In terms of efficiency, free trade thus means that every state should play to maximise their specialisation of production and to minimise doing less efficient tasks (Kindleberger, 1995). Liberals believe that specialisation will improve the welfare of an individual country and that of the world as a whole if countries specialise in one task according to their comparative advantage (O’Brien and Williams, 2013). Moreover, nation states can expand their businesses with foreign direct investments, and this leads to more dynamic business style. Free trade opens up a door to the world for every single state, and domestic companies can export and import their commodities without paying extra tariffs or tax. Eliminating trade barriers creates a field which people can play a role internationally to compete one another in order to improve national as well as international economy (Balaam, and Dillman, 2011b).
Australia gradually reduced its trade protections, which can be any actions by national governments that will give an artificial competitive advantage to domestic producers over foreign producers. The changes to the free trade and protection policies has caused a significant improvement in the number of Free Trade Agreements (FTA) and a shift in Australia's trading relationships, which in turn has affected firms, individuals and also the Australian government. Since the mid 1970s, Australia has started to reduce protection by cutting tariffs, tax on imports, from average tariff levels of 23% in 1968 -69 to 4.4% in 2001. Traditionally, the highly subsidized industries (any form of support to keep domestic industries competitive) are sectors such as motor vehicle and textile, clothing and footwear (TCF). These industries have a fixed low tariff level between 2000 - 2005, to allow them to restructure and become more internationally competitive.
Technological innovation is recognized as being a central factor in the development of modern economies (Foucher & Fitzgibbons, 1992, p.552 (22)). Suppliers need to use advanced method of production as to reduce the cost of production and to generate a reasonable profit whenever there is an increase in demand. Therefore, most of the suppliers will tend to adopt capital incentive. Furthermore, buying local-made goods also help the local and infant industry to survive. Australians should be encouraged to buy Australian-made goods because this will help the local and infant industry to compete locally and internationally.
Finally the Australian economy is ‘busted’ AKA recession. This was due to a number of factors one of these was the Terms of Trade (TOT) falling. This caused Australia’s main industry ‘agriculture’ to be severely effected. With the Interest rates ( I %) rising for long periods of time this caused strong decline in private investment, lessening the multiplier effect.
They believe its function is to improve productivity in key industries that will benefit the economy as a whole. In the 90's, the government's role in the economy is shrinking. Its main function is to provide a stable environment in which the market can function. To achieve this, the government uses a policy mix containing fiscal, monetary and MER which implemented in conjunction with one another will provide a platform where Australian firms can compete successfully in the international market.
The idea of the globalisation of Australian businesses, the process where businesses develop themselves internationally is one of the main issues in our current society. The concept of globalisation has occurred due to many factors, such as reduced trade barriers, a reduction in tariffs and quotas, new developments in technology and also new innovations in transportation technology. These factors that have caused globalisation can result in many consequences, both positive and negative. These consequences are free trade caused by a reduction in tariffs and environmental costs such as pollution caused by factories and greenhouse gasses causing global warming. One of the main factors that caused globalisation in Australia was a reduction in protection, the act of National trade barriers being removed.
(Micheal, Stephen. 2011) Protectionism Economists since the time of Adam Smith have believed that free trade across national borders leads to good effects on labor division among countries, that free trade leads countries to increase their production and consumption, increase the living standard of nations across the world. Protectionism is an economic policy that restricts free trade in order to protect domestic market from foreign competition in the way of different interventions by the government. Countries engage in protectionism in order to achieve political, social and economic goals, to benefit the domestic goods or interests. To create jobs by protecting industries from foreign competition and to change the competitive environment.
The advantage for poor countries in being able to trade for capital is that the payoff is more immediate in their private sector Global Cooperation Free Trade strengthens the organizations to help the standard of law. The World Trade Organization obliges members to respect all understandings and comply with all WTO decisions. Nations that don't authorize contracts lose business and investors move their cash somewhere else. If a nation needs to hold the profits of fre trade, then they must comply with the guidelines. Asset Allocation Free trade enhances the allocation of worldwide assets.
These agreements create a more accountable and fair trading relationship between two or more countries. They promote fairness for all countries involved by reducing trade barriers, cutting tariffs (taxes on imported goods) and establishing a fair set of rules. Free Trade also helps prevent countries from using unfair trade practices to hurt the countries involved. These agreements rebalance the rules governing one countries trading relationship with others; they also make other countries more accountable for their actions. The importance enacting free trade has increased as the whole has grown more competitive in recent years, yet
This will also strengthen and increase the size and the efficiency of the market. The above mentioned process can be considered the development phase of a neoliberal economy. During which the creativity and competitive power of companies will also be developed. One of the best examples of the fruits of neoliberal policies is development of the Free Trade Agreement of FTA. FTA abolished protectionist measures such as tariffs and encourages free and liberal trade amongst counties and companies of different countries.