Professional Documents
Culture Documents
Australia's
TRADE
FIGURING OUT THE FIGURES
© Commonwealth of Australia 2003
This publication is copyright with all rights reserved. Teachers may reproduce the material contained in this
publication for class use provided such material is not for resale or any form of commercial gain. Apart from
photocopying by teachers, no part of this book may be reproduced in any form or by any means without the
written permission of Austrade, except as permitted under the Australian Copyright Act 1968.
Austrade
GPO Box 2386
Canberra ACT 2601
Australia
Acknowledgements:
Department of Foreign Affairs and Trade Market Information and Analysis Division, particularly Jane Monico for
the concept of a trade data book for students, and Neil Batty and Sue Begley for providing data and editing.
Rob Byrne for his original work on this project.
Contents
Introduction 1
Appendix 1—Glossary 74
Appendix 2—Answers 76
Introduction
The Exporting for the Future program aims to raise awareness among young Australians of the importance of
exports to Australia.
Trends in Australia’s Trade: figuring out the figures is the fifth in the Exporting for the Future series. It has been
designed to engage and challenge students by providing a range of skills–based activities examining Australia’s
‘Composition of Trade’. The activities are intended for use with students in Years 9–12 and will assist users to:
Many of the activities have the potential for deeper discussion and further investigation. Other books in this series
will provide valuable field knowledge in the area of international trade and will complement and enrich material in
this publication. Other titles in this series include:
A thorough understanding of Australia’s place in international trade is imperative if today’s students are to
participate in the global community. The activities in this book are designed to contribute to the realisation of this
important goal.
Trends in Australia’s Trade: figuring out the figures is divided into five modules. Teachers may wish to have
students complete entire modules or they may wish to select specific activities as required.
• Module 1—The big wide world of international trade. This module begins with a pre–test (Quick
Quiz) designed to engage students in the topic. A brief overview of exports, imports, foreign exchange
and benefits of international trade then follow in which the main terms, concepts and issues are
introduced. A structure, which can be used to complete a module summary, is then presented. The
correct answers accompanied by a brief explanation are provided in appendix 2.
• Module 2—Analysing Australia’s trade—the tools of the trade. This module provides students with
the necessary skills required to analyse the statistical data used to measure Australia’s trading patterns.
After an introduction to the main terms used in international trade students are introduced to the
concepts of composition and direction of trade. Instruction on how to calculate percentage changes then
follows. Advice on table and graph interpretation is then presented and the module concludes with a
brief explanation of the balance of merchandise trade.
• Module 3—One hundred years of trade. This module provides students with a long–term perspective
of Australia’s direction of trade. (An appreciation of the past is necessary to understand the present.)
Changes to Australia’s direction of trade over the last century are investigated.
• Module 4—Australia’s emerging trade patterns–through the Nineties and into the New
Millennium—Entry level analysis. This module examines Australia’s composition and direction of
trade over the last decade. It commences with an overview of Australia’s exports and then a detailed
examination of Australia’s principal merchandise and service exports. This is followed by an overview of
Australia’s imports and then a detailed examination of Australia’s principal merchandise imports.
Australia’s main customers and suppliers on a country and regional basis are then examined. Australia’s
balance of merchandise trade with selected countries is then inspected which is followed by a structure
that can be used to complete a module summary of Australia’s composition and direction of trade. The
module concludes with a revision exercise.
• Module 5—Australia’s emerging trade patterns–through the Nineties and into the New
Millennium—Extension level analysis. This module is intended for those students who wish to
investigate the topic at a deeper level. It commences with an analysis of Australia’s rank in world exports.
This leads to students selecting a country and undertaking an investigation of its trade with Australia. A
detailed examination of the rank, value and growth of Australia’s merchandise exports is then undertaken
which is followed by an examination of Australia’s merchandise exports by commodity. The importance
of and growth in Australia’s exports of services is then presented and the module concludes with a
structure that can be used to complete a module summary.
Activities
The activities test a range of abilities and intelligences and are arranged under the following headings:
Remember—recall information
Although we live in a large, wealthy country we are not able to produce all the goods and services required by
Australian consumers. Also, our population and therefore our domestic market is small in comparison with many
other countries. Because of these two factors we need to trade with the rest of the world. International trade, the
buying and selling (exchange) of goods and services between countries, has always played an important part in
Australia's economic development.
Purpose:
The purpose of this quiz is not so much to test your current knowledge of international trade but rather to
introduce you to some important issues, trends and facts regarding Australia's international trade patterns,
especially the composition and direction of trade. (Quiz tests like this one, which are given at the beginning of a
topic, are called 'pre–tests'.)
You may have studied some of this material in class and can correctly answer most questions. Alternatively, much
of this information may be new to you. Either way by completing the activities contained in this book you will
gain a deeper understanding and appreciation of:
You might like to complete this quiz again once you have
completed all the activities in this book.
Compare your results to determine the improvement in
your knowledge and understanding.
Instructions:
1. You can work singularly or in pairs.
2. For each question, choose the best alternative.
3. The correct answers accompanied by a brief
explanation are provided in appendix 2.
Quiz questions
2. What were Australia's three principal merchandise exports by value for 2001–02?
(a) coal, crude petroleum, iron ore
(b) wheat, gold, aluminium
(c) wool, bovine meat, aluminium.
9. Considering that in 2001–02 the value of exports of goods and services was $152.2 billion and the value
of imports of goods and services was $151.9 billion, Australia therefore recorded a:
(a) trade constant of $300 million
(b) trade deficit of $300 million
(c) trade surplus of $300 million.
13. In 2001–02 Australia's largest export market in terms of country groups was:
(a) the European Union (EU)
(b) Asia Pacific Economic Cooperation (APEC)
(c) Association of South–East Asian Nations (ASEAN).
14. Which Australian major export item has been the fastest growing over the 1990s with about a 790 per
cent growth?
(a) wine
(b) tourism
(c) educational services.
15. In 2001–02 which country did Australia have a bilateral merchandise trade surplus with?
(a) United States
(b) Japan
(c) China.
What one thing do the following Australian businesses have in common–Mambo, GM–Holden and Menindee
Fruits? They all sell their products on the world market, that is, they export to overseas countries. An export is a
good or service we sell to another country. Australian businesses now export a huge variety of goods and services
including, coal, wool, foodstuffs, passenger motor vehicles, crude petroleum, education services and tourism.
Even though Australia is not one of the world's main trading nations, trade is crucial to the Australian economy
and the wealth of the Australian people. Our exports sales have grown rapidly over the last twenty years as shown
in graph 1.1. Australian businesses are able to sell to a global market of over 5 billion people.
120
100
80
A$ Billion
60
40
20
0
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
Years
Imagine all the Honda cars, LG televisions and IBM computers sold in Australia during the past year. They are just
a small part of all the imports which Australian consumers and businesses buy. An import is a good or service we
buy from another country. We import goods and services because we prefer foreign versions, can purchase them
more cheaply from overseas or we cannot produce them ourselves.
Increased export sales generate foreign exchange earnings. Foreign exchange is money from other countries that
flows back into the Australian economy. Some of this money can be used to buy imports. Of course, it is better for
our economy when export sales are greater than the amount of imports purchased. This avoids the problem of
overspending and creating a foreign debt. Over time, foreign debt can become a serious economic problem
because, as a country, we live beyond our means.
Exports are important to Australia in terms of the benefits to our economy and to our community.
Economic benefits
• More job opportunities. Approximately 1.7 million jobs directly or indirectly connected to the
production of exports.
• 1 in 5 Australian jobs rely on exports, 1 in 4 jobs in regional Australia.
• Exporters tend to pay higher wages, employ a higher proportion of full time permanent staff and are
more likely to provide training for their staff than non–exporters.
• A 10 per cent increase in exports could create 70,000 new Australian jobs.
• Foreign exchange earnings allow Australians to import a wider range of products.
• More open trade has increased average annual family income by $1000 each year since 1986.
Business benefits
• International competition encourages businesses to be more innovative,
efficient and use new technology.
• Exporting businesses generate growth in infrastructure, production facilities and research and design.
• Opportunities for Australians to live and work overseas.
• Development of personal and business relationships
with people overseas.
• Development of closer links with the rest of
the world.
National benefits
• Business and international relationships are
improved through exporting.
• Exports and investment provide almost a
quarter of Australia's total income.
• Exports add diversity to Australia's national
income sources, providing wider markets and
less vulnerability to global economical downturns.
Activity 1.2
Remember
1. List three goods or services that Australia exports.
2. List three goods or services that Australia imports.
3. Why does Australia need to trade with the rest of the world?
4. Why does Australia import some goods and services?
Understand
5. Use the following terms in a sentence to explain their meaning:
• exports
• imports
• foreign exchange
• foreign debt.
Predict
6. What would eventually happen to:
(a) the Australian economy if Australia continually bought more imports and sold less exports
(b) to Australia's standard of living if export sales declined over a long period of time.
Interpret
7. Examine graph 1.1 and then answer the following questions:
(a) What was the approximate value of Australia's exports in:
(i) 1981–82?
(ii) 1991–92?
(iii) 2001–02?
(b) Between which two years did exports increase the most?
(c) Between which years did exports decrease slightly?
(d) Describe the trend in Australia's exports over this twenty–year period.
Create
8. Design an A–3 size poster that could be used to publicise either the main economic, business or national
benefits of international trade. Display your poster in your classroom.
This module has introduced you to some of the main terms, concepts and issues related to Australia's
composition of trade.
Activity 1.3
Create
1. Construct a mind map summary of the main concepts of international trade. Copy and complete the
example which has been started for you.
The language of international trade can be quite confusing at first. This is why you need to refer to the glossary
whenever you come across an unfamiliar term. (Bolded words in the text are explained in the glossary located at
the back of the book). To be able to discuss and write about trade–related issues it is important to know the
meaning of these specialist words.
Of all the technical terms used in international trade, merchandise trade is very important. Merchandise trade
refers to the buying and selling of items that can be seen and touched: a tangible (physical) product. These are
collectively referred to as goods. For example, a computer, wheat, coal or crude petroleum are all goods.
Consequently, merchandise exports refers to the goods Australia sells to other countries and merchandise imports
are those goods Australia buys from other nations.
Merchandise exports are different to services, another important trade term. Services are intangible. They cannot
be seen but are provided by other people. For example, when an Australian business provides investment advice to
overseas companies or individuals, this is known as a financial service. When overseas tourists fly Qantas this is a
transportation service.
Understand
1. Using examples, explain the difference between merchandise and services trade.
2. Write the letter 'M' next to those statements that refer to merchandise and 'S' next to services purchases.
(a) A Japanese tourist visits the Great Barrier Reef.
(b) Australia sells wool to China.
(c) Australia buys computer parts from the United States.
(d) An Australian bank provides foreign exchange facilities to a South Korean exporter.
(e) An Australian consumer uses the Internet to purchase a book from England.
(f) A Chinese student pays to enrol in an Australian university course.
(g) A Californian restaurant purchases a case of wine from an Australian vineyard.
(h) An Australian graphic design firm creates digital layout for European magazines.
Create
3. Using newspapers and magazines create an A3–sized collage poster showing examples of merchandise
and services trade. Display your posters in the classroom.
