Liberalizing the Agricultural Sector in Australia - Essay Example

The Australian and world economies have been strongly supported by WTO and other agencies to formulate an environment where international trade takes place. This has helped the world bodies to ensure exceptional growth rate. The paper looks towards analyzing the role of WTO and the also shows the manner in which it failed to deal with liberalizing the agricultural sector. This then moves and shows the manner in which rural sector has contributed in the Australian economy and the manner in which it has changed. The paper finally dwells on the free trade agreement between US and Australia and the impact it had on Australian economy. World Trade Organization (WTO) is an international organization whose objective is to develop policies with regard to the world economy. WTO main role is to ensure that the world bodies are work in an environment which fosters free trade among the economies. This has thereby resulted in the WTO being part of different negotiations so that multilateral trade agreement is developed among the nations. This has been achieved to a large extent by removing the trade barriers which are present and look towards opening of the economies so that no sector is subsidized and all the sectors compete with each other on an international level. This has helped to remove the discrimination which existed between developed and developing or poor countries and has helped to create a corridor through which all economies are able to come together and carry out business on a common platform (Kenwood, 1995, p. 3). Since, the WTO also supervises the activities it has resulted in a reduction of disputes and has helped to foster an environment through which economies are able to work in coordination with each other so that all the economies are able to gain through international trade which will take place between different economies. WTO has failed to ensure that the negotiation which will act towards the removal of negotiation for agricultural products because of the different mindset and needs and requirements of different economies. Since, developing countries mainly strive through agriculture and is one of the most important constituent so liberalizing the agriculture sector would mean stiffer competition which developing countries might find difficult to deal with (Kenwood, 1995, p. 13). This is supported by the fact 13 members of the WTO who are developing have further given a proposal to ensure that different rights and rules are framed for both the developed and developing nations. This will foster towards ensuring that the developing nations are provides with some degree of protectionism. Even developed countries like Australia find agriculture as one of the important contributor for their growth (Kenwood, 1995, p. 13). The opening up of the economies would provide the larger players to gain a major control of the agricultural market and could lead towards hoarding and other activities which will intensify the difficulty for carrying out the business effectively. The WTO through the Doha Declaration had aimed towards removing the trade barriers on agricultural sector and aimed towards opening of the economy. Despite, the efforts the entire declaration didn’t materialize as expected and are primarily due to the difference in opinion which existed between the developed and developing countries. Removal of barrier would mean that the developing economies would have to face the difficulty of dealing with stiffer competition and since the economies don’t have the required infrastructure which will support the development the negotiation failed. The Australian government to deal with this situation has aimed at framing different rules and regulations like agricultural subsidies, quotas and protection for the agriculture industry. This is done with the objective of preserving the Australian agricultural industry which is the main contributor from the rural sector. Since, agriculture still continues to act as a method through which the economy looks to be better controlled and contributed towards the growth it has caught the attention and has resulted in ensuring better rules and policies which will be aimed at protecting the rural industry. The overall phenomenon was that agriculture still continues to be subsidized and the difference in opinion between the developing and developed countries created the required gap which has made it difficult to develop a framework through which such activities can be reduced. This has resulted in the negotiation to fail and agriculture still continues to be protected which has helped the developed economies to develop their infrastructure and with time the WTO will be able to influence the leaders of different economies and will ensure that the agriculture sector is liberalized and faces competition at the international level. The contribution of the rural sector in terms of GDP, trade and employment has changed significantly over the years. The figures for the rural contribution to the GDP of Australia shows a downward trend which highlights that it was 20% in 1900 which reduced to 3% in 2012 (Kenwood (1), 1995, 48). This is primarily due to the growth in urban development and the manner in which infrastructure has grown all around Australia which has reduced the percentage of rural areas in Australia. The same has been consolidated when we look at the employment levels which have reached to 3% in 2012 from 25% in 1901 which shows a huge dip. A prime reason which have been identified for the sudden dip in the employment level as well as the GDP with regard to the contribution being made by the rural sectors is the widespread growth which manufacturing and tertiary sector have demonstrated. The decrease in the contribution of the rural sector can also be seen from the framework that the export contribution from the rural sector has reduced to 11% in 2011 from being 85% in the 1920s (Kenwood (1), 1995, 48). A strong dip has been witnessed because of the fact that the manufacturing sector has grown with technological advancement. This has thereby provided more opportunities with higher wages, job guarantee and returns. The investments have been thereby diverted in that direction and have resulted in a creation of a situation where the contribution of the rural sector shows a downward trend. The Australian government to deal with this situation has aimed at framing different rules and regulations like agricultural subsidies, quotas and protection for the agriculture industry. This is done with the objective of preserving the Australian agricultural