BSB115 Lecture Notes - Lecture 12: Infant Industry Argument, Unfair Competition, Offshoring
Lecture 12 Economics – International Trade
- are ou agaist free trade ad gloalisatio?
o Loss of culture
o Protestors are against free trade and globalisation
o Differences between countries are lost
- Cheap Pait Destros jos
o End through bringing in cheap imports
o Destroying local manufacturing industries
- Has offshorig hurt the Australia eoo?
o Some companies offshore technical support services to India and elsewhere
- Iteratioal trade as a peretage of GDP,
o Hong Kong and Singapore are almost double other countries
o Hong Kong and Singapore is where ships stop and transfer
o Australia is under 25% of GDP
o USA is about 15% - not an open economy
o Why? Because Australia has a range of resources (both natural and capital)
- The importance of trade to the Australian economy
o Exports and imports as a proportion of GDP have been increasing over time in
Australia
o Australias iig oo
o We now import more than we export
- Why nations trade?
o Theory of absolute advantage: The ability to produce more of a good or service than
competitors using the same amount of resources
o Theory of comparative advantage: The ability of to produce a good or service at a
lower opportunity cost than other producers
▪ Opportunity Cost: the highest-valued alternative forgone to engage in an
activity
- Sources of comparative advantage
o Climate and natural resources
o Relative abundance of labour and capital
o Technology
o Eteral eooies iolig redutios i a firs osts that result fro a
expansion in the size of an industry
o Government policies designed to create comparative advantage in area of the
economy deemed to provide fertile ground
- Wh dot e see oplete speialisatio?
o Not all goods and services are traded internationally
o Production of most goods involves increasing opportunity costs
o Diversity and security are highly valued
- Other benefits from trade
o Gains from trade go beyond the benefits of pure trade
▪ Specialisation & mechanisation
▪ Increased competition
- Protectionism
o Is the use of restrictions to protect domestic producers from foreign competition
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Document Summary
Because australia has a range of resources (both natural and capital) The importance of trade to the australian economy: exports and imports as a proportion of gdp have been increasing over time in. Australia (cid:858)australia(cid:859)s (cid:373)i(cid:374)i(cid:374)g (cid:271)oo(cid:373)(cid:859: we now import more than we export. Wh(cid:455) do(cid:374)(cid:859)t (cid:449)e see (cid:272)o(cid:373)plete spe(cid:272)ialisatio(cid:374): not all goods and services are traded internationally, production of most goods involves increasing opportunity costs, diversity and security are highly valued. Other benefits from trade: gains from trade go beyond the benefits of pure trade, specialisation & mechanisation. Is the use of restrictions to protect domestic producers from foreign competition: e. g. tariff, quota, government support policies, health and safety. Arguments for protection: national security, employment protection. Infant industry argument: unfair competition, gains from trade not equitably distributed, currency manipulation. Why do some people oppose globalisation: anti-globalisation: some people believe that free trade and foreign investment, destroy the distinctive cultures of many countries, create environmental and health problems.
