,924 6 5.8

Republic of Korea 4,722,497 7 11.6

Indonesia 4,009,343 8 12.3

Singapore 3,973,209 9 11.0

Malaysia 3,856,943 10 17.0

Total top ten Merchandise imports 82,479,895




Remember

1. What is meant by the term 'merchandise import market'?

Calculate

2. What is the percentage of total world imports from the top five merchandise import markets?

Interpret

3. Identify Australia's most important merchandise import supplier. Provide reasons why Australia buys somany merchandise imports from this country.

4. With which country did Australia experience the largest 5 year trend growth?

5. Classify the top ten merchandise import markets according to their geographic region. Select from thefollowing geographic regions:

• Africa

• Americas

• Asia

• Europe

• Oceania

Present this information in table form. The first one has been done for you.

6. Based on the above table what generalisation can you make about Australia's principal import sources?

Create

7. Using an outline map of the world, show with arrows of appropriate size the direction of Australia'sprincipal merchandise imports.

8. Construct a column graph to show the relative importance of the top ten merchandise import markets.Use a vertical scale of 1 cm equals $2000 million and a horizontal scale of 1 cm equals 1 country. Shadein orange those countries that are located within the Asian region.

COUNTRY GEOGRAPHIC REGION

United States Americas


Research

9. List ten different products you regularly use, such as your computer, hi–fi system, DVD player, shoes, drink or clothes.

Once you have written your list, answer the following questions:

(a) What is the brand name of the product?

(b) What business made the product?

(c) In which country is the product made?

(d) Why do you think the product was made there?

Compare your list with other class members, noting similarities and differences.

Predict

10. Based on the evidence gathered for the previous question, what could happen to your standard of livingif restrictions were placed on the number of goods that could be imported?

Connect

11. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site atwww.austrade.gov.au:

(a) List the top 10 merchandise imports Australia buys from:

(i) United States

(ii) Japan

(iii) China.

(b) Distinguish between merchandise imports that are:

(i) capital goods

(ii) intermediate goods

(iii) consumer goods.

(c) Based on your answer for the previous question, what generalisation can you make about the type ofmerchandise imports Australia purchases.

Section 4.9 Balance of merchandise trade

The balance of merchandise trade is the difference between the value of merchandise exports and the value ofmerchandise imports. (Remember, 'merchandise' is the internationally accepted term for 'goods'.)

If the value of Australia's merchandise exports is greater than the value of merchandise imports, the balance onmerchandise trade is positive and recorded as a surplus figure. Consequently there is a net inflow of money intoAustralia from merchandise trade.

If however the value of Australia's merchandise exports is less than the value of merchandise imports a deficit ornegative balance on merchandise trade exists. This means a net outflow of funds from Australia.



Activity 4.9


Table 4.8: Merchandise exports and imports by selected countries 2001–02, A$million.

(a) Special Administrative Region of the People's Republic of ChinaSOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 2, TABLE 15, P.48; TABLE 16, P.53.

Remember

1. What is meant by the term 'balance on merchandise trade'?

2. Explain the difference between a trade deficit and a trade surplus.

Calculate

3. Complete the 'Balance on merchandise trade' column. The first one has been done for you.

COUNTRY MERCHANDISE MERCHANDISE BALANCE OF EXPORTS IMPORTS MERCHANDISE TRADE

Japan 22,827,021 15,463,183 7,363,838

United States 12,015,700 21,490,648

Republic of Korea 9,828,447 4,722,497

China 7,811,253 11,275,010

New Zealand 7,657,747 4,739,924

United Kingdom 5,202,092 6,218,841

Singapore 4,940,849 3,973,209

Taiwan 4,843,453 3,132,071

Hong Kong (a) 4,005,853 1,410,004

Indonesia 3,193,675 4,009,343


Interpret

4. Which country was Australia's principal merchandise:

(a) export market?

(b) import supplier?

5. With which countries did Australia have a:

(a) trade surplus?

(b) trade deficit?

Present your answer as a table. The first one has been done for you.

Table 4.9: Australia's bilateral merchandise trade surplus/deficit

Predict

6. What is the likely impact on Australia's balance of trade with the United States if a free trade dealbetween the two countries is agreed to?

Connect

7. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site atwww.austrade.gov.au, research the reasons why Australia traditionally has a merchandise trade deficitwith the United States. (Hint: You will need to compare the composition of Australia's trade with theUnited States as well as the trade policies between the two countries.)

Section 4.10 Trade statistics at a glance

Australia's top 20 exports and imports now includeservices such as tourism and business services. Touristsvisiting Australia pay for accommodation, food, toursand souvenirs. This is called an export because theyspend their overseas money (foreign exchange) onAustralian goods and services. Australian travel overseasis an import because Australian money is spent overseas.

The three fastest growing exports over the last 10 yearsare wine (790 per cent growth), motor vehicles (475per cent growth) and medicaments (400 per centgrowth).

BILATERAL MERCHANDISE BILATERAL MERCHANDISE TRADE SURPLUS 2001-02 TRADE DEFICIT 2001-02

Japan



Table 4.10: Top 20 Australian Table 4.11: Top 20 Australianexports in 2002, A$m imports in 2002, A$m

SOURCE: DFAT STARS DATABASE & ABS CAT. 5302.0

Australia's exports are changing towards more manufacturers and knowledge–based services.

Graph 4.2: Composition of Australia's exports, 1984

SOURCE: ABS TRADE DATA ON DFAT STARS DATABASE.

Tourism 16,333

Coal 12,843

Crude petroleum 6,109

Non-monetary gold 5,307

Iron ore 5,218

Aluminium 4,252

Education 4,203

Wheat 4,136

Beef 4,116

Aluminium ores (incl. alumina) 3,692

Wool 3,598

Professional & Business services 3,397

Motor vehicles 3,083

Dairy products 2,862

Refined petroleum 2,448

Natural gas 2,447

Wine 2,335

Aircraft & parts 1,772

Meat (excl. bovine) f.c.f. 1,726

Medicaments (incl. veterinary) 1,718

Total merchandise exports 119,497

Total Services exports 31,410

Motor vehicles 12,903

Tourism 12,278

Crude petroleum 6,873

Transportation services: Freight transportation 5,609

Aircraft & parts 5,247

Computers 4,989

Medicaments (incl. veterinary) 4,260

Telecommunications equipment 4,122

Professional & Business services 3,827

Non-monetary gold 2,511

Computer parts 2,479

Motor vehicle parts 2,203

Paper & paperboard 2,031

Refined petroleum 1,975

Measuring and controlling instruments 1,848

Toys, games & sporting goods 1,755

Internal combustion piston engines 1,627

Civil engineering equipment 1,436

Heating & cooling equipment 1,404

Furniture 1,384

Total merchandise imports 127,652

Total Services imports 32,856

Manufactures - 17%

Rural - 30%

Minerals and Fuels - 30%

Services - 16%

Other - 4%

Non–Monetary Gold - 2%


Graph 4.3: Composition of Australia's exports, 2002


Graph 4.4: Direction of merchandise exports 2002


Graph 4.5: Australia's exports of services, A$million in 2002


Rural - 19%

Minerals And Fuels - 24%

Manufactures - 25%

Other - 7%

Non–Monetary Gold - 4%

Services - 21%

Japan - 18.5%

EU - 12.4%

ASEAN - 12.2%

Sth Asia - 3.0%U.S.A - 9.6%

Rep. of Korea - 8.3%

China - 7.0%

NZ - 6.6%

Taiwan - 4.0%

Other - 18.3%

AFRICA(incl. EGYPT)

407

AMERICAS

5,211

ASIA

13,024

EUROPE

7,162

OCEANIA

2,679



Activity 4.10

Remember

1 Explain the difference between tourism exports and imports.

2. Explain the difference between merchandise and services exports.

3. List exports that earn foreign exchange in Australia – visitors pay for in Australia.

4. Why are motor vehicles listed as both exports and imports?

Calculate

5. Add up the percentage of merchandise exports in 2002 to Asian countries and create a new pie chartshowing Australia's broad merchandise export destinations as Asia, Europe, USA and other.

6. Calculate the percentages of services exports to each major destination and compare these to themerchandise exports.

Create

7. Prepare an advertising campaign for one of Australia's top 20 exports to be shown in a country of your choice.

Connect

8. Visit the Department of Foreign Affairs and Trade Internet site athttp://www.dfat.gov.au/publications/statistics.html and look at the Direction of Trade Time Seriesbook of statistics. Explain why Australia's export destinations have changed from 1901, when 50.1 percent of Australia's merchandise exports went to the United Kingdom.


Section 4.11 Module summary

Activity 4.11

Summarise the main points of this module by completing the following table.

Table 4. 12: Summary of module 4

Australia's principal merchandise exports Australia's principal merchandise imports

• •

• •

• •

Key Trends: Key Trends:

Australia's principal services exports Australia's principal services imports

• •

• •

• •


Australia's principal merchandise export markets Australia's principal merchandise import markets

• •

• •

• •


Balance on merchandise trade Emerging trade issues

• •

• •

• •

COMPOSITION OF TRADE

DIRECTION OF MERCHANDISE TRADE



Section 4.12 Revision exercise

Activity 4.12


Table 4.13: Australia's balance of merchandise trade with Saudi Arabia


Remember

1. What is meant by the terms:

(a) merchandise exports?

