Australia Globalization Analysis
1003IBA
Globalisation, the Asia-Pacific and Australia
2009
Assessment Essay
By Fabian Mansouri
2735062
Question: How important is politics in shaping the progress of globalisation?
2200 Words
Introduction
During the past century politics has played a crucial role in the leadership and progression of nation states, and their transition into a globalising world. A historic understanding of economic globalisation alerts us to the potential for politics to either enhance or retard its progress1, Australia’s relationship between trade and economic policies can illustrate this progress. The issue is that the growth rate of the economy was reduced by the protectionist policies put in place after 1900, and …show more content…
thus tore-orient the economy to be more internationally competitive and would raise the growth rate and hence per capita income levels.2 The concern here is not with the theoretical basis for this view. Rather, what is the evidence of the extent to which Australian growth was lowered as a result of pursuing for so long the now discredited policies on trade protection? Furthermore what policies were put in place after 1970 towards the progress of trade and an internationally integrated and competitive country.
Protectionist Causes
Protectionist causes, draft back to the goldfields of 1851, where significant numbers of Chinese labourers and their success in ‘tailing’ led to riots and persecution.3 Anti-Chinese sentiment flared again in the 1870s with new gold discoveries in Queensland, which caused Australia to ban all Chinese immigration by the late 1880s.4 The introduction of the Immigration Restriction Act 1901, (WAP) had encouraged the argument, that workers saw cheap non – white labour as a threat to their level of wages, thus unions acted to restrict the supply of labour in particular trades and the use of labour shortages to maintain wages and conditions.5 However Conley argued that the WAP went on “beyond a concern for wages into a belief system encompassing both fear and racism”, having such high support from Edmund Barton and William Morris Hughes impacted even higher levels of racial conflict, however no real effect on trade.6 Would not such prejudice policy cause all trade to decline momentarily? Not particularly, the globalised markets of today do not necessarily look at racial policy of immigration as a barrier to trade, rather the costs and tariffs involved in the trade agreements as further investigation to white policy becomes apparent.
Trade Trends and effects of WOP
Trade between Australia and Asia in particular Japan increased nine-fold between 1913 and 1919, exports to Asia increased from 5.6 per cent in 1913 to 9.2 per cent in 1919. Imports from Asia increased from 3.7 per cent to 12.9 per cent (with Japan as the major trading partner) 7and continued to expand in the 1920s. The real harm to Australian trade was inflicted when Trade Minister Gullet, embarked a new trade policy, whose object was “increasing our exports of primary produce, expanding secondary industry and brining about a considerable increase of rural and industrial employment”.8 The practical outcome of the policy was to raise tariffs on Japanese and US imports.9 The policy only lasted until 1937, but the damage to Australian Asia Pacific trade was severe. It seemed as if a game of chess was played between Australia and Japan, each time one would make a move another would raise a tariff. This effect caused exports of wool and iron ore to decline.10 Between 1936 and 1939 Australian exports to Japan declined from £ 17.7 million to £ 4.9 million causing Australia’s surplus with Japan to switch to deficit.11 From the import and export figures, the belief system encompassing both fear and racist attitudes of the WOP policies becomes a clear example of how Australian growth was lowered and politics intervening in negative ways, affecting both Australia’s globalisation process and economic capacities.
The Historic Shift in Labour Government’s Policies
By the 1970s, Australia’s public policy had developed in an evolutionary manner as the forces of globalisation deepened and became more powerful.12By the 1980s the advances in technology, transport and telecommunications made it clear that Australian policy would shift to involve an integrated international economic system.13 Further examples into the specific actions taken by Australian governments demonstrate how focal political decisions had become towards or against the globalisation progress.