industry which is the main contributor from the rural sector. Since, agriculture still continues to act as a method through which the economy looks to be better controlled and contributed towards the growth it has caught the attention and has resulted in ensuring better rules and policies which will be aimed at protecting the rural industry (Kenwood (1), 1995, 49). A decrease in the contribution of rural sector in terms of trade and employment is a concern for the Australian economy. This is because of the fact that the rural sector will start to find it difficult to deal with the changing business scenarios. The decrease in the contribution from the rural sector puts the Australian economy at risk because the entire situation could unfold in a manner where the Australian economy will have to rely on imports to suffice the agricultural needs. This will tend to put immense pressure on the financial stability of Australia and could result in widespread money being drained off from the system. This will thereby hamper the overall progress and growth phenomenon through which they will find it difficult to provide the basic needs to the people. The Australian government needs to look at the situation carefully as it could result in the creation of a scenario which would hamper the overall progress and will make it difficult for the economy to grow. This could increase the reliance on external bodies and will tend to increase the complexities as the economy will have to look at external assistance. Thus, the overall condition for the rural sector looks bad and requires strong reforms and rules which will help to transform the rural sector. This should be aimed towards improving the contribution of the rural sector and the entire process should be such that it will help the economy to find a path through which overall development of the economy can be better controlled. The free trade agreement between Australia and United States under the name AUSFTA has been drafted and agreed in 2004 with the intention of improving bilateral trade agreement between both the economies. The free trade agreement as the name suggest was done with the objective of allowing both the economies to ensure free trade and have no objections with regard to the trade between any department or sector (Kenwood (2), 1995, 69). The agreement despite the different development and strategies being used by both the economies didn’t provide the same benefit as both the economies were looking at. Both the economies still continue to refrain and have a cover with regard to different sectors like agriculture and sugar. Despite, the manner in which the agreement has affected the overall agreement the manufacturing sector has been able to gain from it. The enactment of the free trade agreement has helped to ensure that more than 97 percent of US non agricultural tariff becomes duty free which has thereby helped to improve the overall business (Kenwood (2), 1995). There are certain areas like pharmaceuticals which are still controlled and have thereby reduced the gains which the Australian economy was hoping to gain from. The overall impact didn’t provide the same incentive which was been thought of and has thereby has affected the gains which could have happened. Despite, it the free trade agreement has helped to create an environment where the overall process looks towards maximizing the gains and has helped the manufacturing sector to gain. The impact has been strong as the contribution of the manufacturing sector towards the GDP of Australia has grown but certain conditions which have been imposed by the US with regard to automobile sector has limited the gains and is an aspect which when improved will help the economy to bring about the transformation and ensure better trade relations. This has ensured a high level two way investment for both Australia and US and has helped the Australian manufacturing sector to get a ready market where the demand is already created (Kenwood (3), 1995, 198). This has helped to bring a transformation and change in the working style of the manufacturing sector. Still, some concerns remains which have to be looked at and over a period of time both the economies will be able to resolve the differences which exist and will be thereby benefitted from the change and will be able to ensure better growths. The free trade agreement has ensured that Australia has a market through which finance can be raised easily and has helped to create a niche market for its products. The impact has been so strong that the Australian economy based on the different developments which have been incurred due to free trade agreement have been able to bring the change through which business effectiveness has grown. The free trade agreement has thereby brought about the required transformation and change through which Australia has been able to gain though the gains have been limited to a large extent. This still provides with an opportunity for the Australian economy through which they will be able to bring the required change in the style of working especially for the manufacturing sector which has witnessed huge growth and will be able to develop an environment through which the overall productivity for the entire region improves (Kenwood (3), 1995, 198). This will help to improve the contribution of the manufacturing sector towards the GDP of Australia and will provide a framework through which better productivity can be ensured in the future. The paper thereby shows the manner in which WTO and free trade agreement has transformed the style of working in Australia and the manner in which the contribution has changed. This has resulted in the development of the urban sector and has taken its toll on rural sector. Overall, the emphasis has been on development and based on the different areas Australia has been able to ensure better growth rates. References Kenwood, A. G. 1995. Australian Economic Institutions since Federation: An Introduction. An Economic Overview. Melbourne, Oxford University Press, Chapter 1, pp. 1-22 Kenwood (1), A. G. 1995. Australian Economic Institutions since Federation: An Introduction. Protection & Australian Agriculture. Melbourne, Oxford University Press, Chapter 3, pp. 43-63 Kenwood (2), A. G. 1995. Australian Economic Institutions since Federation: An Introduction. Protection & Australian Manufacturing. Melbourne, Oxford University Press, Chapter 4, pp. 64-84 Kenwood (3), A. G. 1995. Australian Economic Institutions since Federation: An Introduction. Protection & Australian Manufacturing. Melbourne, Oxford University Press, Chapter 11, pp. 190-208 Read More