Impact of Globalization on Government Business Relations - Essay Example

Impact of Globalisation on Government Business Relations Introduction In general, the government business relation is referring to the way the government intervenes with the business activities that occur within the country. Australian government intervention includes imposing light or heavy tax collection on certain goods aside from having a strong control over the local banks as well as some private- and public-owned companies. To achieve a successful economic performance, Australian government and the business sector should work together to maintain a competitive economic condition. With a strong government support on the local business activities, the overall business and overall economic activities within Australia will be more attractive in terms of having higher gross domestic product (GDP) and low unemployment rate. For this study, the impact of globalization on the Australian government and business relations will be thoroughly discussed. In the process of going through the main discussion, examples that compare the differences between the government business relations prior to globalization and during the globalization era will be provided. Impact of Globalization on the Government Business Relations Similarities between the Australian Government Business Relations within the Domestic Market before and During the Globalization Period Aside from providing the business sectors with public utilities related to the availability of public transportation, electricity, road development, sufficient water supply and sewerage system, the Australian government has been actively participating in the promotion of the Australia’s domestic economic growth rather than giving importance to foreign affairs (Encel, 1962: p. 5). As part of public facilities improvement, Australian government has the power to regulate the business sectors in terms of imposing higher taxes on basic and non-basic commodities way before the era of globalization (Encel, 1962: p. 103). For example: The Australian government publicly announced a 10% value-added tax on goods and services in exchange with income tax cuts back in 1999 (CNN, 1999). Basically the Australian government business relations before the globalization period is more focused on the domestic economic activities rather than the importance of international relations. Even though globalization causes the Australian government to acknowledge the importance of developing business relationship with other countries, the degree of Australian government’s intervention within the local business affairs remains the same. In line with the relationship between the government and local business sector, Australian government intervention can go even up to the extent wherein the local government will provide the business sectors with special protection and privileges that can promote a better business performance on the part of a company. As a result of developing strong ties between the government and the business sectors, often times these two groups would enter into collusion such that the public interest may end up sacrificing at the expense of the business’ profitability (Urofsky, 1969: p. xi). Major Changes Caused by Globalization on Government Business Relations Even though collusion between the Australian government and the business sector remains strong during the era of globalization, the main focus of businesses today have become more complex in terms of having very broad market coverage as compared to the period wherein business transactions occur within the domestic markets only. One of the main goals of globalization is to keep the prices of locally produced goods competitive in the global markets. For this reason, there is a strong need for the local business groups in developed countries not only to build a strong political and business relationship within the domestic market but also the international businesses and governments to enable the Australian-based companies to be able to import raw materials and/or final goods from other developed and developing countries at a relatively cheaper market price. In line with the process of going global, government business relations today are not limited within the geographic boundary of a country. Instead, the government has to develop a strong relationship as they enter into business agreement with the foreign government officials and business people. Removal of Import Tariffs on Selected Products Even though Australian government intervention is not directly in significance with regards to the business people’s freedom to decide on the business terms and contracts with their selected foreign business partners, tax legislation aside from the anti-trust legislation that were implemented by the Australian government can significantly affect the business relationship that can develop between a local businessman and foreign businesses (Keston, 2008). To enable the local business groups to remain attractive in the global markets, the local government today is being challenged in making the legislation and business policy behind the global trading more attractive for the business people. For example: The government’s decision to remove of import tariffs on selected products like computer chips which can be imported straight from highly qualified countries like Japan to support the local manufacturers of computers, consumer electronic products and other electronic equipments (Procassini, 1995: p. 11). As a result of removing import tariffs on electronic raw materials like the computer chips, Australian-based electronic companies will be able to become more competitive as compared with other high technology environment like Japan and Germany in terms of grabbing a bigger global market shares (Procassini, 1995: p. 123). Importance of Building International Relations As part of increasing and strengthening Australia’s trade and financial links within the global markets, Australia’s government has to develop strong intergovernmental relations with other countries. In the process of being able to develop a strong international relations, Australian government has been challenged to improve its international competitiveness by developing and implementing new economic, social, and business policies (Boothe, 1996: p. 23). One way of strengthening Australia’s international relations, Australia has successfully established a close relationship with the United States as one of its well-known alliance and economic partner (Australian Government, 2008). In relation to Australia-United States long-term trade agreement, the Australia-United States Free Trade Agreement (AUSFTA) was implemented back in January 2005 (Australian Government, 2008b). As stated in AUSFTA, the United States will gradually remove taxes and duties upon importing Australian manufactured goods up to 82.4% of its tariff up to the last quarter of 2010; a total of 86.5% between the years 2010 to the last quarter of 2014; and 98.4% by year 2022 until the total importation of goods will be 100% duty free (Australian Government, 2008b). Because of the strengthening of business relationship between Australia and the United States, the United States is considered Australia’s “5th largest merchandise export market” with a total merchandise being exported to the United States worth Australian $ 10,036 million as of 2007 (Australian Government, 2008c; DFAT, 2008). Aside from being Australia’s fifth biggest export destination, the United States is Australia’s 9th largest foreign direct investor (FDI) (Australian Government, 2008c). By inviting more foreign investors to establish their businesses in Australia, more Australian people will have the benefit of having more job opportunities. Australia has been busy developing a strong business and government relationship with other countries like China, Japan, and the Philippines among others. As of 2007, the total Australian export to China, Japan, and the Philippines is Australian $23,802 million, $31,839 million, and $1,103 million respectively (DFAT, 2008b; 2008c; 2008d). Among other countries, Australian government has been focused on developing a good business relationship with China because of the country’s uncontrollable increasing economic and global political power. For this reason, Australia is planning to undertake a joint Free Trade Agreement (FTA) as a strategic way of strengthening the global relations between the two countries (Australian Government, 2008d). The strongest business partner and biggest export market of Australia is Japan for many years. This is primarily due to the fact that Japan’s food products, energy including mineral resources is easily sold throughout the Australian market whereas Australia’s basic goods and raw materials is also an important part of the Japanese’s economy. Similar to the case of China, Australia is also undergoing a negotiation process for Australia-Japan FTA contract (Australian Government , 2008e). Aside from maintaining good business relationship with other developed and successful developing countries like China and Japan, Australian government is also maintaining its business relationship with other countries that are less successful economically. Conclusion Prior to globalization, government business relation was focused on the promotion of domestic economic growth rather than developing foreign relations. Since the main purpose of globalization is to maximize the available human and non-material resources around the world, there is a strong need for each country to re-structure its government business relations within the global markets. As part of the modern government business relations, each government has to reconsider its fiscal policies in relation with the tariffs and duties that are imposed on international trading of goods and services. By removing all possible global trading barriers as being promoted by the World Trade Organization (WTO), Australia will be more competitive in the global markets. References: Australian Government . (2008e). Retrieved September 26, 2008, from Japan Country Brief - August 2008: Introduction: http://www.dfat.gov.au/geo/japan/japan_brief.html Australian Government. (2008). Retrieved September 26, 2008, from United States of America: Australia-United States Relations: http://www.dfat.gov.au/geo/us/ Australian Government. (2008b). 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