Remember
4. International trade has its own terminology. This activity will help you assess your understanding of the
most important terms. Match the term with the correct definition.
TERMS DEFINITIONS
(a) goods 1. Established in 1989 in order to promote open trade and economic
cooperation among Asia-Pacific economies.
(b) exports 2. Any articles exchanged but usually used to refer to raw materials.
(c) direction of trade 3. A group of nations formerly known as the EEC. Since 1 January 1999, the 'euro' has become the
official currency of a number of these member states.
(d) European Union (EU) 4. Goods and services sold to foreign consumers, regardless of where the transaction takes place.
These sales earn foreign exchange.
(e) foreign debt 5. The sale and purchase of foreign currencies.
(f) ETMs 6. Collection of tangible items - also called merchandise.
(g) bilateral 7. Goods and services bought from a seller overseas.
(h) commodities 8. Goods that are changed from raw commodities through processes. They are classified as simply
transformed, and elaborately transformed manufactures.
(i) STMs 9. Physical goods such as raw materials, semi-manufactures and manufactures.
(j) consumer 10. Activities done by people rather than production of physical goods. It is generally any activity
except agriculture, mining and manufacturing.
(k) imports 11. International buying and selling of goods and services and making investments in foreign countries.
(l) medicaments 12. The total level of private and government overseas borrowings.
(m) trade deficit 13. Someone who purchases goods and services to satisfy needs and wants.
(n) primary products 14. Goods that involve high levels of processing. Much value has been added to them.
(o) international trade 15. The 'type' of goods and services exported and imported.
(p) ASEAN 16. When the total value of export merchandise (goods) is greater than the total value
of import merchandise.
(q) composition of trade 17. Products that have been provided by nature such as wheat, coal, crude petroleum.
(r) APEC 18. Sellers of goods and services who have no power to influence the prices they receive.
(s) price taker 19. The countries with which Australia trades.
(t) foreign exchange 20. When the total value of export merchandise (goods) is less than the total value of
import merchandise.
(u) merchandise trade 21. Goods that involve low levels of processing. Little value has been added to them.
(v) trade surplus 22. A group of nations including Indonesia, Malaysia, Philippines, Singapore and Thailand
established to promote political, economic and social aims.
(w) merchandise 23. Trade between two countries.
(x) services 24. Substances used in treating disease; medicines.
(y) manufactures 25. The buying and selling of items that can be seen and touched.
To analyse a country's pattern of trade over time it is necessary to measure changes in the composition and
direction of trade.
The type of goods and services exported and imported can be classified in three different ways
as shown in Table 2.1.
CLASSIFICATION EXAMPLES
DIRECTION
The countries with which Australia trades
OF TRADE
The countries the goods and services are exported to and imported from can be classified in three different ways as
shown in Table 2.2.
CLASSIFICATION EXAMPLES
It is important that you understand these different classifications as they are used throughout the book.
Activity 2.2
Remember
1. Using a diagram, distinguish between 'composition of trade' and 'direction of trade'.
Understand
2. List the three different classifications used for:
(a) composition of trade
(b) direction of trade.
When dealing with changes to the composition and direction of trade it is important to
understand that we are analysing in terms of percentage (relative) changes. The total
volume of world trade is increasing each year. Consequently it is not enough to
examine only money values of exports and imports because these will generally
be increasing with the overall increase in world trade as living standards rise.
Using percentage changes also makes it easier to observe trends and make
comparisons. For example, from 2000–01 to 2001–02 the value of Australia's
exports declined $0.5 billion. By itself this figure does not provide a lot of
information. Especially, it does not give any indication as to how large
or small a fall of $0.5 billion is. The use of percentage changes
overcomes this shortcoming.
Example:
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P. 20.
(NOTE: THE MINUS FIGURE INDICATES A DECREASE OR FALL. ALTERNATIVELY A POSITIVE FIGURE INDICATES AN INCREASE OR RISE.)
EXAMPLE
EXAMPLE
Once this figure has been calculated it is possible to clearly see the relative size of the decrease: in 2001–02 the
value of Australia's exports of goods and services had decreased 0.3% compared to the previous year.
Percentage annual changes are therefore useful for indicating both the size (large or small) and direction (rise or
fall) of a change over a period of time.
Activity 2.3
Calculate
1. Complete the following table by calculating the annual percentage change in Australia's merchandise
exports. The first one has been done for you.
1996-97 78,932
1997-98 87,768 8,836 0.101 10.1
1998-99 85,991
1999-00 97,286
2000-01 119,539
2001-02 121,200
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 4, P. 23
Interpret
2. Between which years did Australia's merchandise exports experience the largest percentage:
(a) increase
(b) decrease?
Understand
3. If you were told Australia's merchandise exports had increased by $1,350 million would this tell you
whether our merchandise exports had risen by a lot, a little or a reasonable amount? Explain your
answer.
Create
4. Construct a column graph to show the percentage changes in Australia's merchandise exports from
1996–97 to 2001–02. Use a horizontal scale of 2 cm equals 1 year and a vertical scale of 1 cm equals 5
percentage points. The graph has been started for you.
25
20
15
10
-5
-10
Participate
5. In pairs clarify when it is better to analyse Australia's merchandise exports using:
(a) dollar amounts
(b) annual percentage changes.
Share your answer with the rest of the class.
Tables can show large amounts of data for comparison in a way that is easy to understand. When interpreting a
table you are looking for similarities and differences in an attempt to identify any trends.
Activity 2.4
SOURCE: EXPORTS OF MAJOR COMMODITIES TIME SERIES 1984 TO 2001, DFAT, TABLE 4, PP.24––25.
Interpret
6. What was the value of 'Total Exports' from Australia to Japan in:
(a) 1986
(b) 2001?
9. Describe the trend in Australia's total merchandise exports to Japan between 1986 and 2001.
Understand
10. What is the advantage of having more than one year's measurements displayed in this table?
Predict
11. Based on the information shown in this table suggest what may happen to the level of total merchandise
exports over the next five year period. (Hint: Base your prediction on past trends.)
When the data contained in tables are also graphed, the data and their relationships are further simplified. Tables
allow comparisons to be made but graphs (diagrams and charts) simplify and emphasise data, highlight trends and
show important relationships even further.
Activity 2.5
Graph 2.2: Australia's trade with Japan and United States 1991–92 to 2001–02
Japan U.S.A
A$m A$m
EXPORTS IMPORTS
25,000 24,000
20,000 20,000
16,000
15,000
12,000
10,000 IMPORTS
8,000
EXPORTS
5,000
4,000
0 0
91-92 93-94 95-96 97-98 99-00 01-02 91-92 93-94 95-96 97-98 99-00 01-02
Interpret
1. What is the unit of measurement?
3. Between which year(s) did Australia's imports from the United States fall?
Calculate
5. What was the approximate value of:
(a) Japanese exports in (i) 1997, (ii) 2001, (iii) 2002?
(b) Japanese imports in (i) 1997, (ii) 2001, (iii) 2002?
(c) United States exports in (i) 1995, (ii) 2001, (iii) 2002?
(d) United States imports in (i) 1995, (ii) 2001, (iii) 2002?
How is what the graphs reveal similar or different to what you first thought about Australia's trade with Japan and
the United States? Share your answers with the rest of the class.
Predict
7. Imagine the Japanese economy enters a period of sustained economic growth. What impact could this
have on Australia's:
(a) export businesses?
(b) employment level?
(c) standard of living?
(d) economic growth?
The difference between the value of a country's merchandise exports and imports is referred to as the balance of
merchandise trade. If the value of exports is greater than the value of imports a trade surplus exists. However if the
value of exports is less than the value of imports a trade deficit occurs. Consider the following example.
Table 2.6: Australia's merchandise trade with Japan and the United States 2001–02
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, PP.209 AND 296.
Table 2.6 shows that in 2001–02 Australia had a trade surplus of approximately $7.4 billion with Japan and a
$–9.5 billion trade deficit with the United States.
Activity 2.6
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.209.
SOURCE: SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.296.
Remember
1. How can you determine whether the balance of merchandise trade is a deficit or surplus figure?
Calculate
2. Complete the 'Balance of merchandise trade' for both tables. The last one has been done for you.
Interpret
4. Describe the overall trend of Australia's balance of merchandise trade with:
(a) Japan
(b) United States.
Create
5. In groups of 3 or 4 design a poster or 60 second radio commercial publicising the importance of Japan
as an important export market. Your poster or commercial should include some of the main economic
and non–economic benefits of this trade.
11
3
8 5 4
7
10 6
9
12
1. N.Z (7%) 4. JAPAN (19%) 7. HONG KONG (3%) 10. ASEAN (12%)
2. STH AMERICA (1%) 5. KOREA (5%) 8. CHINA (7%) 11. EUROPEAN UNION (1%)
3. U.S.A (10%) 6. TAIWAN (4%) 9. SOUTH ASIA (3%) 12. OTHER (17%)
2000-01
Japan - 19.7%
Other - 37.6%
U.S.A - 9.8%
Korea - 7.7%
SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P.6.
Remember
1. What is meant by the term 'merchandise exports'?
2. Why are the amounts expressed as percentages rather than dollar amounts?
3. What is the advantage of having this information presented in graph form instead of a table?
Interpret
4. Decide which of these statements best summarise the graph:
(a) There has been very little change in the direction of Australia's merchandise exports
between 1901 to 2000–01.
OR
(b) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is a
shift away from the United Kingdom and Europe towards the United States and Asia.
OR
(c) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is a
shift away from the United States and Asia towards the United Kingdom and Europe.
5. Select the most appropriate word or figure from the table to complete the following sentences:
(a) Word/figure:
(i) the percentage of Australia's merchandise exports to the United Kingdom continued to
_____________ from ________ % to ________ %, a fall of _______ percentage points.
(ii) the percentage of Australia's merchandise exports to Japan ____________ from _______ % to
_______ %, a __________ of 13.4 percentage points.
(iii) Two major new markets to emerge were _____________ with 4.9% and ______________ with
5.7% of total merchandise exports.
Analyse
6. Outline the main changes to Australia's direction of merchandise exports between:
(a) 1901 to 1950–51
(b) 1950–51 to 2000–01
Participate
7. As a class:
(a) discuss what you think has caused the shift in Australia's exports markets during the last century
(b) outline the foreign relations implications
of these changes
(c) predict the pattern of Australia's
merchandise exports for the next
twenty years.
Activity 3.2
The change in the direction of Australia's merchandise exports can be analysed in more detail if the information is
presented as a table. Examine the following table and then answer the questions.
