Canada and Australia GDP
Canadian trade is twice as large, relative to GDP, as Australia’s.
Canada and Australia are (mainly) English-speaking countries with populations that are not too different in size (Canada is 60 percent larger). But Canadian trade is twice as large, relative to GDP, as Australia’s. Why should this be the case?
Canada has a GDP of $1.8 trillion and Australia has a GDP of $1.5 trillion, they belong to the top 15 countries in the world in terms of GDP according to the World Bank.
Canada borders with one of the largest economies, the United States. Given to the fact that it is one of the largest economies, the trade is much more significant. On the contrary, Australia does not border with any strong economy. However, they do trade with countries like China, which is one of their main trades. Canada is a trading partner with the U.S. and the European Union, while Australia exports to South Korea, Japan.
Also, one of the most important facts is the distance between countries. The closer they are to each other, the greater the trade in terms of transportation, cost and optimizing use of resources. Therefore, this benefits Canada with imports and exports. Canada’s main exports are petroleum, electricity, plastic, whereas Australia’s main exports are barley, fruits and vegetables according to the Foreign Trade Information System OAS, and the Atlas media.
According to the previous paragraph “All estimated gravity models show a strong negative effect of distance on international trade; typical estimates say that a 1 percent increase in the distance between two countries is associated with a fall of 0.7 to 1 percent in the trade between those countries. This drop partly reflects increased costs of transporting goods and services. Economists also believe that less tangible factors play a crucial role: Trade tends to be intense when countries have close personal contact, and this contact tends to diminish when distances are large”. (Krugman, 2012).
Canada and Australia are (mainly) English-speaking countries with populations that are not too different in size (Canada is 60 percent larger). But Canadian trade is twice as large, relative to GDP, as Australia’s. Why should this be the case?
Canada has a GDP of $1.8 trillion and Australia has a GDP of $1.5 trillion, they belong to the top 15 countries in the world in terms of GDP according to the World Bank.
Canada borders with one of the largest economies, the United States. Given to the fact that it is one of the largest economies, the trade is much more significant. On the contrary, Australia does not border with any strong economy. However, they do trade with countries like China, which is one of their main trades. Canada is a trading partner with the U.S. and the European Union, while Australia exports to South Korea, Japan.
Also, one of the most important facts is the distance between countries. The closer they are to each other, the greater the trade in terms of transportation, cost and optimizing use of resources. Therefore, this benefits Canada with imports and exports. Canada’s main exports are petroleum, electricity, plastic, whereas Australia’s main exports are barley, fruits and vegetables according to the Foreign Trade Information System OAS, and the Atlas media.
According to the previous paragraph “All estimated gravity models show a strong negative effect of distance on international trade; typical estimates say that a 1 percent increase in the distance between two countries is associated with a fall of 0.7 to 1 percent in the trade between those countries. This drop partly reflects increased costs of transporting goods and services. Economists also believe that less tangible factors play a crucial role: Trade tends to be intense when countries have close personal contact, and this contact tends to diminish when distances are large”. (Krugman, 2012).
References: Books: Krugman (2012). International Economics: Theory & Policy (9th ed.) P.14 Website: http://www.tradingeconomics.com/australia/gdp http://www.tradingeconomics.com/canada/gdp http://www.sice.oas.org/ctyindex/CAN/CANagreements_e.asp http://atlas.media.mit.edu/profile/country/aus/