The Whitlam Labour government of the mid – 1970s initially sought to integrate Australia more fully with Asia and the rest of the world, one policy implemented to do this was the lowering of tariffs by 25 per cent across-the-board to pursue such aims; however the 1974-75 recession invoked a return to a protectionist national government.14 Likewise, the Fraser Liberal Government of the late 1970s and early 1980s did little to open the Australian economy to the world.15 (Catley 1996, Hill and Mckern, in Dunning (Ed. 1997) characterised this period with restrictions on capital movements, rigid labour markets and inefficient tax system.16 It was in 1983 when Hawke government argued that the Australian economy relied “too heavily on the exports of mining and agricultural commodities”, and prices where continually declining at the time by open global markets17 and Australia needed a “more dynamic and outward looking economy”, which could only be achieved by abandoning protection policies and engaging with the Asian region and the wider global economy.18 Politics at this time in history shifted in debate, a consensus of change had occurred, where both governments came to realise the consequences for “Australia’s declining terms of trade and the costs of regulation and protection”.19 Ultimately, the need to lift protectionist’s ideology and increase international competitiveness become an important factor in policy making.
Impacts of Financial Reform, Floating of Dollar & Tariffs Cuts
Two policies used by the Commonwealth government on opening the Australian economy to international forces were: Financial reform through deregulation of the financial sector, the floating dollar and liberalization to trade.20 These actions alone caused a “profound refocusing” of the political debate in Australia, such that the central political question moved from being one of “how can government intervene in economic life to create social outcomes” to become “how can government create competitive market situations to ensure world – best practise is pursed” .21 Restrictions on capital movements from Australia were lifted during the 1980s via the deregulation of the financial sector and floating of the dollar.22 This caused the nominal volume of inward FDI to grow in 1993 nine times its 1983 volume, while outward FDI grew over the same period to eighteen times its 1983 volume.23 Rising investment flows provided a good indication of global integration, Australia’s economy to grow and the ability of policy to shape the process of globalisation. The second was liberalisation of trade policies via the reductions in tariff protection, causing an international competitive Australian economy. Trade had become “unambiguously international” growing from 31 – 33 per cent of GDP in the 1980s to 35 – 38 per cent of GDP by the early 1990s. The direction of trade services was also increased, with trade services growing by an average 17 per cent per year the 1985 – 1991 period.24
By 1991, the reductions in protection policies used by the commonwealth government had assumed a central role in creating more internationally competitive Australian economy. The Labour government aimed to create a more self-reliant business sector in Australia and the economy, thus was more integrated into international financial and production structures.25 Policy makers saw freer trade as “unequivocally” in the national interest and liberalisation as a guarantor of increased competitiveness.26 Tariff cuts, it argued, would “remove the barriers to competiveness and efficiency” and the economy would “open up to this kind of positive structural change”. 27 As argued “it didn’t matter what other countries did, freer trade was always best policy”. 28
The Coalition Government and the Implementation of Australia-US Free Trade Agreement
Although Australia experienced a change of federal government in 1996, the new coalition government remained committed to global trade liberalisation, arguing that the “nations standard on living derived from its capacity to trade and invest globally”.29 . One element of Howard’s government policies which enabled this was the Australia-US Free Trade Agreement (AUSFTA). Many can be critical about the method in which the coalition carried out trade policies and its support for the manufacturing industry as insufficient, however I’m more concerned with the effect of Howard’s trade policies on the Australian economy and its progress with the United States. After much speculation from the opposition party on whether to support AUSFTA, increased pressure from US congress in 2004 with opposition support for two of labours key amendments on health, gave incentive for labour accept AUSFTA. Australian parliament passed legislation in 2004 and AUSTFA came into force in on January 1st 2005 30 Supporters of AUSTFA argued that it “would expand trade and investment, and connect Australia more closely with the world’s largest economy”.31 Though it’s critics argued it would “damage the progress of WTO negotiations and make Australia’s trade relationships confusing,”32 Besides its speculation Australia’s trade deficit with the United States had increased “Australia’s 13.6 billion dollar trade deficit with the US in 2007 is the highest trade deficit Australia has recorded with any trading partner. In 2006, Australia was the 14th largest export to the US, an immediate rise in trade occurred. The US surplus with Australia was the fourth largest33, The economic indicators again confirm the ability of policy to enhance global progress towards the Australian economy.
