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Trade Policy Dilemmas in Australia

Policies refer to statement of intent about developmental issues. Policies are developmental theories and assumptions about the world. They carry incentives that encourage development and others that discourage particular actions. Public policies are intended to achieve certain objectives, an action by the government to attain certain results. The policy process should help the decision makers clarify their objectives and positions, should be well coordinated so that programs pull in the same direction. It should encourage consistency within the government dealings (Althaus, Bridgman & Davis 137).

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The history of Australia’s international economic policy is an attempt to reconcile the imperatives of her economy with the shifting global economic conditions, structures and philosophy. The main role of trade policy to Australia is to stamp her position in the world, and help in shaping and bringing the influence the international system of trade to her advantage. Globalization has given rise to greater complexity in international economic cycles and this has confronted Australia with both advantages and limitations as an actor in international economic affairs. There have been changes in trade policies in Australia extending beyond the manufacturing cycles towards integrating the world economy rather than separating from it. There have been great changes in the exchange rate and exchange control policy with consequential effects on trade. Industry policy has been shifted from an essential defense orientation based on protection to an outward approach aimed at facilitating development of internationally competitive and dynamic industries (Althaus, Bridgman & Davis 183). Sometime in the recent years, she has had an active program for the negotiation of the preferential trade agreements (PTAs) but the economic benefits of this have so far remained unclear. Traditionally, Australia has always pursued preferences for non discriminatory trade agreements. Bilateral form of trade policy has always been favored by the conservative governments since World War II. The conservative governments have over the years preferred to deal with friends in international trade. Their Labor counterparts on the other side have always been rooting for a trade policy that includes more than just friends in international trade. They argue that Australia does not have the capacity to secure trade deals with trading partners. They argue that the interest of the country are best served through multilateral trade dealings which provides benefits like improved market access for her exports and provision of protection to smaller countries.

Interestingly, the world has turned away from multilateralism, focusing mainly on PTAs as the preferred instruments for policy formulation globally. The unilateral liberalizations by many developing country governments and the increase in economic growth rates of the WTO market members have brought a lot of challenges to the Australian government. There is the belief that PTAs have killed the enthusiasm for and diverted the resources away from multilateral trade negotiations thereby killing the liberalization. The liberalization of Australian economy during the reign of Hawke and Keating made her a landing ground for foreign investors. The local firms faced competition from international operators. The two believed that trade policy was to be an integral part of broad domestic economic management and not much of a subject of international negotiation (Althaus, Bridgman & Davis 189). They believed on protectionism. The cost of PTAs has fallen since there are few industries to be offered protection. Many of the other remaining sectors in the economy like banking are under foreign ownership and are open to foreign competition; therefore the negotiators have little to offer to lure potential investors and partners. This is a big dilemma for Australia.

Australia has not been fully operating in international negotiations since they have focusing on their traditional trading partners like Malaysia. This move is not friendly to a country that is still somewhat keen on multilateral dealings with such associations as ASEAN-CER. The government has been so quick in concessions to the PTA negotiations; it was premature for Australia to conclude the deal. The government has been trying to level the playing field, by trying to be committed to multilateralism; unfortunately, the government seems to underestimate the magnitude of this task. The move requires a lot of strong political leadership, imaginative and policy elites to realize this.

Reference list

Althaus, Catherine, Bridgman Peter & Davis Glyn. The Australian Policy Handbook. 4th Ed. Alexander street, Australia: Southwood Press, 2007.

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