(b) merchandise imports?

(c) 'balance on merchandise trade'?

A$'000 1997-98 1998-99 1999-00 2000-01 2001-02

Total exports 544,673 1,060,385 1,333,457 2,196,426 2,597,964

Total imports 648,132 532,051 1,002,028 1,612,810 1,025,483

Balance on merchandise trade

Top 5 merchandise exports (2001-02)

1. Passenger motor vehicles 74,913 38,131 701,506 1,206,907 1,285,078

2. Confidential items 144,728 143,501 149,727 191,354 287,568

3. Non-monetary gold 0 124,646 68,901 171,515 165,626

4. Live animals 505 4 8,720 69,3041 53,516

5. Cheese and curd 74,343 81,642 94,124 123,622 148,211

Top 5 merchandise imports (2001-02)

1. Crude petroleum 354,735 202,796 450,754 975,464 438,756

2. Refined petroleum 159,297 141,341 324,982 297,698 338,857

3. Confidential items 64,411 103,175 73,197 118,766 86,498

4. Liquefied propane and butane 10,628 20,677 78,727 119,009 74,281

5. Fertilizer 32,443 45,380 55,251 62,687 47,510


Understand

2. Explain, in your own words, what the table measures.

3. What is the time series?


5. Which country do these trade figures refer to?

6. (a) 'Confidential items' is Australia's second largest merchandise export to Saudi Arabia. Where wouldyou find the meaning of this term?

(b) What does the term 'Confidential items' mean?

Calculate

7. In 1997–98 what was the:

(a) value of total merchandise exports from Australia to Saudi Arabia?

(b) value of total merchandise imports to Australia from Saudi Arabia?

(c) balance on merchandise trade?

(d) balance on merchandise trade is surplus or deficit? How can you tell?

8. In 2001–02 what was the:

(a) value of total merchandise exports from Australia to Saudi Arabia?

(b) value of total merchandise imports to Australia from Saudi Arabia?

(c) balance on merchandise trade?

(d) balance on merchandise trade is surplus or deficit? How can you tell?

9. From 1997–98 to 2001–02 what was the percentage increase in:

(a) the export of passenger motor vehicles?

(b) the import of crude petroleum

(c) total exports?

(d) total imports?



Interpret

10. Select the most appropriate response.

(a) Australia's balance on merchandise trade with Saudi Arabia moved from a deficit in 1997–98 to asurplus in 2001–02 because:

(i) Australia bought less imports from Saudi Arabia

(ii) Australia sold more exports to Saudi Arabia.

(b) From 1997–98 to 2001–02 the percentage increase:

(i) in exports from Australia to Saudi Arabia grew at a faster rate than imports from Saudi Arabia toAustralia

(ii) in imports to Australia from Saudi Arabia grew at a faster rate than exports from Australia toSaudi Arabia.

(c) The top five imports in 2002–02 were mainly:

(i) manufactured products

(ii) primary products.

(d) Passenger motor vehicles would be classified as:

(i) STMs

(ii) ETMs.

11. Select the most appropriate word or figure from the table to complete the following sentences:

Word/figure

(a) In 2001–02 the largest merchandise export item sold to Saudi Arabia was ____________________with a value of $_____________. This represented an increase of __________ per cent from 1997–98.

(b) In 2001–02 the largest merchandise import item supplied by Saudi Arabia was ___________________with a value of $______________. This represented an increase of __________ per cent from 1997–98.

Analyse

12. Briefly describe Australia's pattern of trade with Saudi Arabia.

crude petroleum 1,615 1,285,078,000

passenger motor vehicles 438,756,000 24


Module 5 Australia's emerging trade patterns–through the Nineties and into the New Millennium

Extension Level Analysis

Section 5.1 Australia's rank in world exports

Even though Australia is not one of the world's major trading countries, trade is crucial to the Australian economyand wealth of the Australian people. It is therefore most important that Australia develops an expanding exportbase and maintains as high a rank as possible in terms of its share of world export trade.

5: AUSTRALIA’S EMERGING TRADE PATTERNS – extension level analysis


Activity 5.1


Table 5.1: Australia's rank in world exports (US$ million)


Calculate

1. What is Australia's share (percentage) of total world exports for:

(a) 1981?

(b) 1991?

(c) 2001?

Interpret

2. Describe the trend in Australia's rank in world exports.

3. Outline the:

(a) economic

(b) non–economic

implications this has for Australia.

COUNTRY 1981 RANK 1991 RANK 2001 RANK

World 1,914,800 3,492,360 6,247,960

United States 233,739 1 421,755 1 730,960 1

Germany 176,086 2 403,208 2 570,269 2

Japan 151,500 3 314,892 3 403,489 3

France 106,425 5 217,083 4 325,565 4

China 21,476 18 71,966 13 321,936 5

United Kingdom 102,266 6 184,960 5 268,536 6

Canada 72,726 8 126,160 8 261,646 7

Italy 75,284 7 169,593 6 240,760 8

Netherlands 68,743 9 133,076 7 228,876 9

Belgium-Lux. 55,615 10 117,828 9 182,198 10

Hong Kong 21,816 16 98,579 10 176,706 11

Mexico 19,381 25 42,688 19 158,494 12

Korea 21,271 19 72,372 12 150,439 13

Taiwan 22,611 15 76,178 11 122,866 14

Singapore 20,970 21 59,192 16 121,717 15

Australia 21,796 17 41,873 20 63,506 26

4. Which Asian country has improved its ranking the most? Outline the possible benefits to Australianexporters due to this country's improvement.

Communicate

5. The following mind map shows the possible effects to the Australian economy of a rise in Australia'sshare of world exports. In groups of 3 or 4 indicate beside each arrow what would lead to such animpact. The first one has been done for you.

Connect

6. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site atwww.austrade.gov.au, prepare a brief report on two policies the federal government could implement toimprove Australia's export ranking. Present your report to the rest of the class.

POSSIBLE EFFECTS OF A RISE IN

AUSTRALIA'S SHARE OF WORLD EXPORTS

HIGHER STANDARD OF

LIVING

INCREASED EMPLOYMENT

INCREASED ACCESS TO

TECHNOLOGY

INCREASED EXPENDITURE IN

INFASTRUCTURE &PRODUCTION FACILITIES

INCREASED ABILITY TO PURCHASE IMPORTS

INCREASED AVERAGE FAMILY

INCOMES

HIGHER ECONOMIC GROWTH

INCREASED BUSINESS

INVESTMENT

Rise in business profits and decrease in business closures




Section 5.2 Individual country investigation

Australia exports to over 200 countries. Japan is currently Australia's principalmerchandise export market purchasing approximately $22.8 billion worth in2001–02. At the other end of the scale is Tokelau, ranked 219th, withpurchases of just $1,000 in 2001–02.

Activity 5.2

Connect

1. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site atwww.austrade.gov.au, investigate the principal exports to and imports from one of Australia's top tentrading partners. (Use the latest figures available). Present your information in a table format as shownbelow.

Table 5.2: Australia's merchandise trade with a selected country

MERCHANDISE EXPORTSCOUNTRY YEAR

Top ten principal exports:

Commodity (A$'000)

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

_______

Total _______

Top ten principal exportsby broad category (A$'000)

Primary Products

Manufactures

STMs

ETMs

Other

_______

Total _______

MERCHANDISE IMPORTSCOUNTRY YEAR

Top ten principal imports:

Commodity (A$'000)

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

_______

Total _______

Top ten principal importsby broad category (A$'000)

Primary Products

Manufactures

STMs

ETMs

Other

_______

Total _______


Interpret

2. Briefly describe Australia's composition of trade with your selected country.

3. Does Australia traditionally have a trade deficit or surplus with your selected country?

Predict

4. Speculate as to the likely impact on the Australian economy if trade with your selected country wasrestricted due to trade barriers. Present your ideas as a PowerPoint presentation, a poster or mind map.Share your ideas with the rest of the class.

Section 5.3 Australia's major merchandise exports: rank, value and growth

Activity 5.3


Table 5.3: Australia's top ten merchandise exports: rank, value and growth



1 Coal 13,404 8.6


3 Iron ore 5,162 9.7

4 Non-monetary gold 5,129 -1.2

5 Wheat 4,528 1.9

6 Aluminium 4,411 13.0

7 Bovine meat 4,332 15.2

8 Aluminium ores 4,034 11.5

9 Wool 3,396 -0.1


Total 53,357



Analyse

1. Examine the top ten merchandise exports. Elaborate as to why Australia is internationally competitive inthe production of these products.

2. Identify the current:

(a) domestic

(b) international

economic factors that might explain the rise in Australia's two fastest growing merchandise exports.

3. What evidence is there to suggest that Australia's merchandise export profile is slowly changing? (Hint: analyse the '5 year trend growth' figures.)

Investigate

4. List some of the major businesses that produce Australia's top ten merchandise exports.

5. What benefits will flow to these Australian businesses if the demand for the top ten merchandise exportssteadily increases over the next five years?