Conclusion
Some knowledge of Australian history is essential to give an adequate understanding of how the economy is as it is today through policy. The trade deficit and exploration of protectionist policies upon its influence is good evidence relating to the Australian growth record internally. The philosophy and policy framework constructed by the Commonwealth government over the period of 1870 to post 2000, reinforces the ability for policies to create, affect, and change Australia’s globalisation process. The new exposure of the Australian economy to the “winds” of international forces, the effects of trade liberalisation and decreased role for the public sector has characterised the movement of Australia towards “international integration”.34 It’s important to highlight the impact of future policy makers can also have on the shaping of a globalisation, as Australia has been a resource dependent economy, policy makers should assure that Australia’s increased convergence with the world will not increase its vulnerability to global trends.35 The Rudd government needs to foster a strategic attitude amongst its economic- policy bureaucrats whilst maintaining open trade and encouraging domestic competitiveness if Australia is to prosper.36 In the address to the General Assembly To the United Nations Minister Kevin Rudd 's quotes
“there remains much work to be done to prevent the unrestrained greed of unregulated financial markets that has wrought such economic carnage across the world these last 12 months from sowing the seeds of future financial crises”37
Rudd’s statement supports the idea that the Labour government is committed to providing a stronger and more flexible Australian economy towards the impacts of globalisation. It is clear that politics throughout the world, profoundly affect trade outcomes and policy 38 in doing so policy makers have an inseparable task in measuring the global influences towards Australia and creating the best possible choices to fit future economic independence and stability within the global spectrum.
Bibliography
Anderson, Kym and Ross Garnaut . (1987). Australian Protectionism: Extent, Causes and Effects (Sydney: Allen and Unwin).
APGS.(1991).Building a competitive Australia.statements by the Prime Minister.Treasurer and Minister for Industry.
Technology and Commerce. Canberra in Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Bob Hawke .(1985). Stan Kelly Memorial Lecture. Commonwealth Record, 2-8 September. p 1518 in Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Catley,B.(1996). Globalising Australian Capitalism,Cambridge University Press, Cambridge
Downer, A and Fischer, T. (1997). In the national interest. Australia’s Foreign and Trade Policy White Paper. Canberra.APGS
EPAC.(1995).Globalisation issues for Australia, papers and proceedings from the Economic Planning Advisory Commission Seminar, September 15, 1994, AGPS, Canberra.
Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Hill and Meakon, in Dunning. (Ed. 1997). in Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Ian McLean. (May 2004). Australian Economic Growth in Historical, A survey for the Economic Record. University of Adelaide University (2), p1 …show more content…
-20.
Lougheed, A.
L. (1968).International Trade Theory and Economic Growth,
Australian Economic History Review. Vol. 8. No. 2 (September), pp.99-109.
Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Sabra Lane. (2009). Rudd takes place on world stage, Available: http://www.abc.net.au/worldtoday/content/2009/s2695241.htm. Last accessed 22 Sep 2009.
Oxley, Les and David Greasley (1995). A Time-Series Perspective on Convergence:
Australia, UK and the USA since 1870, Economic Record, Vol. 71, No. 214
(September), pp.259-270.
Paul Kelly .(2004).Trade deal: The New Cash Flow The Weekend Australian, 14 -15 Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Peter Ewer. Winton Higgins & Anne Stevens. (1987). Unions and the future of Australia Manufacturing. Sydney. Allen & Unwin, p,8
Trevor Mathhews & John Ravenhill .(1992). Strategic Trade Policy and its implications. in Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 -
235.
Globalisation, the Asia-Pacific and Australia
2009
Assessment Essay
By Fabian Mansouri
2735062
Question: How important is politics in shaping the progress of globalisation?
