Protection/Free Trade Essay Anaylse Impacts

Introduction Stats

• Trade accounts for 42.3% of GDP

• Trade Weighted average tariff rate of 0.99% ⇒ 36% in 1970

Australia:

Trade accounts for 42.3% of GDP

Trade Weighted average tariff rate of 0.99% ⇒ 36% in 1970

Paragraph 1- Growth

Intl:

• Trade Liberalisation  → China SEZs - 22% of GDP, 45% of FDI

• Prot. ⇒ inefficient allocation → US 0.2% ↓ 2017-2023; Future tariffs projected @ 0.8%↓
  .˙. Expense of other industry

Domestic:

• CHAFTA - (give stats on Aus-China trade), impact on economy

• China tariffs on Australian barley ⇒ $1.2b in 2018–19 to near zero in 2020–21

• Mining: 24% of GDP

  • Impact is twofold: Obvious impact on Aus economy; similarly led to trade diversion 

• US tariffs: CBA project could decrease nominal GDP by 0.2%

However 

• Infant industries: e.g. Aus solar panels

Paragraph 2- Unemployment

Unemployment:

• Labour is a derived demand ⇒ FTAs & protection will vary demand for goods, and therefore labour within both domestic and global markets

• (Removal of:) Protectionist Policy:

  • SR increase in structural U/E ⇒ e.g. removal of Aus auto industry subsidies lost 40k jobs in 2017 → domestic firms aren’t intl competitive and .˙. Need to be supported by govt to uphold employment

  • LR efficient allocation of labour resources, and a decline in LR structural U/E

    • This can be aided by LMP (e.g. Fee-Free TAFE, which contributed to low levels of Aus employment @ 4.2% in Aug-2025 (below the NAIRU)

Intl:

• EU ag subsidies

• LR structural U/E ↑ (Firms inefficient) → 2017-2024 → US Protectionist policies cost 142k jobs

Paragraph 3- Inflation

• Free Trade increases competition ⇒ places downwards pressure on inflation

• Protection raises prices (e.g. quotas, subsidies, etc.) ⇒ (Graph here)

Intl:

• US–China trade war (2018–2019) cost the average American household USD $414 annually through impact of tariffs

• Russia-Ukraine war: protectionist export bans + supply shock for Free Trade on wheat, fertilisers, and energy: ⇒ upwards pressure on inflation

  • global CPI rising from 3.2% in 2020 to over 8% in 2022.

Domestic:

• Covid shipping bottlenecks in 2022 increased freight costs by over 400% on major routes ⇒ import inflation ↑ → tradables inflation peaked at 8.7% in 2022

  • I.e. imposition on FT leads to increased inflation

Dumping:

• Intl firms sell their goods in another country’s market at unrealistically low prices

• SR: prices decrease due to foreign firms

• LR: foreign firms are unable to sustain selling at these prices ⇒ leads to domestic producers can’t keep up w/ foreign firms → foreign firms can’t sustain .˙. Prices ↑ in LR

  • Aus currently has 23 anti-dumping tariffs in place

Paragraph 4- Environment Impact

• Free Trade may lead to increased negative externalities (define) → as countries have less stringent environmental control

•  E.g.s

  • Developing economies large draw of fossil fuels; Iran, Saudi, South Africa 99% FF; China largest emitter of mercury in waterways; fail to adhere to montreal protocol Ozone dmg↑ 17

• Also, as an increase in FT leads to greater global demand, economies may focus on exporting widgets which have significant negative externalities on the environment

  • Aus: Coal exports account for 15% of national income ⇒ has risen 5% since 2015 due to increased global trade

  • Intl: shipping accounts for 3% of CO2 emissions

• Subsidies / protection to fix:

  • Future Made in Australia ⇒ subsidies for solar panels

  • US $10bn for photovoltaic energy (2023)

Paragraph 5- Trade Levels

• TL ⇒ Trade ↑ → In the 5 years following the implementation of NAFTA, Mexico’s beef exports to the United States increased annually by an average of 38.2 percent.

• GWP ↑ (Act in same manner)

• Retaliation (Prot) → US China Trade War reduced GWP 0.8% 2019, 1.4% 2020 (S&P projection)

• Bystander effect → Global Trade ↑ 3% in US-China Trade War 

• Specialisation, Intl. Development; etc.

• H/E

• Trade Diversion (Multilaterals & FTAs) → European Union Trading Bloc → Ag subsidies diverts from other nation ⇒ Cost Aus 8bn in exports

• Reliance on intl Trade & National Sec. → Collins Class subs use of LCRs “ongoing Australian self reliance in local supply chains (DoD)

• Susceptibility to Global Shock

Examples:

Intl:

• Vietnam - FTAs (e.g. EVFTA) rose exports 15% in 2021 for Vietnam

• US - China trade war (2018-19) reduced US trade surplus by ≈ 80bn USD

Domestic:

• Aus high levels of FT in 2022-23 supported CAS, which peaked @ 1.3% of GDP, in part due to a consistent BOGS surplus

• China’s tariffs on Australian barley (80.5%) and wine (116–218%) during 2020–22 cut x in exports