Predict

6. If world demand for primary products collapses, what impact would this have on:

(a) Australian primary producers?

(b) regional employment?

(c) government trade policy?


Section 5.4 Australia's merchandise trade by commodity

Activity 5.4


Table 5.4: Australia's merchandise trade by commodity (percentage share)

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02

EXPORTS

0 Food & live animals, chiefly for food 20.7 18.3 18.0 17.4 17.4 18.1

1 Beverages & tobacco 1.0 1.2 1.4 1.6 1.7 1.9

2 Crude materials, inedible (excl fuels) 19.8 20.4 20.0 18.9 19.7 18.5

3 Mineral fuels, lubricants, etc 17.4 17.5 16.5 18.6 21.1 20.8

4 Animal & vegetable oils, fats & waxes 0.3 0.4 0.4 0.3 0.3 0.3

Total Primary Products (Sections 0-4) 59.1 57.8 56.3 56.8 60.1 59.6

5 Chemicals & related products 3.9 3.8 4.2 4.3 4.3 4.4

6 Manufactured goods classified chiefly by material 11.7 12.0 11.8 12.7 11.7 11.2

7 Machinery & transport equipment 13.5 12.6 12.0 11.9 11.2 11.7

8 Miscellaneous manufactured articles 3.6 3.7 4.1 3.9 3.7 3.7

Total Manufactures (Sections 5-8) 32.7 32.1 32.0 32.9 31.0 31.0

9 Commodities & transactions of merchandise 8.2 10.2 11.6 10.4 8.9 9.4

trade not elsewhere classified

Total Exports 100.0 100.0 100.0 100.0 100.0 100.0

IMPORTS

0 Food & live animals, chiefly for food 3.8 3.8 3.9 3.6 3.6 3.9

1 Beverages & tobacco 0.6 0.6 0.6 0.6 0.8 0.7

2 Crude materials, inedible (excl fuels) 1.9 1.8 1.7 1.7 1.6 1.5

3 Mineral fuels, lubricants, etc 6.5 4.9 4.7 7.0 8.9 7.5

4 Animal & vegetable oils, fats & waxes 0.3 0.3 0.3 0.3 0.2 0.2

Total Primary Products (Sections 0-4) 13.2 11.4 11.2 13.1 15.1 13.8

5 Chemicals & related products 11.4 11.3 11.7 11.4 12.0 12.2

6 Manufactured goods classified chiefly by material 13.6 13.8 13.2 12.4 11.9 12.4

7 Machinery & transport equipment 46.6 46.2 46.5 46.7 45.2 44.8

8 Miscellaneous manufactured articles 14.4 14.8 14.8 14.1 14.2 14.6

Total Manufactures (Sections 5-8) 85.9 86.2 86.2 84.6 83.3 84.0

9 Commodities & transactions of merchandise trade 0.9 2.4 2.6 2.3 1.6 2.1

not elsewhere classified

Total Imports 100.0 100.0 100.0 100.0 100.0 100.0



SOURCE: COMPOSITION OF TRADE AUSTRALIA 2001–02, PAGE 24, 'TABLE 5', DFAT.

Communicate

1. Working in pairs select appropriate data that supports each of the following statements. The first one hasbeen done for you.

Analyse

2. Compare and contrast the composition of Australia's merchandise exports and merchandise imports.

3. Imagine you are the Minister for Trade.

(a) What changes would you like to see in Australia's composition of merchandise exports? (Hint: ETMsare high value added products that attract higher prices on world markets.)

(b) What policies would you implement to bring about the desired changes?

(c) How would you evaluate the success of your policies?

%

0

20

40

60

80

100

0

20

40

60

80

100

%

Primary Products Manufactures Other

96-97 97-98 98-99 99-00 00-01 01-02

Primary Products Manufactures Other

96-97 97-98 98-99 99-00 00-01 01-02

Australia's Merchandise Exports, Percentage Share

Australia's Merchandise Imports, Percentage Share

STATEMENT

1. Primary products are Australia's principal merchandise exports.

1. Primary products account for approximately 60 per cent of total merchandise trade.

2. Australia is an importer of mainly manufactured products.

3. Beverages and tobacco are relatively insignificant import items.

4. Machinery and transport equipment are Australia's principal merchandise imports.

EVIDENCE



4. Why does Australia need to import primary products when such items are our main exports? In youranswer refer to the principle of comparative advantage.

Investigate

5. (a) What problems are associated with Australia's present merchandise trade patterns?

(b) How can government policies overcome these problems?

Connect

6. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site atwww.austrade.gov.au, prepare a report on:

(a) Australia's Pattern of Trade. In your report include some discussion of the following points:

• the present composition of Australia's exports and imports.

• reasons for changes to Australia's pattern of trade since the late–1950s.

• possible future changes to Australia's trade pattern.

Present your report to the rest of the class.

(b) some of the problems faced by Australian businesses wanting to sell their products on internationalmarkets. In your report include some discussion of the following points:

• government sponsored programs available to domestic producers to assist them take full advantageof their export potential.

• the benefits of increased exports for the Australian economy.

Section 5.5 Australia's export of services

Service exports now make up 20 per cent of total exports. In 2001–02 the value of service exports was $31.0billion down 1.5 per cent from the Sydney Olympic Games peak of $33.2 billion in 2000–01.

Activity 5.5




Table 5.5: Australia's exports of services by type of activity, A$ million

(a) Passenger services includes Other transportation services, (b) Operational leasing for Sea and Air Transport is included in Other transportation services, (c) For exportsonly in 2000–01 includes $973 million due to Olympic related Audiovisual services.SOURCE: COMPOSITION OF TRADE AUSTRALIA 2001–02, PAGE 26, 'TABLE 7', DFAT, BASED ON ABS CATALOGUES 5368.0 AND 5302.0.

TYPE OF ACTIVITY 1997-98 1998-99 1999-00 2000-01 2001-02

SERVICES

Transportation services 6,611 6,803 6,865 8,062 7,625

Passenger (a) 5,550 5,604 5,848 7,024 6,629

Freight 1,061 1,199 1,017 1,038 996

Other (a) (b) n.p n.p n.p n.p n.p

Travel services 11,540 11,944 13,139 15,366 14,530

Business 893 1,009 1,040 1,166 1,121

Personal 10,647 10,935 12,099 14,200 13,409

Education-related 3,098 2,980 3,422 4,038 4,154

Other 7,549 7,955 8,677 10,16 29,255

Communications services 1,361 1,239 1,475 1,397 1,017

Construction services 31 18 23 68 98

Insurance services 840 859 766 709 673

Financial services 713 716 747 747 784

Computer and information services 532 676 668 797 989

Royalties and licence fees 449 488 572 626 508

Other business services 2,224 2,552 2,852 3,185 3,473

Merchanting and other trade-related services 481 586 501 489 551

Operational leasing services (b) 8 8 15 16 28

Miscellaneous business, professional & technical 1,735 1,958 2,336 2,680 2,894

Legal, accounting, management consulting 328 350 324 541 711and public relations

Advertising, market research and public 95 107 110 122 123opinion polling

Research and development 179 189 231 248 263

Architectural, engineering and other 368 436 648 589 569technical services

Agricultural, mining and on-site processing 36 33 44 29 69

Services between affiliated enterprises 650 731 823 870 882

Other 79 112 156 281 277

Personal, cultural and recreational services 352 388 475 1,514 569

Audiovisual and related services (c) 125 145 175 1,226 99

Other personal, cultural and recreational services 227 243 300 288 470

Government services 553 559 735 733 773

Total Services 25,206 26,242 28,317 33,204 31,039


Interpret

1. Decide which of these statements is true:

(a) Passenger transportation is Australia's largest service export.

or

(b) Personal travel is Australia's largest service export.

2. What evidence can you find to show the impact of the 2001 Sydney Olympic Games?

3. Describe the 5–year trend in:

(a) passenger transportation services

(b) personal travel services.

4. Account for the sudden fall in the value of 'Personal, culturaland recreational services' from 2000–01 to 2001–02.

Understand

5. Why would the impact of an Australian sporting event such as the 2001 Sydney Olympic Games showup in a table that measures the exports of services?

6. Identify the specific service activity that would be affected by:

(a) a dramatic fall in inbound tourists

(b) the expansion into the Asian market by a major Australian bank

7. Complete the following table by providing an example of a type of service provided for each of thecategories. The first one has been done for you.

SERVICE ACTIVITY

Transportation services

Travel services

Communication services

Construction services

Insurance services

Financial services

Computer and information services

Royalties and licence fees

Personal, cultural and

recreational services

EXAMPLE

An Australian shipping company transports some imported goods.



Communicate

8. In groups of 3 or 4 brainstorm the impact on the Australianeconomy of a 30 per cent increase in Australia's export ofservices over the next five years. In particular consider the:

(a) types of jobs created

(b) types of investment required

(c) impact on the natural environment

(d) opportunities for Australian businesses.

In your opinion is such a change desirable. Give reasons for your answer.

Section 5.6 Reflection

This module has introduced you to a range of issues and concepts concerning Australia's composition of trade.

