Free Trade

Topics: International trade, Economics, Free trade Pages: 4 (570 words) Published: June 24, 2014
Free trade exists between nations when all obstacles to trade such as tariffs are removes Free trade occurs because of differences in the quantity and quality of resources COMPERATIVE ADVANTAGE

The advantage one country has over another in the production of a particular good or service. A country has a comparative advantage if it can produce a product at a lower opportunity cost than its trading partner. AUSTRALIA KEY EXPORTS

Mining- Iron Ores, Coal, Gold, Natural, Gas
Agriculture- Wheat and Beef
travel services educational related- International students in Aust schools Tourism
A healthy export sector is important for the following key reasons Driving economic growth- Money for Government
Providing jobs- Employment mining sector
Diversified economy
Balance of payments- Current Amount Deficit vs Surplus, Balance imports and exports

Benefits Free Trade

Prices- Cheaper items overseas
Choice- More choice and greater access to the best goods and services EFFICIENT PRODUCTION
Domestic firms face greater competition from cheap imports. Forces firms to improve efficiency Embrace the best technologies and strive for improved quality and better marketing.

Foster better relations between trading partners, as trading partners want to exchange with each other and protect their trade. Costs of Free Trade

Cheaper imports can replace domestic firms as there is more competition Government won’t assist them

External Balance
Need protection to maintain external balance
unable to compete in global markets. Australia increase import spending which will not improve external balance

Infant industries-
no support, no tariffs, unable to compete and don’t have experience

Nike Case Study
Why does a company like Nike seek to globalise operations?

Access new markets-
Access more consumers
Increase their global sales,...
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