Impact Of Tariffs And Quotas On Wool Trade Essay - 2,180 words

Impact of Tariffs and Quotas on Wool Trade Between Australia and China Economic and trade connections between Australia and China have an inspiring history. As early as the 1670s according to historical records, Chinese-owned fishing boats headed south in the summer to look for this Chinese food delicacy in the waters of Australia's north. The humble sea slug appeared Australia's first processed food export. Later, the arrival of European settlers in Australia led to the development of trade relations with China. Australia and China established formal diplomatic relations in 1972. But the true expansion of economic and trade ties between the two countries began when China decided to open its economy in 1978. The last two decades can be described with extraordinary trade growth.


Nowadays, two-way trade has reached A$10 billion. Primary Products are at the core of Australia's exports to China accounting for around 60% of the total exports. China became Australia's largest market for wool. Recently, Australia and China agreed on a Model Wool Contract. It was designed to provide Chinese buyers and Australian sellers with greater confidence and certainty. Nevertheless, there is room for further improvement in the administration of many of the business exports.1 According to Australian Deputy Prime Minister Mr. Tim Fischer, this agreement will "ensure that uncertainties in the quality of wool provided, delivery times and terms of payment -- which have complicated and impeded the trade -- are addressed effectively." It will foster an improved level of understanding between the wool and wool textiles industries of Australia and China. It is also expected to promote the long term prospects for the wool trade between the two countries.


Australia satisfies over 50 percent of China's wool import demands. China used to buy 136,000 tones of wool, worth some $590 million, in 1998. The Model Wool Contract would provide the basis for a smoother and more transparent wool trade. It was for direct use by Australian exporters and Chinese importers. The Model Wool Contract had received high level government support both in Australia and China.2 Two-way investment between Australia and China is another important part of the bilateral economic relationship. There is much to offer to each other. The economies of the countries make the them ideal investment partners. According to Australian statistics, at the end of June 1999 China had investments here worth A$2.85 billion, while Australian investment in China was valued at A$1.44 billion.


The key point for opening opportunities for Australian and Chinese investors is the reforms in Australias respective economies.3 Talking about the trade issue with other countries, there is much to say about the agreement with World Trade Organization. Trade negotiations have an important role to play in expanding economic and trade linkages. Tim Fischer, former Trade Minister, concluded an agreement on bilateral market access related to China's accession to the World Trade Organization (WTO). It was a significant achievement in the bilateral relationship. China's membership of the WTO is expected to bring great benefits to Australian exporters and will also help China. Negotiators for the Australian government finalized the specific terms of Australia's agreement regarding China's WTO accession just weeks ago. The benefits to Australian companies will not really begin to flow, however, until China finalizes its WTO agreements with its other major trading partners, thereby paving for way for WTO entry.


Two main hurdles recently cleared were a final agreement between China and the European Union, and the granting of Permanent Normal Trading Relation status to China by the United States Senate. The relevant parties hope these developments will lead to China's WTO accession later this year or early next year. When China finally enters the WTO, the benefits for Australian companies will fall into three main categories. First, the reduction of tariffs and trade barriers for Australian goods and services being sold into China. Second, the gradual elimination of restrictions on Australian investments in China. Third, the long-term institutional commitment of China to open its economy and be governed by international trade and investment standards.


Some of these benefits will be felt immediately, while the bulk of the benefits to Australian companies will only be felt over an extended period. One of the immediate benefits to Australians will be improved market access for agricultural and wool. Tariffs on a wide range of agricultural and wool products will be reduced.4 A free trade agreement with the US, the successful completion of the Doha WTO round, and strengthening links with Asia are the key priorities for Australia, Federal Trade Minister Mark Vaile said: You've stated in the past that a free trade agreement (FTA) with the USA is Australia's key bilateral trade priority". What sort of impact will a US FTA have on Australia's economic and trade performance? An FTA with the US, the world's largest economy, would deliver economic benefits to Australia. Two studies commissioned by the Government have found the potential benefits of an Australian-US FTA. The first of these, carried out by the Center for International Economics, showed that complete removal of tariff and non-tariff barriers to bilateral trade could increase GDP by as much as 0.4 per cent, or around $4 billion annually.


The second study, carried out by the APEC Study Center, looked at the wider economic, trade and regional implications. Australia's overall trade strategy is to pursue every opportunity at the multilateral, regional and bilateral level. Those opportunities must complement each other--and ultimately must support the multilateral trade negotiations now underway in the World Trade Organisation (WTO). In 1997 Australia adopted the "White Paper on Foreign and Trade Policy", which sets out an action plan for the coming 15 years, including strengthening of the international trading system and export promotion. China plans to secure its diplomatic relations with Australia by expanding cooperation on the wool trade, according to Chinese textiles officials. China hopes to forge a stronger relationship with Australia in the wool trade.


It can influence political and economic ties between the two countries," said Ji Jun, director of international cooperation at the China National Textile Council. China is proposing that Australia invest 3.2 million US dollars on three model wool factories in China. It is expected to promote the consumption of Australian wool in Chinese industry. Canberra provided 3.2 million dollars of financial assistance to China's wool industry between 1993 and 1996. The industry imports around 100,000 tons of Australian wool a year.(1). Australi ...................................................................................................................................................................................................................................................................................................................................................................

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Essay Tags: wool, china, australian, australia, world trade

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