COUNTRY (a) 1901 1910 1920-21 1930-31 1940-41 1950-51 1960-61 1970-71 1980-81 1990-91 2000-01
A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000 A$'000
Japan 247 1,314 6,235 19,001 10,728 123,100 322,976 1,197,145 5,221,647 14,378,460 23,502,609
United States 6,748 3,198 19,938 5,862 92,938 297,660 144,948 519,424 2,107,002 5,777,911 11,675,278
China 258 228 656 6,702 7,028 1,700 79,714 63,277 670,878 1,347,502 6,842,539
Korea, Rep. of - - 12 3 22 84 3,442 9,685 537,798 3,237,017 9,207,737
New Zealand 2,916 4,686 15,562 5,956 15,386 40,530 123,968 232,231 894,055 2,545,095 6,883,023
United Kingdom 50,390 75,397 135,039 106,965 115,165 641,210 463,182 493,847 700,842 1,796,435 4,645,638
Singapore - - - - - 21,750 24,370 118,397 498,042 2,768,737 5,998,075
Taiwan - - - - - - 4,016 40,009 393,912 1,962,381 5,874,881
Germany 5,105 14,681 2,914 10,623 0 55,476 54,566 147,349 486,975 1,055,632 1,492,975
Malaysia - - 4,242 1,645 8,317 16,428 23,986 66,494 437,177 984,990 2,498,697
Indonesia 409 795 5,137 2,873 6,113 6,486 11,814 39,076 356,158 1,462,287 3,112,125
Italy 278 755 5,096 6,990 21 98,020 95,450 70,897 383,252 923,174 2,101,101
Hong Kong (b) 827 1,388 1,734 765 2,265 11,936 37,578 90,403 306,726 1,559,805 3,910,347
Thailand - - 50 121 386 1,754 3,774 32,290 128,362 665,479 2,221,300
Saudi Arabia - 0 - 0 1 1,926 1,746 14,466 276,250 218,340 2,196,330
Canada 75 201 310 1,926 8,112 34,424 34,054 105,984 433,601 802,111 1,769,882
France 4,618 17,103 12,820 13,496 25 179,640 102,144 103,043 364,923 773,630 1,078,500
Vietnam - - 102 31 281 2 444 15,117 27,782 24,800 498,996
India 1,092 3,071 4,386 6,304 5,750 44,528 28,084 38,031 176,386 667,422 2,086,097
Netherlands 251 743 2,529 775 1 22,480 12,516 47,567 207,769 1,015,684 1,738,511
Papua New Guinea 129 262 586 273 1,135 5,498 35,656 163,369 428,909 778,628 1,050,199
United Arab Emirates - - - - - - 0 4,494 103,137 277,952 1,163,721
South Africa 12,648 3,652 6,099 993 2,918 8,356 14,658 85,947 132,487 178,099 1,300,327
Philippines 604 947 842 666 977 956 7,392 40,935 168,776 436,904 1,500,580
Belgium-Luxembourg 3,011 11,898 13,692 8,390 - 96,490 45,522 42,9781 71,000 447,929 1,003,563
(a) Based on 2000–01 Total Trade ranking. (b) Special Administrative Region of China.
SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P.2.
Calculate
1. (a) List Australia's top eight merchandise export markets for 1901.
(b) List Australia's top eight merchandise export markets for 2000–01.
Communicate
3. In groups of 3 or 4 answer the following questions.
(a) Why was South Africa and India amongst the top eight merchandise exports markets in 1901? (Hint:
Examine a map of the world showing the British Commonwealth countries at the beginning of the
twentieth century.)
(b) Why did the value of Australia's merchandise exports to:
(i) the United States, New Zealand and the United Kingdom fall between 1920–21 to 1930–31?
(Hint: Examine the economic conditions in these countries during the late 1920s and early
1930s.)
(ii) Germany steeply decline between 1910 to 1920–21 and again between 1930–31 to 1940–41?
(Hint: examine the major political conditions in Germany during these periods.)
(iii) Japan decline between 1930–31 to 1940–41? (Hint: examine the major political conditions in
Japan during these periods.)
(iv) the United States rise rapidly from 1960–61 to 1970–71?
Create
4. Produce an A–3 sized poster designed to explain the change in direction of Australia's merchandise
exports during the last century. Your poster must have a short slogan based on the facts and figures
presented in this module and a colourful diagram. Display your poster in the classroom.
Understand
5. Justify the importance to Australia of maintaining beneficial trading relations
with our Asian neighbours. Share your answer with the rest of the class.
6. What evidence can you find to show that the Japanese
economy experienced high levels of economic growth
during the 1970s and 1980s? (Hint: As an economy
experiences economic growth it is able to purchase
more imports.)
Calculate
7. Complete the following table. The first one has been done for you.
U.S.
China
Rep. of Korea
N.Z.
U.K.
Analyse
8. Describe the overall trend in the percentage change in Australia's merchandise exports to:
(a) the United States
(b) China
(c) Republic of Korea.
9. Why is it important to examine both the dollar value of and percentage changes to Australia's
merchandise exports when determining the importance of a country's market?
Participate
10. (a) Use the data from this section and additional investigations to prepare arguments for either side of a
debate entitled 'That Australia should diversify its export markets'. Debate this topic in class.
(b) According to many trade analysts, by 2030 China will be the world's economic superpower. As a
class discuss the implications such a development will have on Australia's trading pattern and
performance.
Activity 3.3
1901 1950-51
Other - 8.3%
Sri Lanka - 1.2%
Belgium/Lux - 1.3% United Kingdom - 59.5% United Kingdom - 48.0%
Indonesia - 2.2% Other - 26.6%
India - 2.8%
NZ - 4.3%
Germany - 6.6%
France - 2.2%
Italy - 2.2%
Canada - 2.3%
U.S.A - 13.8% Malaysia - 2.8%
Indonesia - 2.9%
India - 4.8%
U.S.A - 8.2%
2000-01
U.S.A - 18.9%
Other - 37.8%
Japan - 13.0%
China - 8.4%
SOURCE: DIRECTION OF TRADE SERIES 2000–01 ONE HUNDRED YEARS OF TRADE, DFAT 2002, P7.
Remember
1. What is meant by the term 'merchandise imports'?
Understand
2. (a) In 1901 which geographic region supplied the majority of Australia's merchandise imports?
(i) Americas
(ii) Europe
(iii) Asia
(iv) Oceania
(v) Africa.
(b) In 1950–51 which geographic region supplied the majority of Australia's merchandise imports?
(i) Americas
(ii) Europe
(iii) Asia
(iv) Oceania
(v) Africa.
(c) In 2000–01 which geographic regions supplied the majority of Australia's merchandise imports?
(i) Americas
(ii) Europe
(iii) Asia
(iv) Oceania
(v) Africa.
4. Currently, the majority of Australia's merchandise imports are sourced from the nations within APEC
and ASEAN. Using the outline map of the world at the back of this book shade in blue the countries
that are members of APEC and red those countries that are members of ASEAN. (Hint: Some countries
are members of both APEC and ASEAN.)
Activity 4.1
A$ MILLION % SHARE
Merchandise
Primary Products 71,733 47.1
Manufactures 38,070 25.0
STMs 11,874 7.8
ETMs 26,196 17.2
Other 11,397 7.5
Total Merchandise Exports 121,200 79.6
Services
Transportation 7,625 5.0
Travel 14,530 9.5
Other 8,884 5.8
Total Services Exports 31,039 20.4
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P.20 AND TABLE 2, P.21.
Remember
1. Distinguish between and give examples to illustrate:
(a) export of goods
(b) export of services.
2. Explain why:
(a) 'Primary Products' and 'STMs' and 'ETMs' are
classified as 'Merchandise'.
(b) 'Travel' is classified as a 'Service'.
Understand
3. Determine whether the following statements are true 'T' or false 'F'.
(a) 'ETMs' have a greater value than 'STMs'.
(b) 'Travel' was the largest 'Services' item.
(c) These figures are for the period 2000–01.
(d) The unit of measurement is $A million.
(e) 'Total Service Exports' was greater than 'Total Merchandise Exports'.
(f) The value of 'Manufactures' equals the combined value
of 'STMs' and 'ETMs'.
(g) Primary products account for approximately half of all Australia's exports.
(h) Australia exports a larger percentage of 'STMs' compared to 'ETMs'.
(i) Total merchandise exports account for approximately 60 per
cent of Australia's total exports.
(j) The largest percentage service item is 'Transportation'.
(k) One quarter of all exports consist of 'STMs' and 'ETMs'.
Create
7. What generalisation can you make about the composition of Australia's exports? Share your answer with
the rest of the class.
Communicate
8. As a class, discuss whether Australia should be concerned about its reliance on primary products as its
principal exports item?
Connect
9. There has been much talk in the media that while opportunities for export continue to grow in
traditional commodity–based industries, Australian exporters are increasingly tapping into new areas for
exports. Through the library and the use of the Austrade's web site at www.austrade.gov.au and DFAT
web site at www.dfat.gov.au, prepare a report on
Australia's emerging markets. Select from one of the
following:
(a) Agribusiness and food
(b) Education
(c) Knowledge–based products and services
(d) Environment
(e) Tourism.
Present your report to the rest of the class.
In 2001–02, seventeen of Australia's top twenty merchandise exports were 'Primary Products'. The three
exceptions were aluminium (STM), passenger motor vehicles (ETM) and medicaments (ETM). Together, the
twenty commodities accounted for 60 per cent of total exports in 2001–02.
Activity 4.2
Remember
1. What is meant by the following terms:
(a) merchandise exports
(b) primary products
(c) STMs
(d) ETMs
(e) commodities
3. List the manufactures (i.e. STMs and ETMs) within Australia's top twenty merchandise exports.
4. Indicate one advantage and one disadvantage of only presenting exports data for one year.
5. State one question this table will help you answer and one question it will not help you answer.
6. What is the advantage of presenting the '5 year % trend growth' figures for each item?
Create
7. Construct a column graph to show the value of the top ten merchandise exports. Use a vertical scale of 1
cm equals $1000 million and a horizontal scale of 1 cm equals 1 exports item. Shade in orange the three
columns that represent manufactures.
Calculate
8. What was the value of:
(a) total primary product
(b) total manufactures
within the top twenty merchandise exports?
9. What percentage of Australia's total merchandise export earnings were generated by the top twenty:
(a) primary products?
(b) manufactures?
10. What percentage of Australia's total merchandise export earnings was generated by coal?
Interpret
11. Circle the appropriate word to make the sentence correct.
(a) Products that rank highly in terms of export value are largely unprocessed/processed.
(b) Agricultural products and minerals are the two main categories of manufactured/primary goods.
(c) The top twenty commodities accounted for 60/40 per cent of total exports.
(d) Nickel/crude petroleum experienced the highest five–year percentage trend growth.
(e) Wool/cotton experienced the lowest five–year percentage trend growth.
(f) Australia's merchandise export profile is best described as rural–based/manufacture–based.
Communicate
12. As a class, brainstorm what you think our top ten merchandise exports might be in twenty years time.
Suggest reasons for any possible changes.
Predict
13. Indicate the impact each of the following events could have on the value of Australia's top twenty
merchandise exports:
(a) Australia's acceptance of a reduction in greenhouse gas emission by 15 per cent over ten years.
(b) A severe drought across the entire nation.
(c) A new mining technique, which can increase production by 25 per cent.
(d) A rare cow disease is detected in most European cattle herds.
(e) An increase in consumer demand for clothing made from natural fibres such as wool and cotton.
Services
Travel 14,530
Business 1,121
Personal 13,409
Transportation 7,652
Passenger 6,629
Freight 996
Communication 1,017
Computer and information 989
Financial 784
Government n.e.i. 773
Insurance 673
Personal, cultural and recreational 569
Royalties and licence fees 508
Construction 98
Other business services 3,473
Understand
1. 'Australia's principal service export is tourism'. Explain the meaning of this statement.
