The Impacts of Globalization and Regionalization on Australia - Essay Example

Running Header: Compare and Contrast the Impacts of Globalization and Regionalization on Australia Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Compare and Contrast the Impacts of Globalization and Regionalization on Australia Introduction Oman (1996) argued that regionalism and globalization are words defined by few but used by numerous people (p. 5). Regionalism is the progression that includes economic movement of two or more societies to attain firm integration with one another. It can be an effort controlled by politics energy that is inspired by economic, security and other issues. It can also be as result of microeconomic inertia that develops globalization. Regionalization takes many institutional forms caused by political forces (Ramona, Liviu & Claudiu, 1998, p. 58). These are preferential trade pacts where the members lack universal customs union or international trade policy such as domestic policies harmonization, currency typing, and regulations and standards mutual recognition. Regionalization has resulted to solid recognized policy amalgamation between governments. Australia and New Zealand created a free trade agreement in 1965 that changed to Australia-New Zealand Closer Economic Relations Agreement in 1983 (CER) (Peter, 1992, p.11). All these formed under regional trade arrangements (RTA). The agreement has inserted impact on the Australian economy. Globalization is the increased development of economic undertakings across regional and national political territories (Oman, 1996, p.5). It has resulted to increase in mobilization of intangible and tangible services and goods, together with ownership rights, through investment and trade, and through migration. It is a micro-economic phenomenon and economic outreach process. The vital element on this process is the cross-border investment and international trade flows. There has an increased world GDP share across international borders because world trade has grown rapidly than global output. This has resulted to reduction in trade barriers through trade agreements and unilateral trade liberalization. Globalization has brought mixed fortunes in Australian economy. What is the impact of globalization and regionalization on Australian Economy? Australia Regionalization under CER There is proof on Australia increase in investment and trade with New Zealand after establishment of CER in 1983. According to NZAC New Zealand was Australia sixth biggest import source and fifth biggest export (2004, p. 7). New Zealand existed as a great Australia trade partner, sourcing approximately 22% of New Zealand imports and 19% of New Zealand exports. The trade improvement is 9% per year. There was tariffs elimination and quantitative restrictions on trans-Tasman products. Australia is the second biggest New Zealand investment destination and biggest New Zealand foreign investor. The both way investment has elevated Tasman investment rate twice compared to the rest of the countries. CER has become a model of free trade agreements (FTA).New Zealand has greatly gained from CER but it has also improved the Tran-Tasman link, assisted investment and trade, and placed as a stage for global and huge economies integration networks. There has increased interaction rate among communities that initiated the Tasman during CER development era (NZAC, 2004, p. 7). They are vital to both countries in economic integration development because they are relevance in finance and business. The concern communities are pushing for more business citizenship reforms to improve doing business in both countries. The two countries have challenges concerning labor market because of economic future growth and health as labor force ages. A community demographic profile establishes the future work force. Both countries will handle increasing single population, with 60,000 Australians working in New Zealand and half a million Kiwis moving in opposite way. This will improve view on common border, environment security and migration regulations changing the CER future framework. The other involved communities will initiate cause for economies including, the sporting sector, tourism, training communities and the education and industrial research, and the developing connections between two economies. There is proof that trans-Tasman association succeeds across many sectors where these societies live. Bilateral trade liberalization between New Zealand and Australia affect their competitiveness and specialization (Rukmani &Elizabeth, 2002, p. 10). Third countries and their economic policies are also likely to have an effect on CER. Australia has highly welcomed the trade liberalization in past 20 year. Australia business policies have been favorable to private sector investment in 1990s resulting to improved economy. Australia initiated huge trade liberalization in 1973 with a 25% tariff cut in every manufacturing item. Economic downtown ensued in 1974 from first oil-price shock phenomenon resulted to increase in quota assistance. More tariffs cut down commenced in 1977 along with slash in the duty rates to respond to multinational trade agreements and Australian dollar devaluation. Rukmani and Elizabeth state that the 1983 government initiated huge liberalization by privatizing state-owned companies, introducing strict