International Trade

Chapter 1 of Investigating Macroeconomics -> some definitions are supplemented by personal notes

Linkages between Economies (1)

Trade

Linkages between Economies (2)

Foreign Investment

Linkages between Economies (3)

Migration

Linkages between Economies (4)

Tourism

Australian export percentage of GDP

25% of GDP

Trade

exchange of imports and exports

Foreign Investment

Movement in financial capital

Migration

permanent movement of people

Tourism

temporary movement of people that consume goods and services

Goal of Foreign Investment

to supplement domestic savings for economic development

Savings Investment Gap

small population = small savings, not enough for investment needs

Benefits of Trade (1)

Specialisation

Benefits of Trade (2)

Economies of Scale

Benefits of Trade (3)

Increased Productivity

Benefits of Trade (4)

Higher real incomes

Factors of Level of Exports (1)

Size + structure of economy

Factors of Level of Exports (2)

Relative competitiveness

Factors of Level of Exports (3)

Location

Trade Intensity Ratio

Trade to GDP ratio

Trade Intensity Ratio (Formula)

TI = (X+M) / GDP * 100

Composition of Australia’s Trade

Exports = commodities, Imports = manufactured goods

Most Important Imports

Personal travel, refined petrol, passenger motor vehicles

Most Important Exports

Iron ore, coal, natural gas

General Direction

China, South Korea, India

Free Trade Agreement

international treaty between two or more economies that reduces/diminishes barriers to trade

Bilateral FTA

agreement between two countries

Regional FTA

agreement between more than two countries

Trade bloc

group of countries that agree to reduce trade barriers between themselves but impose barriers to those not included

Trade creation

removing trade barriers and increasing volume of trade

Trade diversion

trade diverted from low cost producer to high cost producer within FTA

Australia has 18 FTAs

14 bilateral, 4 regional