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
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
A healthy export sector is important for the following key reasons
Driving economic growth- Money for Government
Providing jobs- Employment mining sector
Balance of payments- Current Amount Deficit vs Surplus, Balance imports and exports
Benefits Free Trade
STANDARD OF LIVING
Prices- Cheaper items overseas
Choice- More choice and greater access to the best goods and services
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