2200 Words
Introduction
During the past century politics has played a crucial role in the leadership and progression of nation states, and their transition into a globalising world. A historic understanding of economic globalisation alerts us to the potential for politics to either enhance or retard its progress1, Australia’s relationship between trade and economic policies can illustrate this progress. The issue is that the growth rate of the economy was reduced by the protectionist policies put in place after 1900, and …show more content…
thus tore-orient the economy to be more internationally competitive and would raise the growth rate and hence per capita income levels.2 The concern here is not with the theoretical basis for this view. Rather, what is the evidence of the extent to which Australian growth was lowered as a result of pursuing for so long the now discredited policies on trade protection? Furthermore what policies were put in place after 1970 towards the progress of trade and an internationally integrated and competitive country.
Protectionist Causes
Protectionist causes, draft back to the goldfields of 1851, where significant numbers of Chinese labourers and their success in ‘tailing’ led to riots and persecution.3 Anti-Chinese sentiment flared again in the 1870s with new gold discoveries in Queensland, which caused Australia to ban all Chinese immigration by the late 1880s.4 The introduction of the Immigration Restriction Act 1901, (WAP) had encouraged the argument, that workers saw cheap non – white labour as a threat to their level of wages, thus unions acted to restrict the supply of labour in particular trades and the use of labour shortages to maintain wages and conditions.5 However Conley argued that the WAP went on “beyond a concern for wages into a belief system encompassing both fear and racism”, having such high support from Edmund Barton and William Morris Hughes impacted even higher levels of racial conflict, however no real effect on trade.6 Would not such prejudice policy cause all trade to decline momentarily? Not particularly, the globalised markets of today do not necessarily look at racial policy of immigration as a barrier to trade, rather the costs and tariffs involved in the trade agreements as further investigation to white policy becomes apparent.
Trade Trends and effects of WOP
Trade between Australia and Asia in particular Japan increased nine-fold between 1913 and 1919, exports to Asia increased from 5.6 per cent in 1913 to 9.2 per cent in 1919. Imports from Asia increased from 3.7 per cent to 12.9 per cent (with Japan as the major trading partner) 7and continued to expand in the 1920s. The real harm to Australian trade was inflicted when Trade Minister Gullet, embarked a new trade policy, whose object was “increasing our exports of primary produce, expanding secondary industry and brining about a considerable increase of rural and industrial employment”.8 The practical outcome of the policy was to raise tariffs on Japanese and US imports.9 The policy only lasted until 1937, but the damage to Australian Asia Pacific trade was severe. It seemed as if a game of chess was played between Australia and Japan, each time one would make a move another would raise a tariff. This effect caused exports of wool and iron ore to decline.10 Between 1936 and 1939 Australian exports to Japan declined from £ 17.7 million to £ 4.9 million causing Australia’s surplus with Japan to switch to deficit.11 From the import and export figures, the belief system encompassing both fear and racist attitudes of the WOP policies becomes a clear example of how Australian growth was lowered and politics intervening in negative ways, affecting both Australia’s globalisation process and economic capacities.
The Historic Shift in Labour Government’s Policies
By the 1970s, Australia’s public policy had developed in an evolutionary manner as the forces of globalisation deepened and became more powerful.12By the 1980s the advances in technology, transport and telecommunications made it clear that Australian policy would shift to involve an integrated international economic system.13 Further examples into the specific actions taken by Australian governments demonstrate how focal political decisions had become towards or against the globalisation progress.
