Economics for Business: Australian Rock Lobsters Banned from China - Essay Example

? Economics for Business The Main Issue The rock lobster trade is an important industry of Australia. The nation exports rock lobsters to a numberof countries in the world and earns significant revenues in return. China served as the largest export market for the rock lobster industry of Australia. In November, 2010, the Chinese Government imposed a ban on the import of Australian rock lobsters into the Chinese market. However, at the same time, China continued to import lobster from New Zealand and South Africa. The Chinese Government’s decision baffled the authorities of the Australian fishing community. Since China was the biggest importer of the Australian rock lobsters, this industry would lose a significant amount of its revenues in the face of such a prohibition. The Australian Fishing Authorities had also requested the National Government to negotiate these trade restrictions with the Chinese Government. This would save their business from being affected (The Telegraph, 2010). 2. The Chinese economy was the largest buyer of the rock lobster exports of Australia. When the Chinese Government prohibited the Australian lobsters from being imported into the country in November 2010, this came as shocking news to the Australian fishing community. With the exclusion of its biggest export destination, the rock lobster industry in Australia was sure to suffer huge financial losses. The fishing communities in the Victorian province, Western and Southern Australia specialized in the trading of rock lobsters and were expected to be significantly affected as a result of the Chinese ban. The Australian fishing authorities feared that the country’s fishing community would be compelled to sell their catch at very low prices in the market. This in turn would result in lower revenues for these indigenous people. Thus, Australia’s fishing industry was set to be badly hit by China’s import restrictions. Apart from the dairy industry, fishing was also one of the important economic activities in Australia. Expectedly, the prospect of a decline in the revenues of the fishing industry was a cause of concern for the Australian economy. (The Telegraph, 2010) 3. In November 2010, China effected a ban on import of Australian rock lobsters into the Chinese economy. This ban was expected to generate a host of impacts on the Australian economy, the Chinese markets as well as the international trading community. First of all, the Australian fishing communities were expected to be adversely affected by the Chinese prohibition. The fishing communities hailing from the Victorian province, the eastern and southern Australia specialize in the trading and exporting of rock lobsters. They would witness a sharp decline in the revenues earned from the lobster export. The price of lobsters in Australia’s domestic market was expected to fall, as the demand for lobsters to be exported would reduce. This again would affect the profits of the Australian fishing communities, who would have to sell their lobster hauls at much lower prices to the local citizens. While China had implemented a ban on the import of the Australian rock lobsters, the nation continued to import lobsters from New Zealand and South Africa. If this resulted in a decline in the total quantity of lobsters imported in the Chinese economy, this would lead to a rise in lobster prices in the Chinese markets. However, if the country kept its import quantity the same as before by importing more lobsters from New Zealand and South Africa, then the internal lobster prices would not rise. Finally, there was an opportunity for New Zealand and South Africa to gain from the Chinese ban. Even after it had stopped importing Australian rock lobsters, China continued to import is seafood from New Zealand and South Africa. Both these countries could witness an increase in their lobster exports if China decided to import extra lobsters to replenish the missing imports from Australia. This would result in increased export revenues for both these nations (Herald Sun, 2010). The Major Stakeholders 4. The major stakeholders involved in this situation was the Australian Government, Australia’s fishing communities, the Australian Consumers, the Chinese Government, China’s domestic consumers and the lobster exporting communities of New Zealand and South Africa. As a result of the Chinese Government’s prohibition on the imports of Australian rock lobsters both the Australian Government and the country’s fishing communities would witness a decrease in their revenues from lobster exports. On the other hand, the Australian domestic consumers will get to consume lobsters at a reduced price than is usual in the market. The Chinese indigenous consumers would either have to pay a higher price or the same price to purchase imported lobsters depending upon whether the Chinese Government remains satisfied with the lobster imports from New Zealand and South Africa or decides to increase the imported quantities from these countries. In the latter case, New Zealand and South Africa would witness an increase in their lobster exports and thus earn more revenues from this trade. (Herald Sun, 2010) 5. In November 2010, China stopped importing rock lobsters from Australia while it continued to do so from New Zealand and South Africa. The Chinese ban affected various groups of people in Australia, China and the international economy. The Australian fishing communities were expected to be most adversely affected as a result of the ban. The communities residing in the Victorian province as well as eastern and Western Australia were expert at fishing rock lobsters and earned most of their revenues through this trade. These fishing communities would inevitably witness a decrease in their lobster exports and the revenues earned from the exports. The Australian domestic market would be flooded by an abundance of lobsters and this would cause a reduction in their price. The fishing communities would be forced to sell their sea catch to the local consumers at reduced prices. This would again affect their overall revenues earned from the fishing trade (Hobart, 2010). The Theoretical Frame 6. Countries have followed different strategies with respect to their trading activities. Sometimes, they place restrictions on imports from a particular country owing to various reasons. Following this theory, in November 2010, the Chinese Government placed a ban on the import of rock lobsters from Australia. This was expected to adversely affect the fortunes of Australia’s fishing communities who specialized in the lobster trade. As a result of the decreased demand from the export sector, Australia’s domestic market was expected to witness an increase in the supply of lobsters. This would automatically reduce the price of the lobsters in Australia’s domestic markets (The Telegraph, 2010). 7. Nations sometimes place restrictions on the commodities imported from other countries. This is often done when the country wants to encourage the indigenous production of that commodity within its economy. The Government helps the indigenous industry by restricting foreign competition in that sector. It chooses not to import the commodity from other countries. The law of demand in economics proposes an inverse relationship between the price of the commodity and the quantity supplied, provided the supply of the commodity is held constant. However, if the supply of the good in the market increases, with the demand remaining at the previous level, then the price of the commodity will decrease. 8. The above two economic theories were found to be applicable in the case of the Chinese ban on the imports of the Australian rock lobsters. Although the reasons for placing such a prohibition remain unclear, the Chinese Government could have wanted to encourage the domestic lobster industry. For this reason, it decided to stop importing lobsters from Australia. China had been the largest export market for the lobster fishing communities of Australia. When China cased to import the Australian rock lobsters, Australia’s domestic market witnessed an increase in the supply of the seafood. (There was now reduced demand for lobsters in the export market) As a result, the price of lobsters decreased in the domestic economy. References 1. “Australian Rock Lobsters banned from China”, The Mercury Newscore, 2010, January 10, 2012 from http://www.dailytelegraph.com.au/business/business-owner/australian-rock-lobsters-banned-from-china/story-e6frez89-1225963329818 2. “China lobster ban hits Tasmanian fishers”, Hobart, (2010), January 10, 2012 from http://www.abc.net.au/news/stories/2010/11/29/3079237.htm?site=hobart 3. “Chinese cray crisis a Christmas gift”, Herald Sun, (2010), January 10, 2012 from http://www.heraldsun.com.au/ipad/chinese-cray-crisis-a-christmas-gift/story-fn6bfkm6-1225963520733 Read More