Advantages Of Globalisation And Open Trade For Australia

  • Category: Business
  • Words: 1665
  • Grade: 80
Advantages of globalisation and open trade
Globalisation has been driven by two fundamental forces - underlying technological change, which has accelerated the integration of markets, and the freer movement of goods, services, capital and ideas.

The records clearly show the benefits that accrue from open trade and greater liberalisation.

In the five decades since the end of the Second World War "“ we have seen the rise of the General Agreement on Tariffs and Trade and its successor, the World Trade Organisation - we have also seen a dramatic increase in world trade, and a corresponding jump in standards of living.

The same holds true today. A study we initiated (entitled Global Trade Reform "“ Maintaining Momentum) estimates that the elimination of trade barriers would generate global gains in economic growth in excess of $750 billion US per year. Last year, the OECD found that economies with a strong outward trade orientation have been growing faster than those economies with an inward orientation.

In the past 10 years, which has perhaps been the most intense period of globalisation, the proportion of the world population living in extreme poverty has fallen from 28 per cent to 24 per cent. The growth of per capita income in developing APEC economies increased by over 60 per cent, compared to 7 per cent for low income non-APEC countries. Extreme poverty in East Asian APEC economies fell from approximately 36 per cent in 1985 to 20 per cent in 1995.

But the benefits of openness are more than monetary. Countries that have grown prosperous through extensive interaction with other economies don't often resort to armed conflict to resolve their differences. Trade and investment, and the economic growth they encourage, are very positive forces in reducing international tensions.

Clear benefits for Australia
When we focus on the impact of globalisation and open trade on Australia, the benefits are even clearer.

Australia's exports have grown three and a half times over the past 20 years, and exports have increased as a proportion of Australian GDP - from just over 10 per cent in 1981 to nearly 20 per cent in 1999/2000. And it is estimated that if we could achieve a reduction of 50 per cent in global protection, Australia would gain an economic boost of more than $7 billion per year.

The benefits for our community from reduced trade barriers and tariffs are significant. Cuts in tariffs since 1986 have delivered gains of around $1000 per year to the average Australian family. And tariffs still cost the average Australian farm over $2,000 annually.

By pursuing trade liberalisation over the years, Australia has produced a much more productive and outward-looking economy, with more job opportunities and better wages for workers. Around one in five jobs are now linked to exports, and in regional Australia the figure is one in four. Jobs in the export sector also tend to provide better wages and conditions: on average, exporters in manufacturing pay 25 per cent more than those in non-export industries.

We need to dispel the myth that so-called "protectionist" policies really do protect industries from broader industrial and technological change. Australia's textile, clothing and footwear industry is often cited as one that benefited from tariff protection. In fact, during the ten years from 1974 to 1984, when the effective rate of protection increased by an average of 12 per cent each year, TCF employment fell by 3 per cent annually.

The flip side of this is that our manufacturing sector has actually increased its output as tariffs have fallen. Employment in manufacturing since the recession of the early 1990s has trended upwards, returning to the levels of the mid-1980s. Export growth in manufacturing has been twice the rate of the mid-70s to mid-80s, and growth of elaborately transformed manufactures has been even faster. And industries once declared doomed by tariff cuts, like the automotive industry, have been turning in world-beating performances. In fact, last year Australia exported almost $4 billion worth in automotive products.

Globalisation has also opened the door to the benefits of greater Foreign Direct Investment. Foreign Direct Investment gives our industry better access to the latest technologies and helps to strengthen company profitability and jobs. It boosts exports, giving Australian companies better access to distribution channels and networks in international markets. For every dollar generated from Foreign Direct Investment in Australia, 96 cents is retained in Australia "“ 50 cents of that in wages.

Australia is a much stronger economy with the presence of companies like Olivetti, Parmalat, Siemens, Cadbury Schweppes, Oracle, Hewlett-Packard, and Deutsche Asset Management, all of which have established Asia-Pacific headquarters here.

Impact of the "new economy"
I turn now to the question of the emergence of a "new economy", and the impact this has had on Australia.