The Whitlam Labour government of the mid – 1970s initially sought to integrate Australia more fully with Asia and the rest of the world, one policy implemented to do this was the lowering of tariffs by 25 per cent across-the-board to pursue such aims; however the 1974-75 recession invoked a return to a protectionist national government.14 Likewise, the Fraser Liberal Government of the late 1970s and early 1980s did little to open the Australian economy to the world.15 (Catley 1996, Hill and Mckern, in Dunning (Ed. 1997) characterised this period with restrictions on capital movements, rigid labour markets and inefficient tax system.16 It was in 1983 when Hawke government argued that the Australian economy relied “too heavily on the exports of mining and agricultural commodities”, and prices where continually declining at the time by open global markets17 and Australia needed a “more dynamic and outward looking economy”, which could only be achieved by abandoning protection policies and engaging with the Asian region and the wider global economy.18 Politics at this time in history shifted in debate, a consensus of change had occurred, where both governments came to realise the consequences for “Australia’s declining terms of trade and the costs of regulation and protection”.19 Ultimately, the need to lift protectionist’s ideology and increase international competitiveness become an important factor in policy making.
Impacts of Financial Reform, Floating of Dollar & Tariffs Cuts
Two policies used by the Commonwealth government on opening the Australian economy to international forces were: Financial reform through deregulation of the financial sector, the floating dollar and liberalization to trade.20 These actions alone caused a “profound refocusing” of the political debate in Australia, such that the central political question moved from being one of “how can government intervene in economic life to create social outcomes” to become “how can government create competitive market situations to ensure world – best practise is pursed” .21 Restrictions on capital movements from Australia were lifted during the 1980s via the deregulation of the financial sector and floating of the dollar.22 This caused the nominal volume of inward FDI to grow in 1993 nine times its 1983 volume, while outward FDI grew over the same period to eighteen times its 1983 volume.23 Rising investment flows provided a good indication of global integration, Australia’s economy to grow and the ability of policy to shape the process of globalisation. The second was liberalisation of trade policies via the reductions in tariff protection, causing an international competitive Australian economy. Trade had become “unambiguously international” growing from 31 – 33 per cent of GDP in the 1980s to 35 – 38 per cent of GDP by the early 1990s. The direction of trade services was also increased, with trade services growing by an average 17 per cent per year the 1985 – 1991 period.24
By 1991, the reductions in protection policies used by the commonwealth government had assumed a central role in creating more internationally competitive Australian economy. The Labour government aimed to create a more self-reliant business sector in Australia and the economy, thus was more integrated into international financial and production structures.25 Policy makers saw freer trade as “unequivocally” in the national interest and liberalisation as a guarantor of increased competitiveness.26 Tariff cuts, it argued, would “remove the barriers to competiveness and efficiency” and the economy would “open up to this kind of positive structural change”. 27 As argued “it didn’t matter what other countries did, freer trade was always best policy”. 28
The Coalition Government and the Implementation of Australia-US Free Trade Agreement
Although Australia experienced a change of federal government in 1996, the new coalition government remained committed to global trade liberalisation, arguing that the “nations standard on living derived from its capacity to trade and invest globally”.29 . One element of Howard’s government policies which enabled this was the Australia-US Free Trade Agreement (AUSFTA). Many can be critical about the method in which the coalition carried out trade policies and its support for the manufacturing industry as insufficient, however I’m more concerned with the effect of Howard’s trade policies on the Australian economy and its progress with the United States. After much speculation from the opposition party on whether to support AUSFTA, increased pressure from US congress in 2004 with opposition support for two of labours key amendments on health, gave incentive for labour accept AUSFTA. Australian parliament passed legislation in 2004 and AUSTFA came into force in on January 1st 2005 30 Supporters of AUSTFA argued that it “would expand trade and investment, and connect Australia more closely with the world’s largest economy”.31 Though it’s critics argued it would “damage the progress of WTO negotiations and make Australia’s trade relationships confusing,”32 Besides its speculation Australia’s trade deficit with the United States had increased “Australia’s 13.6 billion dollar trade deficit with the US in 2007 is the highest trade deficit Australia has recorded with any trading partner. In 2006, Australia was the 14th largest export to the US, an immediate rise in trade occurred. The US surplus with Australia was the fourth largest33, The economic indicators again confirm the ability of policy to enhance global progress towards the Australian economy.