Activity 5.6

Create

1. Complete the following table. By doing so you will prepare a summary of the main issues and concepts.

COMPOSITION OF TRADE SUMMARY - ISSUES AND CONCEPTS SUMMARY STATEMENT

1. Australia's rank in world exports• ••

2. Individual country investigation•• •

3. Australia's major exports, rank, value and growth• ••

4. Australia's trade by broad category• ••

5. Australia's exports of services• ••


Appendix 1 Glossary

These terms may be useful to teachers and students unfamiliar with some economic terms. For a broaderweb–based glossary see www.econterms.com or www.amosweb.com.

APEC Established in 1989 in order to promote open trade and economic cooperationamong Asia–Pacific economies.

ASEAN A group of nations including Indonesia, Malaysia, Philippines, Singapore andThailand established to promote political, economic and social aims.

Balance of merchandise trade The difference between the value of a country's merchandise exports andimports.

Bilateral trade Trade between two countries.

Capital goods Plant and machinery (ETMs) used to help producers make other goods andservices

Commodities Any articles exchanged but usually used to refer to raw materials.

Composition of trade The 'type' of goods and services exported and imported.

Confidential items Exports of a particular commodity to particular countries are not made public inorder to protect a firm's operations.

Consumer Someone who purchases goods and services to satisfy needs and wants.

Consumer goods Goods intended for general consumption, such as food and clothing

Direction of trade The countries with whom Australia trades.

Elaborately transformed Goods that involve high levels of processing. Much value has been addedmanufactures (ETMs) to them.

European Union (EU) The European Economic Community (EEC) was established by the Treaty ofRome in 1957 to eliminate tariff and non–tariff trade barriers among membersand to form a common market that also allowed the free movement of people,services and capital. Since 1993, the EEC has been referred to as the EuropeanCommunity (EC) and is the main part of the European Union (EU). The EU isalso promoting political integration and the enlargement of the EU with newmember states from eastern and central Europe. Since 1 January 1999, the 'euro'has become the official currency of a number of EU member states.

Exports Goods and services sold to foreign consumers, regardless of where the transactiontakes place. These sales earn foreign exchange.

Foreign debt The total level of private and government overseas borrowings.

Foreign exchange The sale and purchase of foreign currencies.

Goods Same as merchandise.

APPENDIX 1 – glossary


Imports Goods and services bought from a seller overseas.

Intermediate goods Raw materials (primary products and STMs) used to help producers make othergoods and services

International trade International buying and selling of goods and services and making investments inforeign countries.

Manufactures Goods that are changed from raw commodities through processes. They areclassified as simply transformed, and elaborately transformed manufactures.

Medicaments Substances used in treating disease; medicines.

Merchandise Physical goods such as raw materials, semi–manufactures and finishedmanufactures.

Merchandise trade The buying and selling of items that can be seen and touched.

Price taker Sellers of goods and services who have no power to influence the prices they receive.

Primary products Products that have been provided by nature such as wheat,coal, crude petroleum.

Services Activities done by people rather than production of physical goods. It is generallyany activity except agriculture, mining and manufacturing.

Simply transformed Goods that involve low levels of processing. Little value has been added to them.manufactures (STMs)

Trade deficit When the total value of export merchandise (goods) and services is less than thetotal value of import merchandise and services.

Trade surplus When the total value of export merchandise (goods) and services is greater thanthe total value of import merchandise and se


Appendix 2 Answers

Activity 1.1

1. (b) Australia's exports of goods and services were valued at $152.2 billion in 2001–02, down by lessthan one per cent from $152.7 billion in 2000–01. This was mainly due to the slowing globaleconomy, especially in some key Australian export markets. Exports of merchandise (goods) rose byone per cent to $121.2 billion in 2001–02, while exports of services fell marginally to $31.0 billion.

2. (a) Exports of coal were valued at $13.4 billion, crude petroleum $6.0 billion and iron ore $5.2 billiongiving a total of $24.6 billion. These three accounted for 20.3 per cent of a total $121.2 billionmerchandise exports. All of the items listed in responses (b) and (c) are part of Australia's top tenmerchandise exports. Together, Australia's top ten commodities accounted for 44 per cent of totalexports in 2001–02.

3. (a) Since 1996–97, Australia's exports have increased by an average of 9 per cent per annum. Themerchandise exports component has risen by an average 10 per cent per annum since 1996–97, whilethe services component has risen by an average 6 per cent per annum.

4. (c) Based on the Department of Foreign Affairs and Trade's (DFAT) Trade Export Classification(TREC), total Australian exports comprised 47 per cent primary products, 17 per cent ETMs, 8 percent STMs and 8 per cent other merchandise exports. Services accounted for the remaining 20 percent of exports.

5. (b) Imports of goods and services increased by one per cent to $151.9 billion in 2001–02. This was wellbelow the long–term annual growth rate of 8 per cent since 1996–97.

6. (c) Imports of passenger motor vehicle were valued at $9.0 billion, crude petroleum at$6.8 billion andcomputers at $5.0 billion giving a total of $17.4 billion. Note that a proportion of these imports arebusiness inputs. These three imports accounted for 17.4 per cent of a total $119.7 billionmerchandise imports. All of the items listed in responses (a) and (b) are part of Australia's top tenmerchandise imports.

7. (b) The annual growth of Australia's imports has averaged 8 per cent since 1996–97. Imports ofmerchandise goods have increased by an average 9 per cent per annum since 1996–97, while importsof services increased by an average of 6 per cent per annum.

8. (a) Australia's imports have always been dominated by ETMs. In 2001–02, imports comprised 11 percent primary products, 7 per cent STMs, 59 per cent ETMs, 2 per cent other merchandise importsand 21 per cent services.

9. (c) Australia recorded a trade surplus of $328 million in 2001–02, a decrease of $1.8 billion on thesurplus of $2.2 billion recorded in 2000–01. Trade in merchandise goods recorded a surplus of $1.5billion, while trade in services recorded a deficit of $1.2 billion in 2001–02.

10. (a) Australia's share of global merchandise trade stood at 1.0 per cent in 2001. As a result of thisrelatively small share of world trade, Australia is predominately a price taker in international markets,except in the case of a few commodities of which it is a major producer.

APPENDIX 2 – answers


11. (b) Japan continued to be Australia's largest export market in 2001–02, although exports fell by 3 percent to $22.8 billion representing 19 per cent of total exports. The United States was Australia'ssecond largest export market, with exports valued at $12.0 billion in 2001–02, or 10 per cent of totalexports.

12. (a) The United States was Australia's principal source of imports, valued at $21.5 billion in 2002–02 andrepresented 18 per cent of total imports. Japan remained our second largest source of imports, whichwere valued at $15.5 billion and represented 13 per cent of total imports. China was Australia's thirdlargest source of imports, which were valued at $11.3 billion or 9 per cent of total imports.

13. (b) APEC remained Australia's largest trading group. In 2001–02, total exports to APEC members rosemarginally to $87.6 billion and accounted for 72 per cent of Australia's total merchandise exports.Exports to the European Union totalled $14.5 billion in 2001–02 and accounted for 12 per cent oftotal exports. Australia's exports to the Americas rose 4 per cent to $15.5 billion in 2001–02,representing 13 per cent of total exports.

14. (a) Australia's wine industry employs 62 000 people directly and indirectly. The industry relies on accessto overseas markets. Australia's wine exports were worth a record $2.1 billion in 2001–2. It isessential for the long–term growth of our wine industry that it has assured access to overseas markets.

15. (a) Australia's largest bilateral trade surplus was with Japan, valued at $7.4 billion in 2001–02. At $9.5billion Australia's trade deficit with the United States was by far the largest bilateral trade deficit withany trading partner. Australia had a trade deficit of $3.5 billion with China in 2001–02.

Activity 1.2

Remember

1. Some of the major goods and services exported by Australia are coal, wool, foodstuffs, passenger motorvehicles, crude petroleum, education services and tourism.

2. Some of the major goods and service imported by Australia are passenger motor vehicles, televisions,computers and equipment to operate businesses.

3. Australia trades with other countries because we cannot produce all the goods and services thatAustralians want and need. Our small population means that the domestic market alone will notadequately support the Australian economy.

4. We import goods and services when we cannot produce them ourselves or its is cheaper to purchasethem from abroad then produce them here.

Understand

5. Australia exports products to sell overseas generating the foreign exchange to pay for its imports, avoidingthe danger of foreign debt.

6. (a) A decline in exports leads to a loss of foreign exchange necessary to pay for imports.

(b) Australia imports not only important necessities that cannot be produced here, but also luxuries thatAustralian consumers want. Hence a loss of our capacity to import leads to a loss of our standard of living.


7. (a) (i)~$20 billion

(ii)~$70 billion

(iii)~$140 billion

(b) The greatest increase in the value of Australian exports was between 1999 and 2000.

(c) There was a slight decrease in the value of Australia's exports between 1998 and 1999.

(d) The value of Australia's exports has grown steadily (linearly) in the 20 year period between 1980 and 2000.

Activity 1.3

Create

Reasons for trade

• Australia cannot produce all the goods and services required by customers

• Australia has a small domestic market

• Consumers want variety

• Enhanced competitiveness—gain expertise and new technologies in global competition

• Increased productivity, economies of scale, long–term expansion and utilise excess production capacity

• Respond to perceived demand overseas, such as niche markets.