completion laws, broadening tax base, deregulating financial sector and floating Australian dollar (2002, p. 11). The reforms supported job creation and growth but also resulted to huge current account deficit. The economy was plunged into recession after the Reserve Bank elevated interest rates but government carried on tariff cuts. General tariff cut down put 5% Effective Rate of Assistance (ERA) target in 1998 for various industries. The ERA attained aim in 1990 across all sectors with exclusion in vehicles and parts, leather and footwear, textile, clothing and agriculture that came later. Variation in manufacturing sector has increased with the provided aid but general assistance level to the industries in total has reduced. The Asian financial melt down in 1997-98 pushed 75% of Australia export market into down turn. The exports increased through new markets from Europe and CER. An abrupt fall in Australian dollar enhanced exports further. The Australian economy grew continually with 3.8% GDP for 2002. Figure 1 % change in GDP Note. From Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity, (p. 14) by Elizabeth, H. P. & Rukmani, G. 2002. Trade specification impacts under CER A country comparative structure advantages influence specialization in multinational commerce. The comparative theory shows that an economy is highly productive if it deals with services and good that it produces excellently. No country has comparative advantage in every services and goods because of variation in production cost (Rukmani &Elizabeth, 2002, p. 13). The poorest and smallest countries take benefit from specialization. Australia and New Zealand have the same style in primary products comparative advantage mostly in textile fibers. The two countries have manufactured goods comparative disadvantage except wood, travel and leather goods in New Zealand but Australia has established comparative advantage in these products in 1990s. Australia has improved its comparative advantage from 1980s with exclusion of agricultural raw material. Figure2. Changes in Australian and New Zealand comparative advantage over three periods Australia New Zealand Note. From Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity, (p. 14) by Elizabeth, H. P. & Rukmani, G. 2002. The tables indicate the size in comparative advantage change after initiation of free trade between two countries. New Zealand comparative advantage in primary products improved greatly compared to Australia between 1985-89 and 1990-1994. The trend complies with trade theory where trade liberalization benefits increase for countries accessing free trade entry to bigger partner countries. The Australia comparative advantage improved in every product at a higher speed in the afterward times compared to New Zealand. The trend resulted from economic policies established in 1990s, export commodities output and productivity growth. Australia improved its comparative advantage comparing to New Zealand after CER. Globalization in Australian Economy Australia economy is a huge part of the global economy with regard to imported capital and immigration, and mineral and agricultural products export (Paul, 2006, p. 3). The Australian government established the importance of outward focused economy. The government has protected Australian manufacturing sector form economic globalization by use of non-tariff and tariff barriers from era of its establishment as a country in 1901. The government started eliminating the barriers in 1970s. Countries economy successes with outward orientation such as in East Asia influenced Australian to focus on globalization. The economy deregulation and exchange rate floatation have helped Australian economy to globalize rapidly. The economic benefits resulting from globalization are numerous. Exports create one in five Australian jobs and regional economy exports support one in4 jobs. Ten percent increase in exports has created Seventy thousand new jobs. Paul continue to argue that since 1986 every Australian home has added $ 1000 created by highly open economy (2006, p. 4). The Australian economy has done excellent in the last few years and par capita income has risen to about 3% from 1991. There is reduced Inflation and unemployment. This has occurred because of over last 20 years policy and economic reforms. It is also because of knowledgeable multilingual labor force in finance and IT. Foreign business investment rose to US$42 billion in 2004. American Express Asian regional branch and Air France Asian sales coordination are in Australia. The business is in vantage position to acquire the huge benefits from the fast international commerce and trade globalization. Benefits will result from regional initiative involvement, free trade agreement expansion and world trade organization inclusion. Globalization and Inequality in Australian According to Tom (2004) globalization is the proper way to explain the increased inequality in developed countries (p. 2). Globalization proponent argues that globalization is a constantly changing and changed world marker where government equitable redistribution of growth is not desired or required. The government interferes less with market activities. Those opposing says that globalization elevates inequality and countries need to reverse liberal capitalism and globalization to solve the problem. The labor government