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International trade

Discuss about the International Business for Journal of International Affairs.

Australia has plenty of natural resources. Galiani, Schofield, and Torrens (2014) point out that Australia has strong mining industry making it among the world-leading whereby it is the top producer of gold, iron, aluminum, zinc, coal, and lead, etc. It also produces mineral commodities due to the mineral endowment. Australia has available rain-fed land. It also has grazing lands and savannas which are valuable resources, where its sheep, beef, and wool industries are dependent on the broad savannah.

China has a long pillar of textile industry with a high export market that is concentrated. It also has the advantage of human capital, which contributes to the cheap labor that produces quality, competitive goods that are cheap. China also has a superior market with a domestic market that absorbs most of its products.  China has an extended experience in farming through intensive cultivation; the country also boasts of a range of modern industry in its industrial sector (Liu, & Huang, 2016).

Singapore has a multisectoral enterprise with its enhanced role in the movement of goods, money, people, and information. Singapore has been able to take advantage of its labor force with their workers being ranked among the top in the world (Galiani, Schofield & Torrens, 2014). Japan has a temperate climate with abundant rainfall which favors their agriculture. With the labor-abundant economy, Japan has a broad base for its domestic economy as the large local market enables them to have low products costs and operate at maximum scale. Japan also has revolutionized its technology to be capable of advancing in its automotive industry.

India’s largest export is petroleum products, and it has a high consumption rate that surpasses production. Galiani, Schofield, and Torrens (2014) point out that India is the most top consumer of oil produce at number four with a large oil refining capacity at number six worldwide. India exports manufactured jewelry, diamonds and it is rich in skill in export sectors like textiles, mining, and plantations. Vietnam has a land abundance that is extensively put into the growth of rice. The rice is a source of exportto tnam. Textiles and clothing industry has been one of Vietnam’s primary exports. Vietnam also has a large population that translates to sufficient labor force who are paid low wages. Vietnam actively specializes in Tourism industry.

The factors of the endowment to a large extent reflect our trade patterns. The element of endowment describes different scenarios like land availability defines the availability of natural resources, abundant labor defines workforce, and capital defines the quality of production and infrastructure. Countries with unskilled labor are most likely to produce products that have a low cost of the workforce while nations with plenty natural resources in most cases export them. Countries with skilled labor as noted by Galiani, Schofield, and Torrens (2014) produces more than those with unskilled labor. Skilled labor force produces quality complex products that are readily traded internationally. Natural resources if put to proper use can be exported, e.g., minerals, which means more value while if not put into proper use, then the value is insignificant.

Political economy of International Trade

The Australian government has enacted restrictions on export or supply of goods to Democratic People’s Republic of Korea (DPRK). Through the enactment, it prohibits the direct and indirect supply of certain goods like petroleum products, food, medicine, and arms, etc. Exporters who meet exporting appropriate conditions have to apply for sanctions permit or be granted a permit by the Minister. Armstrong (2015) asserts that sanctions can increase the cost to a country’s citizens and businesses since the sanctioned countries are not in a position to purchase their products which results to economic loss caused by production loss and unemployment.

Australia has been engaging in free trade agreements with various countries like China, Chile, Singapore and New Zealand. It is worse off than it would have been without the Australia-United States free trade agreement since data shows that the agreement caused diversion of trade cost sources that are low causing a reduction of trade between the two by $53 billion (Armstrong, 2015). Bilateral trade agreements are most likely issues to do with politics and low on trade issues. Most of the trade agreements don’t benefit Australian consumers but forge a diplomatic relationship.

In 2015, the Australian government effected changes to foreign investment framework. The primary objectives were: to put in place severe consequences to foreign investors who breach investment rules, to regulate agriculture and real estate foreign investment in a better way, and lastly to put in application fees deterring their taxpayers funding cost on Australia foreign investment. With the announcement of the reforms, there was a perception of the changes providing better compliance, better service delivery, and better certainty. It has been evident that there have not been notable changes and the state objectives have not been achieved. Armstrong (2015) denotes that foreign investors are deterred by several foreign investment regulations at the same time, they fear that the foreign investment policies are hurdles to their investments plans. In Australian citizens perceive that effort is not put by the government to regulate foreign investment. The Australian government has had five critical rejections of imports due to claims of doing it on the national interest grounds.

Through intergovernmental agreements, lower tariff barriers have resulted, and more moderate tariffs mean cheap consumer goods whereby the protectionism benefits specific few industries on the Australian citizen's expense. Through free trade agreements and imposing sanctions, trade is affected negatively due to such barriers that are driven both politically and economically. 

Foreign Exchange, the IMF and the International Economic Environment

IMF’s primary mission is to ensure that there is an international monetary system that is steady and also that there is an exchange rate systems and system of international payments that enable member countries and its citizens transact with the other. IMF keep a watch on member countries as pointed out by Van Der Veer and De Jong (2013) for example, through their formal surveillance where it monitors policies, provides advice for them to adopt and promote policies that promote economic growth, improve living standards and lower financial crises exposure. It offers loans to member countries and capacity development to assist them to build advanced economic institutions and enhance citizen’s abilities. The organization issues Special Drawing Rights (SDR) which is an international reserve asset that complements their member country’s certified reserves.