Imports

• Consumers prefer foreign versions (consumer choice)

• Consumers can purchase more cheaply or better quality from overseas

• Australia cannot produce all the goods and services required by customers (Qantas jets)

• Businesses require the latest high technology to remain globally competitive.

Exports

• Exports and investment earn foreign exchange – almost a quarter of Australia's total income

• Businesses earn more money selling to a wider market

• Supplying to global markets create job opportunities

• Living standard improve as more GDP comes from export earnings.

Benefits of trade

• Businesses gain expertise and new technologies in global competition

• Business and international relationships improve through exporting

• Exporting businesses tend to pay higher wages, employ more full–time staff and train staff thannon–exporters



• Consumers have greater choice

• Foreign exchange earnings allow Australians to import more

• Exports and investment add diversity to Australia's national income sources, providing wider markets andless vulnerability to global economic downturns

• Development of closer links with the rest of the world.

Foreign exchange

• Foreign exchange earnings allow Australians to import more

• Foreign debt occurs when Australians import more than they export.

Activity 2.1

Understand

1. When an Australian exports bails of wool or imports cars from Korea, they are engaging in themerchandise trade; the trade in tangible objects or goods. When an Australian provides advice as aconsultant in the US or stays in a hotel in Turkey, they are engaging in the services trade; the trade inintangibles like knowledge or care.

2. (a) S (b) M (c) M (d) S (e) M (f) S (g) M (h) S.

4. (a) 6 .(b) 4 (c) 19 (d) 3 (e) 12 (f) 14 (g) 23 (h) 2 (i) 21 (j) 13 (k) 7 (l) 24 (m) 20 (n) 17 (o) 11 (p) 22 (q) 15 (r) 1 (s) 18 (t) 5 (u) 25 (v) 16 (w) 9 (x) 10 (y) 8.

Activity 2.2

Remember

1. Composition of trade – drawing of a range of goods and services.

Direction of trade – map with arrows going from Australia to Asia, Europe, etc.

Understand

2. (a) Broad category, commodity (goods), type of activity (services).

(b) Country, country groups, geographic regions.


Activity 2.3

Calculate

1. Table 2.4: Australia's merchandise exports

Interpret

2. (a) The largest percentage increase in Australia's merchandise exports occurred in the financial year 2000–01.

(b) The largest percentage decrease in Australia's merchandise exports occurred in the financial year 1998–99.

Understand

3. More information than just the dollar value is required to decide whether an increase or decrease inmerchandise exports is significant. The change must be examined in the context of the overall value ofmerchandise exports as a percentage trend – a relative increase or decrease.

Activity 2.4

Interpret

1. Australia's merchandise exports to Japan (A$ '000).

2. This table measure Australia's composition of trade to Japan, in terms of the broad category ofcomposition, over the time period 1986–2001.

3. A$ '000.

4. Australian exports are being measured.

5. The exports are destined for Japan.

YEAR MERCHANDISE DIFFERENCE CHANGE PERCENTAGE EXPORTS CHANGE

(A$ million)

1996-97 78,932

1997-98 87,768 8,836 0.101 10.1

1998-99 85,991 -1,777 -0.021 -2.1

1999-00 97,286 11,295 0.116 11.6

2000-01 119,539 22,253 0.186 18.6

2001-02 121,200 1,661 0.014 1.4

C O L U M N 1 C O L U M N 2 C O L U M N 3 C O L U M N 4

Column 2Column 1

Column 3 X 1001

Year 2 - Year 1



6. (a) A$ 9,045,080,000.

(b) A$ 23,719,486,000.

7. (a) The value of unprocessed primary products fell between 1991 and 1996.

(b) The value of ETMs rose the most between 1986 and 1991.

8. (a) F (b) T (c) T (d) T (e) F.

9. Between 1986 and 2001 Australia's total merchandise exports grew steadily.

Understand

10. Having multiple years displayed allows the reader to identify trends with respect to the increasing ordecreasing value of certain categories of product. This allows the reader to estimate whether Japan wouldbe a good potential market for different categories of products.

Predict

11. Based on a model of steady growth you could estimate that the value of Australian exports to Japan willbe approximately A$28,000,000,000 in 2006.

Activity 2.5

Interpret

1. The unit of measurement is a million Australian dollars.

2. (a) Australia's exports to Japan fell between 95–96, 97–98 and 00–01.

(b) Australia's exports to Japan rose sharply between 99–00.

3. Australia's exports to the United States fell between 91–92 and 95–96.

4. (a) Although there are periods where the level of imports drops, the trend in imports from the UnitedStates is one of growth.

(b) After a slight fall from 1991–2 to 1999–96, exports to the United States then cycle between periodswhere there is no growth and periods where there is weak growth.

Calculate

5. (a) (i) A$m 17,500 (ii) A$m 24,000 (iii) A$m 22,500

(b) (i) A$m 12,500 (ii) A$m 15,000 (iii) A$m 15,000

(c) (i) A$m 4,000 (ii) A$m 12,000 (iii) A$m 12,000

(d) (i) A$m 16,000 (ii) A$m 22,000 (iii) A$m 20,000


Predict

7. (a) If the Japanese economy grows it will strengthen demand for imports, including goods and servicesfrom Australia.

(b) Many Australian jobs are supported by businesses that export. An increase in Australian exportsshould lead to higher levels of employment.

(c) Australian's standard of living improves with the level of imports. An increasing level of exportactivity generates the foreign exchange to increase the level of imports.

(d) As a major export market improved economic growth in Japan will lead to improved economicgrowth in Australia.

Activity 2.6

Remember

1. If the balance of merchandise trade is a negative figure, there is a trade deficit. If it is a positive figure,there is a trade surplus.

Calculate

2. Table 2.7: Australia's merchandise trade with Japan


Table 2.8: Australia's merchandise trade with the United States


Interpret

4. (a) The trend in Australia's merchandise trade with Japan is one of a growing trade surplus.

(b) The trend in Australia's merchandise trade with the United States is one of a shrinking trade deficit.

A$'000 1997-98 1998-99 1999-00 2000-01 2001-02

Total exports 17,580,431 16,566,022 18,822,161 23,494,946 22,827,021

Total imports 12,660,370 13,587,465 14,109,834 15,369,531 15,463,183

Balance of merchandise trade 4,920,061 2,978,557 4,712,327 8,125,415 7,363,838

A$'000 1997-98 1998-99 1999-20 2000-01 2001-02

Total exports 7,794,223 7,983,545 9,602,395 11,652,048 12,015,700

Total imports 19,834,401 20,893,267 23,134,601 22,350,729 21,490,648

Balance of merchandise trade -12,040,178 -12,909,722 -13,532,206 -10,698,681 -9,474,948



Activity 3.1

Remember

1. Merchandise exports are tangible things, like goods (rather than intangible things, like services) that areproduced in Australia and sold for foreign currency, usually overseas.

2. The value of the Australian dollar has changed over time and it would be misleading to compare dollaramounts from separate decades. In addition the Australian currency changed from the pound to dollar in1966, rendering prices incomparable before and after that period.

3. Having our direction of trade represented graphically allows us to see which markets are our dominantexport destinations and how that changes over time.

Interpret

4. (b) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is ashift away from the United Kingdom and Europe towards the United States and Asia.

5. (a) (i) the percentage of Australia's merchandise exports to the U.K. decreased from 50.7% to 32.79% ,a fall of 18 percentage points.

(ii) the percentage of Australia's merchandise exports to the United States increased from 6.8% to15.2%, a rise of 8.4 percentage points.

(iii) the percentage of Australia's merchandise exports to the European countries shown (Belgium–Luxemburg, France, Germany and the United Kingdom) declined from 63.4% to 49.5%.

(iv) the major new market to emerge was Japan with 6.3% of the total of merchandise exports in 1950–51.

(b)(i) the percentage of Australia's merchandise exports to the United Kingdom continued to decreasefrom 32.7% to 3.9%, a fall of 28.8 percentage points.

(ii) the percentage of Australia's merchandise exports to Japan increased from 6.3% to 19.7%, a rise of13.4 percentage points.

(iii) Two major new markets to emerge were Taiwan with 4.9% and China with 5.7% of totalmerchandise exports.

Analyse

6. (a) Over the period 1901 to 1950–51 there was a diversification in the direction of our merchandiseexports, with a move away from the UK to the US and the rest of Europe. Note also thedevelopment of Japan as an export market and the increase in exports to countries grouped underother.

(b) Over the period 1950–51 to 2000–01 Asia became established as the major export market, withJapan the largest single destination and other Asian countries, China, Taiwan and Korea, becomingother important markets. The USA and UK have also diminished as export destinations. Notice alsothe diversity represented by the increasing size of the 'Other' category as an export destination.


Activity 3.2

1. (a) United Kingdom, South Africa, United States, Germany, France, Belgium –Luxembourg, New Zealand, India.

(b) Japan, United States, Korea, New Zealand, China, Singapore, Taiwan, United Kingdom.