(Hint: When an overseas tourist travels to Australia we are in fact exporting a service – tourism).
2. Explain why the government spends money on promoting Australia as a tourist destination.
Calculate
3. What percentage of total services do the following items account for:
(a) 'Personal travel'?
(b) 'Passenger transportation'?
4. Determine whether the following statements are true 'T' or false 'F'.
(a) Almost half of Australia's export services were travel expenditures by tourists.
(b) Transportation is the second largest service export
(c) Tourism–related expenditure is a major component of Australia's service exports.
Create
5. In groups of 3 or 4, design either a sixty–second commercial or a three–minute PowerPoint presentation
for the Tourism Council of Australia, publicising the importance of overseas tourism to the Australian
economy. During your commercial or presentation make reference to the income and jobs generated by
this important service export. Present your commercial or presentation to the rest of the class.
Communicate
6. Brainstorm the reasons why tourists want to visit Australia. Present your ideas in a mind map. The first
one has been done for you.
NATURAL WONDERS
Connect
7. Through the library and the use of the DFAT web site at Austrade's
web site at www.austrade.gov.au and www.dfat.gov.au, research
tourist data over the last decade. Prepare a brief report outlining:
• tourist numbers
• the trend in tourist numbers
• length of stay
• ten most important countries of origin
• average expenditure per tourist
• ten most popular places visited.
Only about a tenth of Australia's merchandise imports consist of primary products, such as, food, beverages and
crude petroleum. Much of the remainder was manufactures, mainly ETMs, such as, computers, machinery and
transport equipment, to be used by Australian businesses in the production of goods and services. The main
service imports consist of transportation, travel, communication and insurance.
Activity 4.4
$A MILLION 2001-02%
SHARE
Merchandise
Primary Products 16,505 10.9
Manufactures 100,342
STMs 11,157
ETMs 89,185
Other 2,807
Total Merchandise Imports 119,654
Services
Transportation 10,876
Travel 11,043
Other 10,338
Total Service Imports 32,257
Total Imports 151,911 100.0
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 1, P.20.
Remember
1. Distinguish between and give examples to illustrate:
(a) imports of goods
(b) imports of services.
Interpret
2. Select the appropriate word to make the sentence correct.
(a) Most of Australia's imports are primary/manufactured products.
(b) ETMs/STMs make up the largest share of Australia's imported manufactures.
(c) Total merchandise imports account for 78.7/52.5 per cent of total imports.
(d) Travel is Australia's smallest/largest service imports.
Calculate
3. Complete the '2001–02 % share' column. The first one has been done for you.
Create
4. Draw a bar chart to represent Australia's imports of goods and services, using a horizontal scale of 1 cm
equals 10 per cent (therefore the bar will be 10 cm long). Shade in red the merchandise items and blue
the service items.
Understand
5. What evidence can you find in the goods within your house or school that Australia's main import item
is ETMs? (Hint: Examine the country of origin of selected items.)
Communicate
6. (a) What generalisations can you make about the composition of Australia's main imports? Share your
answer with the rest of the class.
(b) Should Australia be concerned about its reliance on manufactured imports? Explain your view.
Activity 4.5
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 4, P. 23 AND TABLE 11, P.34.
Interpret
1. List the manufactured imports that relate to the motor vehicle.
2. What do the majority of the top ten merchandise imports have in common?
3. Which merchandise import experienced the highest '5 year % trend growth'?
Calculate
4. What percentage of Australia's top ten merchandise imports came from:
(a) primary products?
(b) manufactured products?
Create
5. Construct a column graph to show the value of the top ten merchandise imports. Use a vertical scale of
1 cm equals $1000 million and a horizontal scale of 1 cm equals 1 import item. Shade in pink the two
columns that represent primary products.
6. Determine whether the following statements are true 'T' or false 'F'.
(a) Australia imports mainly ETMs.
(b) 'Passenger motor vehicles' accounts for approximately 20 per cent of the top ten
merchandise imports.
(c) Many of the top ten merchandise imports are used in Australian businesses.
(d) 'Computers' and 'computer parts' have a combined value of $7,518 million.
Communicate
7. As a class, brainstorm what you think our top ten merchandise imports might be in twenty years time.
Suggest reasons for any possible change.
Investigate
8. Why does Australia need to import these goods instead of producing them ourselves? (Hint: In your
answer refer to the reasons for trade, specifically the concept of comparative advantage.)
Predict
9. If Australia could no longer import the three largest merchandise items what would be
the likely impact on Australia's:
(a) economic growth?
(b) level of employment?
(c) standard of living?
(d) business profitability?
Australia's merchandise export markets are diverse. Asian markets account for approximately 60 per cent of
Australia's merchandise exports in 1992 and 56 per cent in 2002.
Activity 4.6
Remember
1. What is meant by the term 'merchandise export market'?
Understand
2. Identify Australia's most important export market for 2001–02. Provide reasons why this country buys
so many of Australia's exports.
3. Find one piece of evidence that shows the influence of Australia's history on our main merchandise
exports markets.
Calculate
4. Complete the 'Total of top ten' row.
5. (a) What is the percentage of total world merchandise exports sold to the top ten exports markets for:
(i) 1991–92?
(ii) 2001–02?
(b) What generalisation can you make about Australia's main export markets based on
these two figures?
6. (a) What is the percentage increase in the total value of merchandise export trade to the top ten export
markets from 1991–92 to 2001–02?
(b) What generalisation can you make about the growth in Australia's merchandise exports to the top
ten export markets based on this figure?
Interpret
7. Rank the countries for the year 1991–92. Comment on the changes in the rank order between 1991–92
and 2001–02.
8. (a) Which of the top ten countries changed its rank position the most?
(b) Brainstorm why this country has become an important Australian export market over the last decade.
9. Determine whether the following statements are true 'T' or false 'F'.
(a) In 1991–92 most of Australia's merchandise exports were sold to the United States.
(b) Japan's percentage of total Australian merchandise exports decreased between 1991–92 to 2001–02
but it still remains Australia's principal export market.
(c) Singapore's rank order has fallen between 1991–92 to 2001–02.
(d) The percentage of total Australian merchandise exports sold to China increased between
1991–92 to 2001–02.
(e) The Asian region is where most of Australia's principal export markets are located.
Create
10. Using an outline map of the world, show with arrows of appropriate size the direction of Australia's
merchandise exports to the top ten export markets for 2001–02.
11. Construct a column graph to show the relative importance of the top ten merchandise export markets.
Use a vertical scale of 1 cm equals $2,000 million and a horizontal scale of 1 cm equals 1 country. Shade
in blue those countries that are located within the Asian region.
13. According to many trade analysts, by 2030 China will be the world's economic superpower. As a class
discuss the implications such a development will have on Australia's trading pattern and performance.
Another way to analyse Australia's principal export customers is to examine trade patterns with specific geographic
regions. The Asia–Pacific region is of utmost importance to Australian exporters.
Activity 4.7
1991-92 2001-02
SOURCE: DIRECTION OF TRADE TIME SERIES 1981–82 TO 2001–02, DFAT, 'AUSTRALIA'S MERCHANDISE EXPORTS BY GEOGRAPHIC REGIONS', P.23.
Understand
1. What is the advantage of presenting this information as a graph instead of a table?
Predict
3. How may the direction of Australia's merchandise exports change in the next 20 years? Give reasons for
your predictions. Share your answer with the rest of the class.
In 2001–02 Australia bought approximately $120 billion worth of merchandise imports from over 200 countries.
However, the top twenty suppliers accounted for 87 per cent and the top ten 69 per cent of the total.
As with the direction of merchandise exports Australia relies on an important core of countries for the supply of
most of its merchandise imports.
Activity 4.8
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 2, TABLE 16, P.53.
Remember
1. What is meant by the term 'merchandise import market'?
Calculate
2. What is the percentage of total world imports from the top five merchandise import markets?
Interpret
3. Identify Australia's most important merchandise import supplier. Provide reasons why Australia buys so
many merchandise imports from this country.
4. With which country did Australia experience the largest 5 year trend growth?
5. Classify the top ten merchandise import markets according to their geographic region. Select from the
following geographic regions:
• Africa
• Americas
• Asia
• Europe
• Oceania
Present this information in table form. The first one has been done for you.
6. Based on the above table what generalisation can you make about Australia's principal import sources?
Create
7. Using an outline map of the world, show with arrows of appropriate size the direction of Australia's
principal merchandise imports.
8. Construct a column graph to show the relative importance of the top ten merchandise import markets.
Use a vertical scale of 1 cm equals $2000 million and a horizontal scale of 1 cm equals 1 country. Shade
in orange those countries that are located within the Asian region.
Predict
10. Based on the evidence gathered for the previous question, what could happen to your standard of living
if restrictions were placed on the number of goods that could be imported?
Connect
11. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site at
www.austrade.gov.au:
(a) List the top 10 merchandise imports Australia buys from:
(i) United States
(ii) Japan
(iii) China.
(b) Distinguish between merchandise imports that are:
(i) capital goods
(ii) intermediate goods
(iii) consumer goods.
(c) Based on your answer for the previous question, what generalisation can you make about the type of
merchandise imports Australia purchases.
The balance of merchandise trade is the difference between the value of merchandise exports and the value of
merchandise imports. (Remember, 'merchandise' is the internationally accepted term for 'goods'.)
If the value of Australia's merchandise exports is greater than the value of merchandise imports, the balance on
merchandise trade is positive and recorded as a surplus figure. Consequently there is a net inflow of money into
Australia from merchandise trade.
If however the value of Australia's merchandise exports is less than the value of merchandise imports a deficit or
negative balance on merchandise trade exists. This means a net outflow of funds from Australia.
Activity 4.9
Table 4.8: Merchandise exports and imports by selected countries 2001–02, A$million.
Remember
1. What is meant by the term 'balance on merchandise trade'?
Calculate
3. Complete the 'Balance on merchandise trade' column. The first one has been done for you.
Japan
Predict
6. What is the likely impact on Australia's balance of trade with the United States if a free trade deal
between the two countries is agreed to?
Connect
7. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site at
www.austrade.gov.au, research the reasons why Australia traditionally has a merchandise trade deficit
with the United States. (Hint: You will need to compare the composition of Australia's trade with the
United States as well as the trade policies between the two countries.)
Australia's exports are changing towards more manufacturers and knowledge–based services.
Services - 16%
Rural - 30%
Non–Monetary Gold - 2%
Other - 4%
Manufactures - 17%
Non–Monetary Gold - 4%
Other - 7%
Minerals And Fuels - 24%
Manufactures - 25%
SOURCE: ABS TRADE DATA ON DFAT STARS DATABASE.
Taiwan - 4.0%
EU - 12.4%
NZ - 6.6%
China - 7.0%
ASEAN - 12.2%
Rep. of Korea - 8.3%
Sth Asia - 3.0%
U.S.A - 9.6%
SOURCE: ABS TRADE DATA ON DFAT STARS DATABASE.