claimed that globe development increased income inequality and worsens the effects of structural change. The wage to profit ratio is widely used to assess this. The wages share in total factor income in 1974-75 was 61.5% compare to 54.4% in 2020-03. In 2002-03 the profit share was 25.0% and highest since 1959-60 (Tom, 2004, p. 5). The labor government engineered the shifts with the help of Australian union leadership. The Labor aim succeeded through the accord with Trade unions Council of Australia to reduce salaries to substitute workers taxation and social advantages. This implied that social outcomes were directly reliant on government. There was enough evidence that Labor insufficiently compensated for reduced salaries. Figure 3 Profits and wages of total factor income Note. From Is Increasing Inequality Inevitable in Australia?, Globalisation and Rising Inequality in Australia, (p. 6) by Tom, C. 2004. A survey conducted by Harding revealed that poverty rose from 11.3% to 13.0% in 1990s (Tom. 2004, p. 7). The center for independent studies (CIS) challenged the results for analyzing poverty using half figure of average income. The half-average method is more precise in showing inequality and results to huge poverty values because higher incomes have been increasing rapidly compared to lower incomes. Globalization threat to Australian culture Globalization has interfered widely on Australian culture and norms. Advancement in transport and communication technologies has permitted for new products of culture (Jonathan, 2002 p.50). Exchange and consumption in changing global market environment has caused entertainment ownership and media consolidation and elevated streaming of cultural products out and into Australia. Leisure period involves company logos and increase in cultural products from US shows the erosion of Australian culture. There are claims of international organizations invasion into national sovereignty and the magnified impact of migration of social integration are preventing Australia polity to hold its own principle values and establish its shared identity. Conclusion Australia and New Zealand agreement under CER created a firm economic movement that has resulted to improved trade between two countries. The trade has grown by 9% per year where Australia is the second largest New Zealand investment target and largest New Zealand foreign investor. These are benefits from process of regionalization under CER agreement. The policy harmonization has allowed both countries citizens to work on either country in order to handle labor force challenges. Bilateral trade liberalization between New Zealand and Australia has been affect by the third countries economic policies. The effect of global oil crisis in 1974 caused the Australian Government to raise quota assistance to absorb the effects. There is influence of external economic events on Australia economy such as 1997-98 Asian financial crises that caused reduction of Australian export market. The Australian comparative advantage has improved with speed compared to New Zealand after CER agreement conforming to trade theory. The Australian government initiated aggressive economic globalization in 1970s through removal of economic barriers resulting to long-term improved economy. The country has benefited from globalization economically through job creation. There is also improved par capita income rising by 3% since 1991. Foreign investment has also improved. Globalization has also contributed to inequality in Australia. This is confirmed by reduced wages share in total income from 1974-75 to 2002-03. Globalization is also a threat to Australian culture through advanced transportation and communication technologies that have introduced new products forms of culture. References Elizabeth, H. P. & Rukmani, G. (2002). Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity, (4-24). Jonathan, P. (2002). Globalisation, a threat to Australian culture?. Journal of Australian Political Economy, 48 (5), 46-60. New Zealand Australia Connections (NZAC) Research Centre. (2004). Australia's trade and investment relations under the Australia-New Zealand closer economic relations. Journal of Trade Agreement, 2 (1), 2-11. Oman, C. (1996), The policy challenges of globalisation and regionalization. OECD Development, 11 (1), 4-45. Paul, R. (2006). Globalization and its impact on the Australian agri-food system, 1-15. Peter, J. L.(1992). Regionalisation and world trade. OECD Economic Studies, 18 (4), 7-43. Ramona, F. Liviu, G. M. & Claudiu, G. M. (1998). Globalization & Regionalization in International Trade, 5(2), 54-98. Tom, C. (2004). Is Increasing Inequality Inevitable in Australia?, Globalisation and Rising Inequality in Australia, 3 (1), 2-25. Appendices Figure 1 % change in GDP Note. From Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity, (p. 14) by Elizabeth, H. P. & Rukmani, G. 2002. Figure2. Changes in Australian and New Zealand comparative advantage over three periods Australia New Zealand Note. From Closer economic relations between Australia and New Zealand: specialisation, competitiveness, complementarity, (p. 14) by Elizabeth, H. P. & Rukmani, G. 2002. Figure 3 Profits and wages of total factor income Note. From Is Increasing Inequality Inevitable in Australia?, Globalisation and Rising Inequality in Australia, (p. 6) by Tom, C. 2004. Read More