2. Many of the top eight export destinations for 1901 are no longer major export destinations in 2001.These include South Africa, Germany, France, Belgium –Luxembourg and India. All of the five countriesthat have moved onto the major destination list – Japan, Korea, China, Singapore, and Taiwan – are inAsia. Also note the diminishing role of the United Kingdom in Australian affairs, slipping from firstposition to eighth.

Understand

5. Asian countries represent five of our top eight export destinations. As indicated by the growth of thesemarkets as export destinations, their economic growth is strong and Australia will benefit from mutualtrading relationships.

6. During the 1970's and 1980's the value of Japan as an export destination was A$ 1,197,145,000 and A$5,221,627,000 respectively. This was up from A$ 322,976,000 in the 1960's, which is a sharp rise. Thisindicates substantial economic growth in Japan during this time.

Calculate

7. Table 3.2: Percentage change in Australia's merchandise exports

8. The overall trend in the percentage change in Australia's merchandise exports to:

(a) the United States is a gradual decline.

(b) China is fluctuating over the decades.

(c) Republic of Korea is increasing after a dramatic increase in 1970–71 to 1980–81.

9. It is important to examine both the dollar value of and percentage changes to Australia's merchandiseexports when determining the importance of a country's market because the value of exports willgenerally rise with inflation and the overall increase in world trade, while the significance of the value canbe measured by the percentage change.

COUNTRY 1960-61 TO 1970-71 1970-71 TO 1980-81 1980-81 TO 1990-91 1990-91 TO 2000-2001

Japan 271 336 175 63

U.S. 258 306 174 102

China -92 960 101 408

Rep. of Korea 181 5453 502 184

N.Z. 87 285 185 170

U.K. 7 42 156 159



Activity 3.3

Remember

1. Merchandise imports are tangible things, like goods (rather then intangible things, like services) fromoverseas that are sold in Australia.

Understand

2. (a) In 1901 the geographic region that supplied the majority of Australia's merchandise imports was

(ii) Europe.

(b) In 1950–51 the geographic region that supplied the majority of Australia's merchandise imports was

(ii) Europe.

(c) In 2000–01 the geographic region that supplied the majority of Australia's merchandise imports was

(iii) Asia.

3. The main changes to Australia's direction of merchandise imports:

(a) Over the period 1901 to 1950–51 there was a diversification in the direction of our merchandiseimports, with a slight move away from the UK, the US and the rest of Europe. Note also the increasein imports from countries grouped under other with more diversified sourcing of goods.

(b) Over the period 1950–51 to 2000–01 Asia became established as the major import source region,but the USA became the largest single source of goods. Notice also the diversity represented by theincreasing size of the 'Other' category as an import sources.

Activity 4.1

Remember

1. (a) Goods (merchandise) exports are tangible things, like wool, cars and wine, that are produced inAustralia and sold for foreign currency, usually overseas.

(b) Services exports are intangible things that are activities by people. Services include finance, tourismand education, that are activities delivered by Australian businesses to people from overseas forforeign currency. Services may be delivered in Australia or overseas.

2. (a) 'Primary Products' and 'STMs' and 'ETMs' are tangible things so are classified as 'Merchandise'.

(b) 'Travel' is intangible, an activity that includes travel agency and hotel services and is thereforeclassified as a 'Service'.

Understand

3. (a) T (b) T (c) F (d) T (e) F (f) T (g) T (h) F (i) F (j) F (k) T.


Interpret

6. (a) Australia is a major exporter of primary products.

(b) Travel is Australia's principal services export.

(c) The value of 'Total Merchandise Exports' is $121,200.

(d) Exports of 'STMs' are less than 'ETMs'.

(e) This table records the value of Australia's exports of goods and services for 2001–02.

Activity 4.2

Remember

1. (a) Merchandise (goods) exports are tangible things, like wool, cars and wine, that are produced inAustralia and sold for foreign currency, usually overseas.

(b) primary products are products that have been provided by nature such as wheat, coal, crudepetroleum.

(c) Simply transformed manufactures (STMs) are goods that involve low levels of processing. Little valuehas been added to them.

(d) Elaborately transformed manufactures (ETMs) are goods that involve high levels of processing. A lotof value has been added to them.

(e) Commodities are any articles exchanged, but usually used to refer to raw materials.

Understand

2. The primary products within Australia's top twenty merchandise exports are: coal, crude petroleum, ironore, non–monetary gold, wheat, aluminium, bovine meat, aluminium ores, wool, natural gas, meat,cotton, copper, nickel, other ores. (Milk and cream are processed and packaged.)

3. The manufactures (i.e. STMs and ETMs) within Australia's top twenty merchandise exports are:passenger motor vehicles, refined petroleum, alcoholic beverages, medicaments, milk and cream.

4. Advantages of only presenting exports data for one year include presenting current strong exports sectorsin a positive light even if they are falling over time and emphasising areas of strength at a particular time.Disadvantages of only presenting exports data for one year include possible selection of a year that is notrepresentative, and planning decisions and funding may concentrate on a sector in decline rather thanone that trend data shows has potential for enormous growth.

5. This table will help you answer questions about the ranking, value and trend growth of only the top 20merchandise exports in the 2001–02 financial year, but it will not help you answer questions about otheryears', other merchandise exports or services exports.

6. The advantage of presenting the '5 year % trend growth' figures for each item is that it shows industrysectors that are growing or falling in importance to the Australian economy.



Calculate

8. Within the top twenty merchandise exports the value of (a) total primary product is A$60,695 millionand (b) total manufactures is A$11,436 million

9. The percentage of Australia's total merchandise export earnings generated by the top twenty (a) primaryproducts is 50% and (b) manufactures is 9.4%.

10. Coal generated 11 per cent of Australia's total merchandise export earnings.

Interpret

11. (a) Products that rank highly in terms of export value are largely unprocessed.

(b) Agricultural products and minerals are the two main categories of primary goods.

(c) The top twenty commodities accounted for 60 per cent of total exports.

(d) Crude petroleum experienced the highest five–year percentage trend growth.

(e) Wool experienced the lowest five–year percentage trend growth.

(f) Australia's merchandise export profile is best described as rural–based.

Predict

13. The impact on the value of Australia's top twenty merchandise exports of:

(a) Australia's acceptance of a reduction in greenhouse gas emission by 15 per cent over ten years wouldbe to diminish the value of fuel exports.

(b) a severe drought across the entire nation would be to diminish the value of crop exports.

(c) a new mining technique, which can increase production by 25 per cent would be to increase thevalue of mined resources exports.

(d) a rare cow disease is detected in most European cattle herds would be to increase the value of meatexports.

(e) an increase in consumer demand for clothing made from natural fibres such as wool and cottonwould be to increase the value of natural fibre exports.

Activity 4.3

Understand

1. 'Australia's principal service export is tourism' because tourism earned the highest amount of foreignexchange in 2002, more than all other goods or services export categories.

2. To encourage more tourists to visit Australia and therefore earn more foreign exchange.

Calculate

3. (a) 'Personal travel' – 43.2%

(b) 'Passenger transportation' – 21.4%

4. (a) T (b) T (c) T.


Activity 4.4

Remember

1. (a) Goods (merchandise) imports are tangible things, like petrol, clothing and computers, that areproduced overseas and sold to Australians.

(b). Services imports include finance, tourism and transportation, which are activities delivered byforeign businesses to people from Australia. Services may be delivered overseas or in Australia. The foreign exchange earned from the transaction returns to the country where the service provider is registered.

Interpret

2. (a) Most of Australia's imports are manufactured products.

(b) ETMs make up the largest share of Australia's imported manufactures.

(c) Total merchandise imports account for 78.7 per cent of total imports.

(d) Travel is Australia's largest service imports.

Calculate

3. The '2001–02 % share' column.

Communicate

6. (a) Australia's main imports are more sophisticated manufactures.

(b) The types of manufactures are the important factor. Australia relies on sophisticated manufacturedimports to have the most cutting edge technology in business, industry and for tourism services(computer technology and planes). These imports are largely business inputs, not consumer goods,and therefore not a worry. Australian businesses use the technology to produce other sophisticatedmanufactures and business services. Some of these are later exported (software, Qantas travel) to earnforeign exchange.

$A MILLION 2001-02% SHARE

Merchandise


Manufactures 100,342 66.0

STMs 11,157 7.3

ETMs 89,185 58.7

Other 2,807 1.8

Total Merchandise Imports 119,654 78.7

Services

Transportation 10.876 7.1

Travel 11,043 7.2

Other 10,338 6.8

Total Service Imports 32,257 21.2

Total Imports 151,911 100.0



Activity 4.5

Interpret

1. Manufactured imports relating to the motor vehicle: passenger motor vehicles, crude petroleum, motorvehicles for transporting goods and motor vehicle parts.

2. The majority of the top ten merchandise imports are elaborately transformed manufactures (hightechnology) and many are business inputs, rather than consumer items.

3. Medicaments experienced the highest '5 year % trend growth'.

Calculate

4. The percentages of Australia's top ten merchandise imports that came from:

(a) primary products were 7.5 per cent.

(b) manufactured products were 92.5 per cent.

Create

6. (a) T (b) F (c) T (d) T.