13,024
7,162
5,211
2,679
407
Activity 4.10
Remember
1 Explain the difference between tourism exports and imports.
3. List exports that earn foreign exchange in Australia – visitors pay for in Australia.
Calculate
5. Add up the percentage of merchandise exports in 2002 to Asian countries and create a new pie chart
showing Australia's broad merchandise export destinations as Asia, Europe, USA and other.
6. Calculate the percentages of services exports to each major destination and compare these to the
merchandise exports.
Create
7. Prepare an advertising campaign for one of Australia's top 20 exports to be shown in a
country of your choice.
Connect
8. Visit the Department of Foreign Affairs and Trade Internet site at
http://www.dfat.gov.au/publications/statistics.html and look at the Direction of Trade Time Series
book of statistics. Explain why Australia's export destinations have changed from 1901, when 50.1 per
cent of Australia's merchandise exports went to the United Kingdom.
Activity 4.11
Summarise the main points of this module by completing the following table.
• •
• •
• •
Key Trends: Key Trends:
• •
• •
• •
Key Trends: Key Trends:
Australia's principal merchandise export markets Australia's principal merchandise import markets
• •
• •
• •
Key Trends: Key Trends:
• •
• •
• •
Activity 4.12
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.261.
Remember
1. What is meant by the terms:
(a) merchandise exports?
(b) merchandise imports?
(c) 'balance on merchandise trade'?
6. (a) 'Confidential items' is Australia's second largest merchandise export to Saudi Arabia. Where would
you find the meaning of this term?
(b) What does the term 'Confidential items' mean?
Calculate
7. In 1997–98 what was the:
(a) value of total merchandise exports from Australia to Saudi Arabia?
(b) value of total merchandise imports to Australia from Saudi Arabia?
(c) balance on merchandise trade?
(d) balance on merchandise trade is surplus or deficit? How can you tell?
Interpret
10. Select the most appropriate response.
(a) Australia's balance on merchandise trade with Saudi Arabia moved from a deficit in 1997–98 to a
surplus in 2001–02 because:
(i) Australia bought less imports from Saudi Arabia
(ii) Australia sold more exports to Saudi Arabia.
(b) From 1997–98 to 2001–02 the percentage increase:
(i) in exports from Australia to Saudi Arabia grew at a faster rate than imports from Saudi Arabia to
Australia
(ii) in imports to Australia from Saudi Arabia grew at a faster rate than exports from Australia to
Saudi Arabia.
(c) The top five imports in 2002–02 were mainly:
(i) manufactured products
(ii) primary products.
(d) Passenger motor vehicles would be classified as:
(i) STMs
(ii) ETMs.
11. Select the most appropriate word or figure from the table to complete the following sentences:
Word/figure
(a) In 2001–02 the largest merchandise export item sold to Saudi Arabia was ____________________
with a value of $_____________. This represented an increase of __________ per cent from 1997–98.
(b) In 2001–02 the largest merchandise import item supplied by Saudi Arabia was ___________________
with a value of $______________. This represented an increase of __________ per cent from
1997–98.
Analyse
12. Briefly describe Australia's pattern of trade with Saudi Arabia.
Even though Australia is not one of the world's major trading countries, trade is crucial to the Australian economy
and wealth of the Australian people. It is therefore most important that Australia develops an expanding export
base and maintains as high a rank as possible in terms of its share of world export trade.
Activity 5.1
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 2, TABLE 13, P.42.
Calculate
1. What is Australia's share (percentage) of total world exports for:
(a) 1981?
(b) 1991?
(c) 2001?
Interpret
2. Describe the trend in Australia's rank in world exports.
3. Outline the:
(a) economic
(b) non–economic
implications this has for Australia.
Communicate
5. The following mind map shows the possible effects to the Australian economy of a rise in Australia's
share of world exports. In groups of 3 or 4 indicate beside each arrow what would lead to such an
impact. The first one has been done for you.
INCREASED HIGHER
INCREASED
ACCESS TO STANDARD OF
EMPLOYMENT
TECHNOLOGY LIVING
Rise in business
profits and decrease
in business closures
INCREASED INCREASED
INCREASED
EXPENDITURE IN ABILITY TO
AVERAGE FAMILY
INFASTRUCTURE & PURCHASE
INCOMES
PRODUCTION FACILITIES IMPORTS
Connect
6. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site at
www.austrade.gov.au, prepare a brief report on two policies the federal government could implement to
improve Australia's export ranking. Present your report to the rest of the class.
Activity 5.2
Connect
1. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site at
www.austrade.gov.au, investigate the principal exports to and imports from one of Australia's top ten
trading partners. (Use the latest figures available). Present your information in a table format as shown
below.
Manufactures Manufactures
STMs STMs
ETMs ETMs
Other Other
_______ _______
Total _______ Total _______
3. Does Australia traditionally have a trade deficit or surplus with your selected country?
Predict
4. Speculate as to the likely impact on the Australian economy if trade with your selected country was
restricted due to trade barriers. Present your ideas as a PowerPoint presentation, a poster or mind map.
Share your ideas with the rest of the class.
Section 5.3 Australia's major merchandise exports: rank, value and growth
Activity 5.3
Table 5.3: Australia's top ten merchandise exports: rank, value and growth
Total 53,357
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 1, TABLE 9, P.28.
Analyse
1. Examine the top ten merchandise exports. Elaborate as to why Australia is internationally competitive in
the production of these products.
3. What evidence is there to suggest that Australia's merchandise export profile is slowly changing?
(Hint: analyse the '5 year trend growth' figures.)
Investigate
4. List some of the major businesses that produce Australia's top ten merchandise exports.
5. What benefits will flow to these Australian businesses if the demand for the top ten merchandise exports
steadily increases over the next five years?
Predict
6. If world demand for primary products collapses, what impact would this have on:
(a) Australian primary producers?
(b) regional employment?
(c) government trade policy?
Activity 5.4
Examine the following table and then answer the questions.
Table 5.4: Australia's merchandise trade by commodity (percentage share)
0 Food & live animals, chiefly for food 20.7 18.3 18.0 17.4 17.4 18.1
2 Crude materials, inedible (excl fuels) 19.8 20.4 20.0 18.9 19.7 18.5
3 Mineral fuels, lubricants, etc 17.4 17.5 16.5 18.6 21.1 20.8
4 Animal & vegetable oils, fats & waxes 0.3 0.4 0.4 0.3 0.3 0.3
Total Primary Products (Sections 0-4) 59.1 57.8 56.3 56.8 60.1 59.6
5 Chemicals & related products 3.9 3.8 4.2 4.3 4.3 4.4
6 Manufactured goods classified chiefly by material 11.7 12.0 11.8 12.7 11.7 11.2
7 Machinery & transport equipment 13.5 12.6 12.0 11.9 11.2 11.7
Total Manufactures (Sections 5-8) 32.7 32.1 32.0 32.9 31.0 31.0
9 Commodities & transactions of merchandise 8.2 10.2 11.6 10.4 8.9 9.4
trade not elsewhere classified
IMPORTS
0 Food & live animals, chiefly for food 3.8 3.8 3.9 3.6 3.6 3.9
1 Beverages & tobacco 0.6 0.6 0.6 0.6 0.8 0.7
2 Crude materials, inedible (excl fuels) 1.9 1.8 1.7 1.7 1.6 1.5
3 Mineral fuels, lubricants, etc 6.5 4.9 4.7 7.0 8.9 7.5
4 Animal & vegetable oils, fats & waxes 0.3 0.3 0.3 0.3 0.2 0.2
Total Primary Products (Sections 0-4) 13.2 11.4 11.2 13.1 15.1 13.8
5 Chemicals & related products 11.4 11.3 11.7 11.4 12.0 12.2
6 Manufactured goods classified chiefly by material 13.6 13.8 13.2 12.4 11.9 12.4
7 Machinery & transport equipment 46.6 46.2 46.5 46.7 45.2 44.8
8 Miscellaneous manufactured articles 14.4 14.8 14.8 14.1 14.2 14.6
Total Manufactures (Sections 5-8) 85.9 86.2 86.2 84.6 83.3 84.0
9 Commodities & transactions of merchandise trade 0.9 2.4 2.6 2.3 1.6 2.1
not elsewhere classified
100 100
80 80
60 60
40 40
20 20
0 0
96-97 97-98 98-99 99-00 00-01 01-02 96-97 97-98 98-99 99-00 00-01 01-02
SOURCE: COMPOSITION OF TRADE AUSTRALIA 2001–02, PAGE 24, 'TABLE 5', DFAT.
Communicate
1. Working in pairs select appropriate data that supports each of the following statements. The first one has
been done for you.
STATEMENT EVIDENCE
1. Primary products are Australia's principal 1. Primary products account for approximately 60 per cent of
merchandise exports. total merchandise trade.
Analyse
2. Compare and contrast the composition of Australia's merchandise exports and merchandise imports.
Investigate
5. (a) What problems are associated with Australia's present merchandise trade patterns?
(b) How can government policies overcome these problems?
Connect
6. Through the library and the use of the DFAT web site at www.dfat.gov.au and Austrade's web site at
www.austrade.gov.au, prepare a report on:
(a) Australia's Pattern of Trade. In your report include some discussion of the following points:
• the present composition of Australia's exports and imports.
• reasons for changes to Australia's pattern of trade since the late–1950s.
• possible future changes to Australia's trade pattern.
Present your report to the rest of the class.
(b) some of the problems faced by Australian businesses wanting to sell their products on international
markets. In your report include some discussion of the following points:
• government sponsored programs available to domestic producers to assist them take full advantage
of their export potential.
• the benefits of increased exports for the Australian economy.
Service exports now make up 20 per cent of total exports. In 2001–02 the value of service exports was $31.0
billion down 1.5 per cent from the Sydney Olympic Games peak of $33.2 billion in 2000–01.
Activity 5.5
(a) Passenger services includes Other transportation services, (b) Operational leasing for Sea and Air Transport is included in Other transportation services, (c) For exports
only in 2000–01 includes $973 million due to Olympic related Audiovisual services.
SOURCE: COMPOSITION OF TRADE AUSTRALIA 2001–02, PAGE 26, 'TABLE 7', DFAT, BASED ON ABS CATALOGUES 5368.0 AND 5302.0.
2. What evidence can you find to show the impact of the 2001 Sydney Olympic Games?
Understand
5. Why would the impact of an Australian sporting event such as the 2001 Sydney Olympic Games show
up in a table that measures the exports of services?
7. Complete the following table by providing an example of a type of service provided for each of the
categories. The first one has been done for you.
Travel services
Communication services
Construction services
Insurance services
Financial services
Communicate
8. In groups of 3 or 4 brainstorm the impact on the Australian
economy of a 30 per cent increase in Australia's export of
services over the next five years. In particular consider the:
(a) types of jobs created
(b) types of investment required
(c) impact on the natural environment
(d) opportunities for Australian businesses.
This module has introduced you to a range of issues and concepts concerning Australia's composition of trade.
Activity 5.6
Create
1. Complete the following table. By doing so you will prepare a summary of the main issues and concepts.
APEC Established in 1989 in order to promote open trade and economic cooperation
among Asia–Pacific economies.
Balance of merchandise trade The difference between the value of a country's merchandise exports and
imports.