Conclusion
Some knowledge of Australian history is essential to give an adequate understanding of how the economy is as it is today through policy. The trade deficit and exploration of protectionist policies upon its influence is good evidence relating to the Australian growth record internally. The philosophy and policy framework constructed by the Commonwealth government over the period of 1870 to post 2000, reinforces the ability for policies to create, affect, and change Australia’s globalisation process. The new exposure of the Australian economy to the “winds” of international forces, the effects of trade liberalisation and decreased role for the public sector has characterised the movement of Australia towards “international integration”.34 It’s important to highlight the impact of future policy makers can also have on the shaping of a globalisation, as Australia has been a resource dependent economy, policy makers should assure that Australia’s increased convergence with the world will not increase its vulnerability to global trends.35 The Rudd government needs to foster a strategic attitude amongst its economic- policy bureaucrats whilst maintaining open trade and encouraging domestic competitiveness if Australia is to prosper.36 In the address to the General Assembly To the United Nations Minister Kevin Rudd 's quotes
“there remains much work to be done to prevent the unrestrained greed of unregulated financial markets that has wrought such economic carnage across the world these last 12 months from sowing the seeds of future financial crises”37
Rudd’s statement supports the idea that the Labour government is committed to providing a stronger and more flexible Australian economy towards the impacts of globalisation. It is clear that politics throughout the world, profoundly affect trade outcomes and policy 38 in doing so policy makers have an inseparable task in measuring the global influences towards Australia and creating the best possible choices to fit future economic independence and stability within the global spectrum.
Bibliography
Anderson, Kym and Ross Garnaut . (1987). Australian Protectionism: Extent, Causes and Effects (Sydney: Allen and Unwin).
APGS.(1991).Building a competitive Australia.statements by the Prime Minister.Treasurer and Minister for Industry.
Technology and Commerce. Canberra in Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Bob Hawke .(1985). Stan Kelly Memorial Lecture. Commonwealth Record, 2-8 September. p 1518 in Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Catley,B.(1996). Globalising Australian Capitalism,Cambridge University Press, Cambridge
Downer, A and Fischer, T. (1997). In the national interest. Australia’s Foreign and Trade Policy White Paper. Canberra.APGS
EPAC.(1995).Globalisation issues for Australia, papers and proceedings from the Economic Planning Advisory Commission Seminar, September 15, 1994, AGPS, Canberra.
Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Hill and Meakon, in Dunning. (Ed. 1997). in Graham Pratt, David Poole. (1999). Globalisation and Australian Universities, Policies and impacts. 12 (6). p334-344
Ian McLean. (May 2004). Australian Economic Growth in Historical, A survey for the Economic Record. University of Adelaide University (2), p1 …show more content…
-20.
Lougheed, A.
L. (1968).International Trade Theory and Economic Growth,
Australian Economic History Review. Vol. 8. No. 2 (September), pp.99-109.
Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Sabra Lane. (2009). Rudd takes place on world stage, Available: http://www.abc.net.au/worldtoday/content/2009/s2695241.htm. Last accessed 22 Sep 2009.
Oxley, Les and David Greasley (1995). A Time-Series Perspective on Convergence:
Australia, UK and the USA since 1870, Economic Record, Vol. 71, No. 214
(September), pp.259-270.
Paul Kelly .(2004).Trade deal: The New Cash Flow The Weekend Australian, 14 -15 Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 - 235.
Peter Ewer. Winton Higgins & Anne Stevens. (1987). Unions and the future of Australia Manufacturing. Sydney. Allen & Unwin, p,8
Trevor Mathhews & John Ravenhill .(1992). Strategic Trade Policy and its implications. in Tom Conley (2009). The Vulnerable Country, Australian and the global economy. Sydney: University of New South Wales. p34 -
235.