Investigate

8. Australia needs to import these goods instead of producing them itself because other countries may havea comparative advantage in their production. They may have cheaper resources, more skilled workers inthe specialised field or better infrastructure to produce these ETMs at the moment. Australia'scomparative advantage may be in how it uses these ETMs in its businesses to produce other goods andservices, some for export.

Predict

9. If Australia could no longer import the three largest merchandise items Australia's:

(a) economic growth could slow

(b) level of employment could fall

(c) standard of living could fall

(d) business profitability could fall.

Activity 4.6

Remember

1. 'Merchandise export markets' are countries or regions that purchase merchandise from Australian businesses.

Understand

2. Japan was Australia's most important export market for 2001–02. Japan buys Australian primary produce as business inputs for their manufactures.


3. The United Kingdom is our 6th most important merchandise export market.

Calculate

4. (A$'000)

5. (a) The percentage of total world merchandise exports sold to the top ten exports markets for:

(i) 1991–92 was 70.5 per cent

(ii) 2001–02 was 67.9 per cent.

(b) Australia's main export markets are also the major world export markets, based on these two figures.

6. (a) The percentage increase in the total value of merchandise export trade to the top ten export marketsfrom 1991–92 to 2001–02 was 47.1 per cent.

(b) Australia's merchandise exports to the top ten export markets have doubled in value over this period.

Interpret

7. While the main three markets retained their rank over the decade China has increased in importance,while Singapore has fallen in rank between 1991–92 and 2001–02.

8. (a) China changed its rank position the most?

(b) China has become an important Australian export market over the last decade as it has opened toworld trade and encouraged investment from overseas. It joined the WTO in 2002 and it is noweasier for Australian firms to do business in China.

9. (a) F (b) T (c) T (d) T (e) T.

Participate

12. The rank order of Australia's principal merchandise export markets if the following events occurred:

(a) Australia signs a free trade agreement with the United States. The US may take first place.

(b) The Asian economies suffer a prolonged economic recession. It will alter because Australia will findalternative markets as it did during the 1997 Asian Economic Crisis.

(c) Foreign relations between Indonesia and Australia deteriorate. Indonesia may fall from the top 10 markets.

(d) The Chinese economy experiences high levels of sustained economic growth. China may rise in rank.

(e) Australia is admitted as a member of ASEAN. The US, New Zealand and United Kingdom may fallin relation to ASEAN nations as important markets.

13. If by 2030 China will be the world's economic superpower, Australia is likely to trade in goods andservices even more with China and enjoy related economic growth.

Total of top ten $38,819,361 $82,326,090



Activity 4.7

Understand

1. It is easier to see the importance of each region as an export market as a pie graph.

2. (a) The majority of Australia's merchandise exports markets are located in North Asia.

(b) The percentage of Australia's merchandise exports sold in the Asian region in 2001–02 was 57 per cent.

(c) The Middle East has been the fastest growing regional export market over the past decade.

(d) The percentage of Australia's merchandise exports sold to the Eastern European region has fallenover the last decade.

(e) Aside from the Asian regional markets Eastern Europe was Australia's second largest merchandiseexport market followed by North America.

Predict

3. Australia's merchandise exports are likely to grow in Asia, Eastern Europe, the Middle East and NorthAmerica in the next 20 years. Australia's goods and services are in demand from the fast developingeconomies in these regions and the possible Free Trade Agreement with the United States could openthis tightly regulated market to Australian exports.

Activity 4.8

Remember

1. 'Merchandise import markets' are countries or regions that provide merchandise for Australian businesses.

Calculate

2. The percentage of total world imports from the top five merchandise import markets is 51.1 per cent.

Interpret

3. Australia's most important merchandise import supplier is the United States. Australia buys so manymerchandise imports from this country because it produces much of the worlds leading technologyrequired for Australian businesses to compete in the global market.

4. Australia experienced the largest 5 year trend growth with China.


5. The top ten merchandise import markets according to their geographic region.

6. Based on the above table Asia is Australia's principal import source by region.

Activity 4.9

Remember

1. The 'balance on merchandise trade' is the difference between the value of a country's merchandiseexports and imports.

2. A trade deficit occurs when the total value of export merchandise (goods) and services is less than thetotal value of import merchandise and services. A trade surplus occurs when the total value of exportmerchandise (goods) and services is greater than the total value of import merchandise and services.

Calculate

3. The 'Balance on merchandise trade'.

COUNTRY GEOGRAPHIC REGION

United States Americas

Japan Asia

China Asia

Germany Europe

United Kingdom Europe

New Zealand Oceania

Republic of Korea Asia

Indonesia Asia

Singapore Asia

Malaysia Asia

COUNTRY MERCHANDISE MERCHANDISE BALANCE OF EXPORTS IMPORTS MERCHANDISE TRADE

Japan 22,827,021 15,463,183 7,363,838

United States 12,015,700 21,490,648 -9,474,948

Republic of Korea 9,828,447 4,722,497 5,105,950

China 7,811,253 11,275,010 -3,463,757

New Zealand 7,657,747 4,739,924 2,917,823

United Kingdom 5,202,092 6,218,841 -1,016,749

Singapore 4,940,849 3,973,209 967,640

Taiwan 4,843,453 3,132,071 1,711,382

Hong Kong (a) 4,005,853 1,410,004 2,595,849

Indonesia 3,193,675 4,009,343 -815,668



Interpret

4. (a) Japan was Australia's principal merchandise export market.

(b) United States was Australia's principal merchandise import supplier.

5. Table 4.9: Australia's bilateral merchandise trade surplus/deficit

Predict

6. Australia's balance of trade is likely to improve with the United States if a free trade agreement (FTA)between the two countries is agreed to as an FTA will open the restrictive US market to Australianmerchandise and services, particularly agricultural products.

Activity 4.10

Remember

1. Tourism exports earn foreign exchange when overseas visitors pay for hotels, tours and souvenirs inAustralia and tourism imports use Australian foreign exchange reserves when Australians travel overseasand pay for hotels, tours and souvenirs.

2. Merchandise exports involve selling items overseas that can be seen and touched to earn foreignexchange, while services exports involve selling activities done by people rather than production ofphysical goods to earn foreign exchange, such as education and tourism.

3. Exports that earn foreign exchange in Australia include: tourism, education, travel and communication.

4. Motor vehicles are listed as both exports and imports because Australian companies export cars (theMiddle East is a large market), but some Australians choose to buy cars from overseas for reasons such asperformance, cost and prestige.

Calculate

5. Australia's broad merchandise export destinations are Asia 53.1%, Europe 12.4%, USA 9.7% and other 24.8%.

6. The percentages of services exports to each major destination are Africa 1.4%, Americas 18.3%, Asia45.7%, Europe 25.1% and Oceania 9.4%. These have some similarity to merchandise exports.

BILATERAL MERCHANDISE BILATERAL MERCHANDISE TRADE SURPLUS 2001-02 TRADE DEFICIT 2001-02

Japan United States

Republic of Korea China

New Zealand United Kingdom

Singapore Indonesia

Taiwan

Hong Kong


Activity 4.11

Australia's principal merchandise exports Australia's principal merchandise imports

• Coal • Passenger motor vehicles

• Crude petroleum • Crude petroleum

• Iron ore • Computers

Key Trends: increase in ETMs, decrease in gold and wool. Key Trends: increase in high technology and bio-sciences, slowing

in computer-related imports.

Australia's principal services exports Australia's principal services imports

• Travel • Transportation

• Transportation • Travel

• Communication

Key Trends: Tourism top 2002 export earner, but IT and financial Key Trends: Costs to move goods and people to and from Australia

services are growing. remain the major expense

Australia's principal merchandise export markets Australia's principal merchandise import markets

• Japan • United States

• United States • Japan

• Republic of Korea • China

Key Trends: China has grown as an export market while Singapore Key Trends: China continues to rise in importance for Australia as an has fallen. Singapore is likely to improve again following signing STM source while the USA continues to supply ETMs.of the free trade agreement with Singapore.

Balance on merchandise trade Emerging trade issues

• Japan -a surplus balance (they buy resources) •

• USA - a deficit balance (we buy ETMs) •

• China - a deficit balance (we buy STMs). •

COMPOSITION OF TRADE

DIRECTION OF MERCHANDISE TRADE

• Role of WTO Doha round in opening markets to agricultural products and services.

• Influence of free trade agreements

• Global influence of events (terrorism, SARS) on services trade, particularly tourism.



Activity 4.12

Remember

1. (a) Merchandise exports are the selling of items overseas that can be seen and touched.

(b) Merchandise imports are the buying of items from overseas that can be seen and touched.

(c) 'Balance on merchandise trade' is the difference between the value of a country's merchandiseexports and imports.

Understand

2. The table measures Australia's main merchandise trade with Saudi Arabia.

3. The time series tracks movements in Australia's trade over periods of time.

4. The unit of measurement in table 4.13 is thousands of Australian dollars.

5. These trade figures refer to Australia's merchandise trade with Saudi Arabia.

6. (a) You find the meaning of 'Confidential items' in the glossary.