Capital goods Plant and machinery (ETMs) used to help producers make other goods and
services
Commodities Any articles exchanged but usually used to refer to raw materials.
Composition of trade The 'type' of goods and services exported and imported.
Confidential items Exports of a particular commodity to particular countries are not made public in
order to protect a firm's operations.
Consumer Someone who purchases goods and services to satisfy needs and wants.
Consumer goods Goods intended for general consumption, such as food and clothing
Elaborately transformed Goods that involve high levels of processing. Much value has been added
manufactures (ETMs) to them.
European Union (EU) The European Economic Community (EEC) was established by the Treaty of
Rome in 1957 to eliminate tariff and non–tariff trade barriers among members
and to form a common market that also allowed the free movement of people,
services and capital. Since 1993, the EEC has been referred to as the European
Community (EC) and is the main part of the European Union (EU). The EU is
also promoting political integration and the enlargement of the EU with new
member states from eastern and central Europe. Since 1 January 1999, the 'euro'
has become the official currency of a number of EU member states.
Exports Goods and services sold to foreign consumers, regardless of where the transaction
takes place. These sales earn foreign exchange.
Foreign debt The total level of private and government overseas borrowings.
Intermediate goods Raw materials (primary products and STMs) used to help producers make other
goods and services
International trade International buying and selling of goods and services and making investments in
foreign countries.
Manufactures Goods that are changed from raw commodities through processes. They are
classified as simply transformed, and elaborately transformed manufactures.
Merchandise trade The buying and selling of items that can be seen and touched.
Price taker Sellers of goods and services who have no power to influence the
prices they receive.
Primary products Products that have been provided by nature such as wheat,
coal, crude petroleum.
Services Activities done by people rather than production of physical goods. It is generally
any activity except agriculture, mining and manufacturing.
Simply transformed Goods that involve low levels of processing. Little value has been added to them.
manufactures (STMs)
Trade deficit When the total value of export merchandise (goods) and services is less than the
total value of import merchandise and services.
Trade surplus When the total value of export merchandise (goods) and services is greater than
the total value of import merchandise and se
Activity 1.1
1. (b) Australia's exports of goods and services were valued at $152.2 billion in 2001–02, down by less
than one per cent from $152.7 billion in 2000–01. This was mainly due to the slowing global
economy, especially in some key Australian export markets. Exports of merchandise (goods) rose by
one per cent to $121.2 billion in 2001–02, while exports of services fell marginally to $31.0 billion.
2. (a) Exports of coal were valued at $13.4 billion, crude petroleum $6.0 billion and iron ore $5.2 billion
giving a total of $24.6 billion. These three accounted for 20.3 per cent of a total $121.2 billion
merchandise exports. All of the items listed in responses (b) and (c) are part of Australia's top ten
merchandise exports. Together, Australia's top ten commodities accounted for 44 per cent of total
exports in 2001–02.
3. (a) Since 1996–97, Australia's exports have increased by an average of 9 per cent per annum. The
merchandise exports component has risen by an average 10 per cent per annum since 1996–97, while
the services component has risen by an average 6 per cent per annum.
4. (c) Based on the Department of Foreign Affairs and Trade's (DFAT) Trade Export Classification
(TREC), total Australian exports comprised 47 per cent primary products, 17 per cent ETMs, 8 per
cent STMs and 8 per cent other merchandise exports. Services accounted for the remaining 20 per
cent of exports.
5. (b) Imports of goods and services increased by one per cent to $151.9 billion in 2001–02. This was well
below the long–term annual growth rate of 8 per cent since 1996–97.
6. (c) Imports of passenger motor vehicle were valued at $9.0 billion, crude petroleum at$6.8 billion and
computers at $5.0 billion giving a total of $17.4 billion. Note that a proportion of these imports are
business inputs. These three imports accounted for 17.4 per cent of a total $119.7 billion
merchandise imports. All of the items listed in responses (a) and (b) are part of Australia's top ten
merchandise imports.
7. (b) The annual growth of Australia's imports has averaged 8 per cent since 1996–97. Imports of
merchandise goods have increased by an average 9 per cent per annum since 1996–97, while imports
of services increased by an average of 6 per cent per annum.
8. (a) Australia's imports have always been dominated by ETMs. In 2001–02, imports comprised 11 per
cent primary products, 7 per cent STMs, 59 per cent ETMs, 2 per cent other merchandise imports
and 21 per cent services.
9. (c) Australia recorded a trade surplus of $328 million in 2001–02, a decrease of $1.8 billion on the
surplus of $2.2 billion recorded in 2000–01. Trade in merchandise goods recorded a surplus of $1.5
billion, while trade in services recorded a deficit of $1.2 billion in 2001–02.
10. (a) Australia's share of global merchandise trade stood at 1.0 per cent in 2001. As a result of this
relatively small share of world trade, Australia is predominately a price taker in international markets,
except in the case of a few commodities of which it is a major producer.
11. (b) Japan continued to be Australia's largest export market in 2001–02, although exports fell by 3 per
cent to $22.8 billion representing 19 per cent of total exports. The United States was Australia's
second largest export market, with exports valued at $12.0 billion in 2001–02, or 10 per cent of total
exports.
12. (a) The United States was Australia's principal source of imports, valued at $21.5 billion in 2002–02 and
represented 18 per cent of total imports. Japan remained our second largest source of imports, which
were valued at $15.5 billion and represented 13 per cent of total imports. China was Australia's third
largest source of imports, which were valued at $11.3 billion or 9 per cent of total imports.
13. (b) APEC remained Australia's largest trading group. In 2001–02, total exports to APEC members rose
marginally to $87.6 billion and accounted for 72 per cent of Australia's total merchandise exports.
Exports to the European Union totalled $14.5 billion in 2001–02 and accounted for 12 per cent of
total exports. Australia's exports to the Americas rose 4 per cent to $15.5 billion in 2001–02,
representing 13 per cent of total exports.
14. (a) Australia's wine industry employs 62 000 people directly and indirectly. The industry relies on access
to overseas markets. Australia's wine exports were worth a record $2.1 billion in 2001–2. It is
essential for the long–term growth of our wine industry that it has assured access to overseas markets.
15. (a) Australia's largest bilateral trade surplus was with Japan, valued at $7.4 billion in 2001–02. At $9.5
billion Australia's trade deficit with the United States was by far the largest bilateral trade deficit with
any trading partner. Australia had a trade deficit of $3.5 billion with China in 2001–02.
Activity 1.2
Remember
1. Some of the major goods and services exported by Australia are coal, wool, foodstuffs, passenger motor
vehicles, crude petroleum, education services and tourism.
2. Some of the major goods and service imported by Australia are passenger motor vehicles, televisions,
computers and equipment to operate businesses.
3. Australia trades with other countries because we cannot produce all the goods and services that
Australians want and need. Our small population means that the domestic market alone will not
adequately support the Australian economy.
4. We import goods and services when we cannot produce them ourselves or its is cheaper to purchase
them from abroad then produce them here.
Understand
5. Australia exports products to sell overseas generating the foreign exchange to pay for its imports, avoiding
the danger of foreign debt.
6. (a) A decline in exports leads to a loss of foreign exchange necessary to pay for imports.
(b) Australia imports not only important necessities that cannot be produced here, but also luxuries that
Australian consumers want. Hence a loss of our capacity to import leads to a loss of our
standard of living.
Activity 1.3
Create
• Australia cannot produce all the goods and services required by customers
• Australia has a small domestic market
• Consumers want variety
• Enhanced competitiveness—gain expertise and new technologies in global competition
• Increased productivity, economies of scale, long–term expansion and utilise excess production capacity
• Respond to perceived demand overseas, such as niche markets.
Imports
Benefits of trade
Foreign exchange
Activity 2.1
Understand
1. When an Australian exports bails of wool or imports cars from Korea, they are engaging in the
merchandise trade; the trade in tangible objects or goods. When an Australian provides advice as a
consultant in the US or stays in a hotel in Turkey, they are engaging in the services trade; the trade in
intangibles like knowledge or care.
Activity 2.2
Remember
1. Composition of trade – drawing of a range of goods and services.
Direction of trade – map with arrows going from Australia to Asia, Europe, etc.
Understand
2. (a) Broad category, commodity (goods), type of activity (services).
(b) Country, country groups, geographic regions.
Calculate
1996-97 78,932
Interpret
2. (a) The largest percentage increase in Australia's merchandise exports occurred in the
financial year 2000–01.
(b) The largest percentage decrease in Australia's merchandise exports occurred in the
financial year 1998–99.
Understand
3. More information than just the dollar value is required to decide whether an increase or decrease in
merchandise exports is significant. The change must be examined in the context of the overall value of
merchandise exports as a percentage trend – a relative increase or decrease.
Activity 2.4
Interpret
1. Australia's merchandise exports to Japan (A$ '000).
2. This table measure Australia's composition of trade to Japan, in terms of the broad category of
composition, over the time period 1986–2001.
3. A$ '000.
6. (a) A$ 9,045,080,000.
(b) A$ 23,719,486,000.
7. (a) The value of unprocessed primary products fell between 1991 and 1996.
(b) The value of ETMs rose the most between 1986 and 1991.
9. Between 1986 and 2001 Australia's total merchandise exports grew steadily.
Understand
10. Having multiple years displayed allows the reader to identify trends with respect to the increasing or
decreasing value of certain categories of product. This allows the reader to estimate whether Japan would
be a good potential market for different categories of products.
Predict
11. Based on a model of steady growth you could estimate that the value of Australian exports to Japan will
be approximately A$28,000,000,000 in 2006.
Activity 2.5
Interpret
1. The unit of measurement is a million Australian dollars.
2. (a) Australia's exports to Japan fell between 95–96, 97–98 and 00–01.
(b) Australia's exports to Japan rose sharply between 99–00.
3. Australia's exports to the United States fell between 91–92 and 95–96.
4. (a) Although there are periods where the level of imports drops, the trend in imports from the United
States is one of growth.
(b) After a slight fall from 1991–2 to 1999–96, exports to the United States then cycle between periods
where there is no growth and periods where there is weak growth.
Calculate
5. (a) (i) A$m 17,500 (ii) A$m 24,000 (iii) A$m 22,500
(b) (i) A$m 12,500 (ii) A$m 15,000 (iii) A$m 15,000
(c) (i) A$m 4,000 (ii) A$m 12,000 (iii) A$m 12,000
(d) (i) A$m 16,000 (ii) A$m 22,000 (iii) A$m 20,000
Activity 2.6
Remember
1. If the balance of merchandise trade is a negative figure, there is a trade deficit. If it is a positive figure,
there is a trade surplus.
Calculate
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.209.
SOURCE: ADAPTED FROM COMPOSITION OF TRADE AUSTRALIA 2001–02, DFAT, SECTION 4, P.296.
Interpret
4. (a) The trend in Australia's merchandise trade with Japan is one of a growing trade surplus.
(b) The trend in Australia's merchandise trade with the United States is one of a shrinking trade deficit.
Activity 3.1
Remember
1. Merchandise exports are tangible things, like goods (rather than intangible things, like services) that are
produced in Australia and sold for foreign currency, usually overseas.