Technological change has been one of the driving forces of globalisation, the so-called new economy is having a significant and beneficial impact on our economy.

The changes being wrought by the advances in information technology do represent a quantum leap in how people around the world will do business, and it is these advances that are propelling us down the road of globalisation.

The impact of the new technologies on production, management and marketing are well-documented and significant. Just about every area of business activity has benefited from computerisation, and these benefits flow on to consumers in the form of higher quality goods and services at cheaper prices.

As we heard this morning at the ICT networking session, the advent of B2C, B2B and B2E services should be embraced and encouraged.

The rise of e-commerce is surfing on the rapid expansion of the Internet. The latest set of statistics released by the National Office for the Information Economy indicates that Australians continue to embrace the emerging digital information economy. With adult Internet usage at 43 per cent, Australia ranks as a world leader, behind only Norway, the United States, Iceland and Sweden. Young Australians aged 12-24 rank even higher at 82 per cent, behind only the United States. More than 740,000 Australian adults shopped online in the 12 months to February 2000, and we were world leaders in terms of paying for Internet purchases online, equal with the United States at 74 per cent of Internet shoppers.

E-commerce has great potential for Australian exporters, opening a window to the world at very low cost. This is of great value to small and medium sized enterprises, and helps attack the myth of growing domination of markets by giant multinational corporations. E-commerce also reduces geographic disadvantage, placing firms in regional Australia on an equal footing with those in our capital cities.

Let me give you one small example. A Western Australian wine producer, Goundrey Wines is a small Western Australian firm located some 400 kilometres south of Perth. The company has adopted a Web-based marketing strategy that allows customers to order and pay for wine online, from the company's home page. Some 10-15 per cent of the company's production is now exported to markets in the UK, US, New Zealand and in Asia, to customers who otherwise would have remained outside its reach. A small firm, that because of its geographical location may once have struggled to realise cellar door sales to customers from Perth, can now market itself across the globe.

The same story is being repeated all over Australia, and our Government is moving to help Australian businesses reap the full potential of new e-commerce opportunities.

I would also like to mention that some 80% of Australian Business Club Australia members are SMEs, and that the Club was built two years ago on a virtual foundation "“ members are meeting each other and doing business on-line.

Finally, I should also stress that Australian companies are not just following the e-commerce trend "“ many of then are also at the forefront of developing the very IT backbone on which e-commerce is being built. Companies such as Keycorp, a supplier of e-commerce and smart card platforms and electronic payment terminals, are winning contracts in Asia, North America and Europe. While transnational firms dominate the IT market we should recognise that numerous highly capable Australian IT firms are making their mark in this global industry.

I've said much today about the advantages of embracing globalisation and open trade. Please don't misunderstand me "“ I'm just as aware as anyone that the challenges posed by globalisation are also very real. While some firms may relish the freedom that open trade provides them, others may find it all too much.

What governments and communities need to do is to develop the policies necessary to cope with adjustment to globalisation's changes in a fair and effective manner. If doors close for some, other doors must be opened for them. We need to ensure that all Australians have the opportunity to share the benefits that globalisation can undoubtedly bring.

Above all, we need to be realistic. The forces that are pushing globalisation are going to push on regardless of what we think about the process. The technological changes that have been set in motion are irreversible. We might have some choice in how we participate in the process, but deciding to opt out is not an option.

The benefits of globalisation and open trade are not illusory. Not only are they very real, they represent the tip of the iceberg in terms of what we could actually gain if we embrace globalisation enthusiastically.

After many years of breaking down trade barriers, Australia has developed a vibrant, strong, outward-looking economy that has shown itself capable of surviving the storms that have swept the nations around it. We need to stay the course, as the best means of ensuring both our continued prosperity, and our relevance in a world that is ever changing.

Australia is a great innovator of new technology and Australians have an insatiable appetite for new technology.

The IMF have ranked Australia second in the world in the new economy stakes, and Australia is a major player in the new economy. By continuing to pursue the opening of new markets, Australia will be able to capitalise on our unique position, and move from strength to strength in the new Century.
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