IMF provides policy advice where it advises its members on achieving economic stability to prevent crises. The organization observers countries financial sectors for them to be able to detect risks that enable crises prevention.It provides financing to in countries that are troubled with issues such as drought and health issues like Ebola. Lending by providing financial assistance to governments and enhance accountability while spending. It shares knowledge with members to revolutionize their institutions and economic policies. The IMF has been critical in the establishment of financial institutions like nation’s central banks and training staff  (Sarangi, 2012).

Through the quota system IMF’s primary source of financing, each member country is allotted a quota, based on its size in the global economy. When a member joins, it pays one quota of its quota in the form of currencies that are widely accepted, and the remaining three quarters settled in the country’s currencies.  It also gets money via multilateral borrowing where its able to enhance its resources. IMF supplements its resources through bilateral borrowing. The organization also receives money through debt relief and concessional lending. When concessional lending is carried out to nations that have low-income, the cash is resourced by contributions from IMF and the member countries and not through the quota subscription system.

Global economic stability is supported to evade financial crises, economic crises, and inflation.  IMF assists by providing surveillance as every member accept to be subjected to financial and economic policies to international community scrutiny. The global inspection is carried out in the regions, countries and at the global level. It works with members and various agencies to fill data gaps for stability. The global economic stability is supported through lending whereby it comes in by providing financial assistance to streamline macroeconomic problems, lower disruption to the global and local economy by providing policy program support. It offers technical assistance in creating and implementing economic policies that are comprehensive.

The organization carries out training to the state officials. This enables the state officials to be in a position to examine economic developments, forecast and model tools and create and implement financial and macroeconomic policies that are comprehensive. IMF has a Financial Programming and Policies course that was launched online in international languages in English, Spanish, French, and Russia. The various courses in the macroeconomic framework training include Fiscal Policy, Financial Sector Policies, Macroeconomic Statistics, Monetary Exchange rates, Specialized Fiscal Courses and General Macroeconomic Analysis, etc.

References

Armstrong, S. (2015). The economic impact of the Australia–US free trade agreement. Australian Journal Of International Affairs, 69(5), 513-537. doi:10.1080/10357718.2015.1048777

Birchler, K., Limpach, S., & Michaelowa, K. (2016). Aid Modalities Matter: The Impact of Different World Bank and IMF Programs on Democratization in Developing Countries. International Studies Quarterly, 60(3), 427-439. doi:10.1093/isq/sqw014

Bojnec, Š., & Fert?, I. (2018). Globalization and Outward Foreign Direct Investment. Emerging Markets Finance & Trade, 54(1), 88-99. doi:10.1080/1540496X.2016.1234372

Diaz, J., & Zirkel, S. (2012). Globalization, Psychology, and Social Issues Research:An Introduction and Conceptual Framework. Journal Of Social Issues, 68(3), 439-453. doi:10.1111/j.1540-4560.2012.01757.x

Galiani, S., Schofield, N., & Torrens, G. (2014). Factor Endowments, Democracy, and Trade Policy Divergence. Journal Of Public Economic Theory, 16(1), 119-156. doi:10.1111/jpet.12057

Liu, C. Y., & Huang, X. (2016). The Rise of Urban Entrepreneurs in China: Capital Endowments and Entry Dynamics. Growth & Change, 47(1), 32-52. doi:10.1111/grow.12117

Oladimeji, M. S., Ebodaghe, A. T., & Shobayo, P. B. (2017). Effect Of Globalization On Small And Medium Enterprises (Smes) Performance In Nigeria. International Journal Of Entrepreneurial Knowledge, 51(2), 56-65. doi:10.1515/ijek-2017-0011

Round, K., & Shanahan, M. P. (2012). From Protection to Competition: The Politics of Trade Practices Reform in Australia and the Trade Practices Act 1965. Australian Journal Of Politics & History, 58(4), 497-511. doi:10.1111/j.1467-8497.2012.01649.x

Sarangi, U. (2012). Role of IMF and World Bank in Global Macroeconomic Stability. Journal Of International Economics (0976-0792), 3(1), 31-43.

Sly, N. (2012). International Productivity Differences, Trade and the Distributions of Factor Endowments. Review Of International Economics, 20(4), 740-757. doi:10.1111/j.1467-9396.2012.01050.x

Van Der Veer, K. M., & De Jong, E. (2013). IMF-Supported Programmes: Stimulating Capital to Non-defaulting Countries. World Economy, 36(4), 375-395. doi:10.1111/twec.12044

Vogiatzoglou, K. (2016). Ease of Doing Business and FDI Inflows in ASEAN. Journal Of Southeast Asian Economies, 33(3), 343-363. doi:10.1355/ae33-3dA

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