2. The value of the Australian dollar has changed over time and it would be misleading to compare dollar
amounts from separate decades. In addition the Australian currency changed from the pound to dollar in
1966, rendering prices incomparable before and after that period.
3. Having our direction of trade represented graphically allows us to see which markets are our dominant
export destinations and how that changes over time.
Interpret
4. (b) The main change in the direction of Australia's merchandise exports between 1901 to 2000–01 is a
shift away from the United Kingdom and Europe towards the United States and Asia.
5. (a) (i) the percentage of Australia's merchandise exports to the U.K. decreased from 50.7% to 32.79% ,
a fall of 18 percentage points.
(ii) the percentage of Australia's merchandise exports to the United States increased from 6.8% to
15.2%, a rise of 8.4 percentage points.
(iii) the percentage of Australia's merchandise exports to the European countries shown (Belgium–
Luxemburg, France, Germany and the United Kingdom) declined from 63.4% to 49.5%.
(iv) the major new market to emerge was Japan with 6.3% of the total of merchandise
exports in 1950–51.
(b)(i) the percentage of Australia's merchandise exports to the United Kingdom continued to decrease
from 32.7% to 3.9%, a fall of 28.8 percentage points.
(ii) the percentage of Australia's merchandise exports to Japan increased from 6.3% to 19.7%, a rise of
13.4 percentage points.
(iii) Two major new markets to emerge were Taiwan with 4.9% and China with 5.7% of total
merchandise exports.
Analyse
6. (a) Over the period 1901 to 1950–51 there was a diversification in the direction of our merchandise
exports, with a move away from the UK to the US and the rest of Europe. Note also the
development of Japan as an export market and the increase in exports to countries grouped under
other.
(b) Over the period 1950–51 to 2000–01 Asia became established as the major export market, with
Japan the largest single destination and other Asian countries, China, Taiwan and Korea, becoming
other important markets. The USA and UK have also diminished as export destinations. Notice also
the diversity represented by the increasing size of the 'Other' category as an export destination.
2. Many of the top eight export destinations for 1901 are no longer major export destinations in 2001.
These include South Africa, Germany, France, Belgium –Luxembourg and India. All of the five countries
that have moved onto the major destination list – Japan, Korea, China, Singapore, and Taiwan – are in
Asia. Also note the diminishing role of the United Kingdom in Australian affairs, slipping from first
position to eighth.
Understand
5. Asian countries represent five of our top eight export destinations. As indicated by the growth of these
markets as export destinations, their economic growth is strong and Australia will benefit from mutual
trading relationships.
6. During the 1970's and 1980's the value of Japan as an export destination was A$ 1,197,145,000 and A$
5,221,627,000 respectively. This was up from A$ 322,976,000 in the 1960's, which is a sharp rise. This
indicates substantial economic growth in Japan during this time.
Calculate
8. The overall trend in the percentage change in Australia's merchandise exports to:
(a) the United States is a gradual decline.
(b) China is fluctuating over the decades.
(c) Republic of Korea is increasing after a dramatic increase in 1970–71 to 1980–81.
9. It is important to examine both the dollar value of and percentage changes to Australia's merchandise
exports when determining the importance of a country's market because the value of exports will
generally rise with inflation and the overall increase in world trade, while the significance of the value can
be measured by the percentage change.
Activity 3.3
Remember
1. Merchandise imports are tangible things, like goods (rather then intangible things, like services) from
overseas that are sold in Australia.
Understand
2. (a) In 1901 the geographic region that supplied the majority of Australia's merchandise imports was
(ii) Europe.
(b) In 1950–51 the geographic region that supplied the majority of Australia's merchandise imports was
(ii) Europe.
(c) In 2000–01 the geographic region that supplied the majority of Australia's merchandise imports was
(iii) Asia.
Activity 4.1
Remember
1. (a) Goods (merchandise) exports are tangible things, like wool, cars and wine, that are produced in
Australia and sold for foreign currency, usually overseas.
(b) Services exports are intangible things that are activities by people. Services include finance, tourism
and education, that are activities delivered by Australian businesses to people from overseas for
foreign currency. Services may be delivered in Australia or overseas.
2. (a) 'Primary Products' and 'STMs' and 'ETMs' are tangible things so are classified as 'Merchandise'.
(b) 'Travel' is intangible, an activity that includes travel agency and hotel services and is therefore
classified as a 'Service'.
Understand
3. (a) T (b) T (c) F (d) T (e) F (f) T (g) T (h) F (i) F (j) F (k) T.
Activity 4.2
Remember
1. (a) Merchandise (goods) exports are tangible things, like wool, cars and wine, that are produced in
Australia and sold for foreign currency, usually overseas.
(b) primary products are products that have been provided by nature such as wheat, coal, crude
petroleum.
(c) Simply transformed manufactures (STMs) are goods that involve low levels of processing. Little value
has been added to them.
(d) Elaborately transformed manufactures (ETMs) are goods that involve high levels of processing. A lot
of value has been added to them.
(e) Commodities are any articles exchanged, but usually used to refer to raw materials.
Understand
2. The primary products within Australia's top twenty merchandise exports are: coal, crude petroleum, iron
ore, non–monetary gold, wheat, aluminium, bovine meat, aluminium ores, wool, natural gas, meat,
cotton, copper, nickel, other ores. (Milk and cream are processed and packaged.)
3. The manufactures (i.e. STMs and ETMs) within Australia's top twenty merchandise exports are:
passenger motor vehicles, refined petroleum, alcoholic beverages, medicaments, milk and cream.
4. Advantages of only presenting exports data for one year include presenting current strong exports sectors
in a positive light even if they are falling over time and emphasising areas of strength at a particular time.
Disadvantages of only presenting exports data for one year include possible selection of a year that is not
representative, and planning decisions and funding may concentrate on a sector in decline rather than
one that trend data shows has potential for enormous growth.
5. This table will help you answer questions about the ranking, value and trend growth of only the top 20
merchandise exports in the 2001–02 financial year, but it will not help you answer questions about other
years', other merchandise exports or services exports.
6. The advantage of presenting the '5 year % trend growth' figures for each item is that it shows industry
sectors that are growing or falling in importance to the Australian economy.
Calculate
8. Within the top twenty merchandise exports the value of (a) total primary product is A$60,695 million
and (b) total manufactures is A$11,436 million
9. The percentage of Australia's total merchandise export earnings generated by the top twenty (a) primary
products is 50% and (b) manufactures is 9.4%.
10. Coal generated 11 per cent of Australia's total merchandise export earnings.
Interpret
11. (a) Products that rank highly in terms of export value are largely unprocessed.
(b) Agricultural products and minerals are the two main categories of primary goods.
(c) The top twenty commodities accounted for 60 per cent of total exports.
(d) Crude petroleum experienced the highest five–year percentage trend growth.
(e) Wool experienced the lowest five–year percentage trend growth.
(f) Australia's merchandise export profile is best described as rural–based.
Predict
13. The impact on the value of Australia's top twenty merchandise exports of:
(a) Australia's acceptance of a reduction in greenhouse gas emission by 15 per cent over ten years would
be to diminish the value of fuel exports.
(b) a severe drought across the entire nation would be to diminish the value of crop exports.
(c) a new mining technique, which can increase production by 25 per cent would be to increase the
value of mined resources exports.
(d) a rare cow disease is detected in most European cattle herds would be to increase the value of meat
exports.
(e) an increase in consumer demand for clothing made from natural fibres such as wool and cotton
would be to increase the value of natural fibre exports.
Activity 4.3
Understand
1. 'Australia's principal service export is tourism' because tourism earned the highest amount of foreign
exchange in 2002, more than all other goods or services export categories.
2. To encourage more tourists to visit Australia and therefore earn more foreign exchange.
Calculate
3. (a) 'Personal travel' – 43.2%
(b) 'Passenger transportation' – 21.4%
Remember
1. (a) Goods (merchandise) imports are tangible things, like petrol, clothing and computers, that are
produced overseas and sold to Australians.
(b). Services imports include finance, tourism and transportation, which are activities delivered by
foreign businesses to people from Australia. Services may be delivered overseas or in Australia.
The foreign exchange earned from the transaction returns to the country where the service
provider is registered.
Interpret
2. (a) Most of Australia's imports are manufactured products.
(b) ETMs make up the largest share of Australia's imported manufactures.
(c) Total merchandise imports account for 78.7 per cent of total imports.
(d) Travel is Australia's largest service imports.
Calculate
3. The '2001–02 % share' column.
$A MILLION 2001-02%
SHARE
Merchandise
Primary Products 16,505 10.9
Manufactures 100,342 66.0
STMs 11,157 7.3
ETMs 89,185 58.7
Other 2,807 1.8
Total Merchandise Imports 119,654 78.7
Services
Transportation 10.876 7.1
Travel 11,043 7.2
Other 10,338 6.8
Total Service Imports 32,257 21.2
Communicate
6. (a) Australia's main imports are more sophisticated manufactures.
(b) The types of manufactures are the important factor. Australia relies on sophisticated manufactured
imports to have the most cutting edge technology in business, industry and for tourism services
(computer technology and planes). These imports are largely business inputs, not consumer goods,
and therefore not a worry. Australian businesses use the technology to produce other sophisticated
manufactures and business services. Some of these are later exported (software, Qantas travel) to earn
foreign exchange.
Activity 4.5
Interpret
1. Manufactured imports relating to the motor vehicle: passenger motor vehicles, crude petroleum, motor
vehicles for transporting goods and motor vehicle parts.
2. The majority of the top ten merchandise imports are elaborately transformed manufactures (high
technology) and many are business inputs, rather than consumer items.
Calculate
4. The percentages of Australia's top ten merchandise imports that came from:
(a) primary products were 7.5 per cent.
(b) manufactured products were 92.5 per cent.
Create
6. (a) T (b) F (c) T (d) T.
Investigate
8. Australia needs to import these goods instead of producing them itself because other countries may have
a comparative advantage in their production. They may have cheaper resources, more skilled workers in
the specialised field or better infrastructure to produce these ETMs at the moment. Australia's
comparative advantage may be in how it uses these ETMs in its businesses to produce other goods and
services, some for export.
Predict
9. If Australia could no longer import the three largest merchandise items Australia's:
(a) economic growth could slow
(b) level of employment could fall
(c) standard of living could fall
(d) business profitability could fall.
Activity 4.6
Remember
1. 'Merchandise export markets' are countries or regions that purchase merchandise
from Australian businesses.
Understand
2. Japan was Australia's most important export market for 2001–02. Japan buys Australian primary
produce as business inputs for their manufactures.
Calculate
4. (A$'000)
5. (a) The percentage of total world merchandise exports sold to the top ten exports markets for:
(i) 1991–92 was 70.5 per cent
(ii) 2001–02 was 67.9 per cent.
(b) Australia's main export markets are also the major world export markets, based on these two figures.
6. (a) The percentage increase in the total value of merchandise export trade to the top ten export markets
from 1991–92 to 2001–02 was 47.1 per cent.
(b) Australia's merchandise exports to the top ten export markets have doubled in value over this period.
Interpret
7. While the main three markets retained their rank over the decade China has increased in importance,
while Singapore has fallen in rank between 1991–92 and 2001–02.