(b) 'Confidential items' are exports of a particular commodity to particular countries that are not madepublic in order to protect a firm's operations. This is usually when there is only one supplier of aparticular good or service.

Calculate

7. In 1997–98 the:

(a) value of total merchandise exports from Australia to Saudi Arabia was A$544,673,000.

(b) value of total merchandise imports to Australia from Saudi Arabia A$648,132,000.

(c) balance on merchandise trade was A$–103,459,000.

(d) balance on merchandise trade is a deficit because it is a negative figure.

8. In 2001–02 the:

(a) value of total merchandise exports from Australia to Saudi Arabia was A$2,597,964,000.

(b) value of total merchandise imports to Australia from Saudi Arabia was A$1,025,483,000.

(c) balance on merchandise trade was A$1,572,481,000.

(d) balance on merchandise trade is surplus because the amount is positive.

9. From 1997–98 to 2001–02 the percentage increase in:

(a) the export of passenger motor vehicles was 1615%.

(b) the import of crude petroleum was 24%.

(c) total exports was 377%.

(d) total imports was 58%.


Interpret

10. (a) Australia's balance on merchandise trade with Saudi Arabia moved from a deficit in 1997–98 to asurplus in 2001–02 because (ii) Australia sold more exports to Saudi Arabia.

(b) From 1997–98 to 2001–02 the percentage increase (i) in exports from Australia to Saudi Arabiagrew at a faster rate than imports from Saudi Arabia to Australia

(c) The top five imports in 2002–02 were mainly (i) manufactured products.

(d) Passenger motor vehicles would be classified as (ii) ETMs.

11. (a) In 2001–02 the largest merchandise export item sold to Saudi Arabia was passenger motor vehicleswith a value of A$1,285,078,000. This represented an increase of 1615 per cent from 1997–98.

(b) In 2001–02 the largest merchandise import item supplied by Saudi Arabia was crude petroleum witha value of A$438,756,000. This represented an increase of 24 per cent from 1997–98.

Analyse

12. While all trade has increased between Australia and Saudi Arabia from 1997–98 to 2001–02 the greatestincrease has been in exports of Australia's cars.

Activity 5.1

Calculate

1. Australia's percentage share of total world exports for (a) 1981 is 1.14% (b) 1991 is 1.19% (c) 2001 is 1.02%.

Interpret

2. Australia's rank in world exports has been falling over the last 20 years.

3. (a) The economic implications of this fall for Australia is that our wealth is not growing as fast as theworld exports leaders, influencing business and employment growth.

(b) The non–economic implications of this fall for Australia is that our individual wealth and livingstandards are not growing as fast as the world exports leaders

4. China has improved its ranking the most. This country's improvement could bring benefits to Australianexporters by providing expanded markets to their goods and services.

Communicate

5. The possible effects to the Australian economy of a rise in Australia's share of world exports.

(a) Increased employment : rise in business profits and decrease in business closures.

(b) Higher standard of living: more consumer spending providing more business activity.

(c) Increased access to technology: more efficient and globally competitive business practices, rise inbusiness profits.

(d) Increased business investment: more efficient and globally competitive business practices, rise inbusiness profits.



(e) Increased average family incomes: more consumer spending providing more business activity andemployment.

(f) Increased expenditure in infrastructure and production facilities: more efficient and globallycompetitive business practices, rise in business profits.

(g) Increased ability to purchase imports: more consumer choice and spending providing more businessactivity in retail and distribution sectors.

(h) Higher economic growth: rise in business profits and decrease in business closures: rise inemployment levels and living standards.

Activity 5.3

Analyse

1. Australia is internationally competitive in the production of these products because of its comparativeadvantage, particularly its factor conditions in natural resources and vast farming lands, infrastructure andskilled labour as well as its companies' strategies and government policies.

2. Australia's two fastest growing merchandise exports have risen

(a) domestically because of a growing economy and government industry support

(b) internationally because of increased demand in the region and government involvement withindustries in opening new markets, such as the Middle East for cars.

3. Australia's merchandise export profile is slowly changing from a resource base to more elaboratelytransformed manufactures (cars). Trade figures that also include services show an even greater changewith tourism services as the largest single export on 2002.

Investigate

4. Some of the major businesses that produce Australia's top ten merchandise exports: BHP Billiton, Shelland GMH Holden.

5. Benefits flowing to these Australian subsidiaries include expanded profits, upgraded infrastructure andtechnology, expanded employment levels.

Predict

6. If world demand for primary products collapses, the impact would be:

(a) reduced profits and business failures for Australian primary producers

(b) falling regional employment

(c) a confirmation of the government trade policy to attempt to minimise the restrictive policies of the EU and USA through its work on the Cairns Group and WTO Doha round.


Activity 5.4

Communicate

Analyse

2. Australia's merchandise exports are still largely primary products while its merchandise imports are largelymanufactures, partially used for business productivity. This table does not include services, the fastestgrowing export and import sector.

3. (a) Possible changes would include more ETMs that attract higher prices and more agricultural products

(b) Free trade agreements and greater access to EU and US markets through the Doha round of the WTOwould bring about the desired changes.

(c) The success of the policies could be measured by the percentage increase in export earnings.

4. Australia needs to import primary products even when some primary products are our main exportsbecause we cannot produce the specific goods or produce them as cheaply or in the quality or quantityrequired – the principle of comparative advantage.

Investigate

5. (a) There is little movement in the percentage share of both the top ten merchandise exports and imports.The movement that is occurring is in the lower ranking items and in services, now shown in this table.

(b) Government policies can overcome these problems by encouraging industry growth through assistance,opening markets through agreements, encouraging investment and expanding education in potentialgrowth areas.

Activity 5.5

Interpret

1. (b) Personal travel is Australia's largest service export.

2. The higher value of the total services in 2000 than other years shows the impact of the 2000 SydneyOlympic Games.

3. (a) passenger transportation services have increased gradually over five years with a slight fall following theAsian economic crisis in 1997.

(b) personal travel services have also increased gradually over five years with a slight fall following the Asianeconomic crisis in 1997. The education travel component has seen steady annual increases.

EVIDENCE


2. Manufactures account for approximately 83 per cent of total merchandise trade

3. Beverages and tobacco only account for approximately 0.7 per cent of total merchandise imports.

4. Machinery and transport equipment account for approximately 45 per cent of total merchandise trade

5. Crude materials and mineral fuels account for approximately 19 per cent of total merchandise exports.



4. The sudden fall in the value of 'Personal, cultural and recreational services' from 2000–01 to 2001–02was related to the end of the 2000 Sydney Olympics and athletes, trainers and tourists returning home.Similar swelling in certain sectors is expected from the Rugby World Cup in October 2003, whichattracts more travel and business activity than the Olympics.

Understand

5. Tourism services are an export as money spent in Australia by overseas tourists is called foreign exchange.

6. (a) Personal tourism services would be hurt by a dramatic fall in inbound tourists.

(b) Financial services would increase with the expansion into the Asian market by a major Australian bank.

7.

Communicate

8. The impact on the Australian economy of a 30 per cent increase in Australia's export of services over thenext five years could mean:

(a) jobs will be created in the knowledge economy: IT, bio-technology, finance, education, engineering, design, etc.

(b) investment will be required in higher education, communications infrastructure

(c) decreased impact on the natural environment with less emphasis on extracting natural resources

(d) exceptional opportunities for Australian businesses as Australia has a strong skills base and innovativebusinesses. Australia's small population and tax base for the size of the continent has requiredAustralians to be 'smarter' with less.

SERVICE ACTIVITY

Transportation services

Travel services

Communication services

Construction services

Insurance services

Financial services

Computer and information services

Royalties and licence fees

Personal, cultural and recreational services

EXAMPLE

An Australian shipping company transports some imported goods.

Hotels provide accommodation for tourists.

An Australian telecommunications company charges users of their infrastructure.

An Australian engineering company designs and supervises a dam construction in Asia.

An Australian insurance company insures overseas businesses.

An Australian bank opens in Singapore.

An Australian company provides bio-recognition solutions to the US government.

Overseas artists record work by Australian songwriters.

An Australian film studio is used to film a 'Hollywood' blockbuster

COMPOSITION OF TRADE SUMMARY - ISSUES AND CONCEPTS

1. Australia's rank in world exports

• 16th in merchandise exports

Summary statement: Australia's position has fallen over the last 20 years as developing Asian economies have overtaken.

3. Australia's major exports, rank, value and growth

• Coal, A$13,404 million, 8.6% growth

• Crude petroleum, A$5,965 million, 36.8% growth

• Iron ore, A$5,162 million, 9.7% growth

Summary statement: Australia still relies on resources for its merchandise exports.

4. Australia's merchandise trade by broad category

• Primary products, 59.6%

• Manufactured products 31%

Summary statement: food, beverages (wine), rural goods (wool, cotton) and resources are the major exports but ETMs are increasing in importance.

5. Australia's exports of services

• Travel

• Transportation

• Business services

Summary statement: Services are the fastest growing sector and provide future opportunities for global growth. Tourism was the single top export for 2002.


Activity 5.6

APPENDIX 3 – world map outline


Appendix 3 World map outline

EFF TrendsInTrade

Documents

Transcript of EFF TrendsInTrade