Participate
12. The rank order of Australia's principal merchandise export markets if the following events occurred:
(a) Australia signs a free trade agreement with the United States. The US may take first place.
(b) The Asian economies suffer a prolonged economic recession. It will alter because Australia will find
alternative markets as it did during the 1997 Asian Economic Crisis.
(c) Foreign relations between Indonesia and Australia deteriorate. Indonesia may fall from the
top 10 markets.
(d) The Chinese economy experiences high levels of sustained economic growth. China may
rise in rank.
(e) Australia is admitted as a member of ASEAN. The US, New Zealand and United Kingdom may fall
in relation to ASEAN nations as important markets.
13. If by 2030 China will be the world's economic superpower, Australia is likely to trade in goods and
services even more with China and enjoy related economic growth.
Activity 4.7
Understand
1. It is easier to see the importance of each region as an export market as a pie graph.
2. (a) The majority of Australia's merchandise exports markets are located in North Asia.
(b) The percentage of Australia's merchandise exports sold in the Asian region in 2001–02
was 57 per cent.
(c) The Middle East has been the fastest growing regional export market over the past decade.
(d) The percentage of Australia's merchandise exports sold to the Eastern European region has fallen
over the last decade.
(e) Aside from the Asian regional markets Eastern Europe was Australia's second largest merchandise
export market followed by North America.
Predict
3. Australia's merchandise exports are likely to grow in Asia, Eastern Europe, the Middle East and North
America in the next 20 years. Australia's goods and services are in demand from the fast developing
economies in these regions and the possible Free Trade Agreement with the United States could open
this tightly regulated market to Australian exports.
Activity 4.8
Remember
1. 'Merchandise import markets' are countries or regions that provide merchandise
for Australian businesses.
Calculate
2. The percentage of total world imports from the top five merchandise import markets is 51.1 per cent.
Interpret
3. Australia's most important merchandise import supplier is the United States. Australia buys so many
merchandise imports from this country because it produces much of the worlds leading technology
required for Australian businesses to compete in the global market.
6. Based on the above table Asia is Australia's principal import source by region.
Activity 4.9
Remember
1. The 'balance on merchandise trade' is the difference between the value of a country's merchandise
exports and imports.
2. A trade deficit occurs when the total value of export merchandise (goods) and services is less than the
total value of import merchandise and services. A trade surplus occurs when the total value of export
merchandise (goods) and services is greater than the total value of import merchandise and services.
Calculate
3. The 'Balance on merchandise trade'.
Interpret
4. (a) Japan was Australia's principal merchandise export market.
(b) United States was Australia's principal merchandise import supplier.
Predict
6. Australia's balance of trade is likely to improve with the United States if a free trade agreement (FTA)
between the two countries is agreed to as an FTA will open the restrictive US market to Australian
merchandise and services, particularly agricultural products.
Activity 4.10
Remember
1. Tourism exports earn foreign exchange when overseas visitors pay for hotels, tours and souvenirs in
Australia and tourism imports use Australian foreign exchange reserves when Australians travel overseas
and pay for hotels, tours and souvenirs.
2. Merchandise exports involve selling items overseas that can be seen and touched to earn foreign
exchange, while services exports involve selling activities done by people rather than production of
physical goods to earn foreign exchange, such as education and tourism.
3. Exports that earn foreign exchange in Australia include: tourism, education, travel and communication.
4. Motor vehicles are listed as both exports and imports because Australian companies export cars (the
Middle East is a large market), but some Australians choose to buy cars from overseas for reasons such as
performance, cost and prestige.
Calculate
5. Australia's broad merchandise export destinations are Asia 53.1%, Europe 12.4%, USA 9.7%
and other 24.8%.
6. The percentages of services exports to each major destination are Africa 1.4%, Americas 18.3%, Asia
45.7%, Europe 25.1% and Oceania 9.4%. These have some similarity to merchandise exports.
COMPOSITION OF TRADE
• Travel • Transportation
• Transportation • Travel
• Communication
Key Trends: Tourism top 2002 export earner, but IT and financial Key Trends: Costs to move goods and people to and from Australia
services are growing. remain the major expense
Australia's principal merchandise export markets Australia's principal merchandise import markets
• Japan -a surplus balance (they buy resources) • Role of WTO Doha round in opening markets to
• USA - a deficit balance (we buy ETMs) • agricultural products and services.
• China - a deficit balance (we buy STMs). •• Influence of free trade agreements
• Global influence of events (terrorism, SARS) on
services trade, particularly tourism.
Activity 4.12
Remember
1. (a) Merchandise exports are the selling of items overseas that can be seen and touched.
(b) Merchandise imports are the buying of items from overseas that can be seen and touched.
(c) 'Balance on merchandise trade' is the difference between the value of a country's merchandise
exports and imports.
Understand
2. The table measures Australia's main merchandise trade with Saudi Arabia.
3. The time series tracks movements in Australia's trade over periods of time.
5. These trade figures refer to Australia's merchandise trade with Saudi Arabia.
Calculate
7. In 1997–98 the:
(a) value of total merchandise exports from Australia to Saudi Arabia was A$544,673,000.
(b) value of total merchandise imports to Australia from Saudi Arabia A$648,132,000.
(c) balance on merchandise trade was A$–103,459,000.
(d) balance on merchandise trade is a deficit because it is a negative figure.
8. In 2001–02 the:
(a) value of total merchandise exports from Australia to Saudi Arabia was A$2,597,964,000.
(b) value of total merchandise imports to Australia from Saudi Arabia was A$1,025,483,000.
(c) balance on merchandise trade was A$1,572,481,000.
(d) balance on merchandise trade is surplus because the amount is positive.
11. (a) In 2001–02 the largest merchandise export item sold to Saudi Arabia was passenger motor vehicles
with a value of A$1,285,078,000. This represented an increase of 1615 per cent from 1997–98.
(b) In 2001–02 the largest merchandise import item supplied by Saudi Arabia was crude petroleum with
a value of A$438,756,000. This represented an increase of 24 per cent from 1997–98.
Analyse
12. While all trade has increased between Australia and Saudi Arabia from 1997–98 to 2001–02 the greatest
increase has been in exports of Australia's cars.
Activity 5.1
Calculate
1. Australia's percentage share of total world exports for (a) 1981 is 1.14% (b) 1991 is 1.19%
(c) 2001 is 1.02%.
Interpret
2. Australia's rank in world exports has been falling over the last 20 years.
3. (a) The economic implications of this fall for Australia is that our wealth is not growing as fast as the
world exports leaders, influencing business and employment growth.
(b) The non–economic implications of this fall for Australia is that our individual wealth and living
standards are not growing as fast as the world exports leaders
4. China has improved its ranking the most. This country's improvement could bring benefits to Australian
exporters by providing expanded markets to their goods and services.
Communicate
5. The possible effects to the Australian economy of a rise in Australia's share of world exports.
(a) Increased employment : rise in business profits and decrease in business closures.
(b) Higher standard of living: more consumer spending providing more business activity.
(c) Increased access to technology: more efficient and globally competitive business practices, rise in
business profits.
(d) Increased business investment: more efficient and globally competitive business practices, rise in
business profits.
(e) Increased average family incomes: more consumer spending providing more business activity and
employment.
(f) Increased expenditure in infrastructure and production facilities: more efficient and globally
competitive business practices, rise in business profits.
(g) Increased ability to purchase imports: more consumer choice and spending providing more business
activity in retail and distribution sectors.
(h) Higher economic growth: rise in business profits and decrease in business closures: rise in
employment levels and living standards.
Activity 5.3
Analyse
1. Australia is internationally competitive in the production of these products because of its comparative
advantage, particularly its factor conditions in natural resources and vast farming lands, infrastructure and
skilled labour as well as its companies' strategies and government policies.
2. Australia's two fastest growing merchandise exports have risen
(a) domestically because of a growing economy and government industry support
(b) internationally because of increased demand in the region and government involvement with
industries in opening new markets, such as the Middle East for cars.
3. Australia's merchandise export profile is slowly changing from a resource base to more elaborately
transformed manufactures (cars). Trade figures that also include services show an even greater change
with tourism services as the largest single export on 2002.
Investigate
4. Some of the major businesses that produce Australia's top ten merchandise exports: BHP Billiton, Shell
and GMH Holden.
5. Benefits flowing to these Australian subsidiaries include expanded profits, upgraded infrastructure and
technology, expanded employment levels.
Predict
6. If world demand for primary products collapses, the impact would be:
(a) reduced profits and business failures for Australian primary producers
(b) falling regional employment
(c) a confirmation of the government trade policy to attempt to minimise the restrictive policies of the
EU and USA through its work on the Cairns Group and WTO Doha round.
Communicate
EVIDENCE
1. Primary products account for approximately 60 per cent of total merchandise trade.
3. Beverages and tobacco only account for approximately 0.7 per cent of total merchandise imports.
4. Machinery and transport equipment account for approximately 45 per cent of total merchandise trade
5. Crude materials and mineral fuels account for approximately 19 per cent of total merchandise exports.
Analyse
2. Australia's merchandise exports are still largely primary products while its merchandise imports are largely
manufactures, partially used for business productivity. This table does not include services, the fastest
growing export and import sector.
3. (a) Possible changes would include more ETMs that attract higher prices and more agricultural products
(b) Free trade agreements and greater access to EU and US markets through the Doha round of the WTO
would bring about the desired changes.
(c) The success of the policies could be measured by the percentage increase in export earnings.
4. Australia needs to import primary products even when some primary products are our main exports
because we cannot produce the specific goods or produce them as cheaply or in the quality or quantity
required – the principle of comparative advantage.
Investigate
5. (a) There is little movement in the percentage share of both the top ten merchandise exports and imports.
The movement that is occurring is in the lower ranking items and in services, now shown in this table.
(b) Government policies can overcome these problems by encouraging industry growth through assistance,
opening markets through agreements, encouraging investment and expanding education in potential
growth areas.
Activity 5.5
Interpret
1. (b) Personal travel is Australia's largest service export.
2. The higher value of the total services in 2000 than other years shows the impact of the 2000 Sydney
Olympic Games.
3. (a) passenger transportation services have increased gradually over five years with a slight fall following the
Asian economic crisis in 1997.
(b) personal travel services have also increased gradually over five years with a slight fall following the Asian
economic crisis in 1997. The education travel component has seen steady annual increases.
4. The sudden fall in the value of 'Personal, cultural and recreational services' from 2000–01 to 2001–02
was related to the end of the 2000 Sydney Olympics and athletes, trainers and tourists returning home.
Similar swelling in certain sectors is expected from the Rugby World Cup in October 2003, which
attracts more travel and business activity than the Olympics.
Understand
5. Tourism services are an export as money spent in Australia by overseas tourists
is called foreign exchange.
6. (a) Personal tourism services would be hurt by a dramatic fall in inbound tourists.
(b) Financial services would increase with the expansion into the Asian market by a
major Australian bank.
7.
Construction services An Australian engineering company designs and supervises a dam construction in Asia.
Computer and information services An Australian company provides bio-recognition solutions to the US government.
Royalties and licence fees Overseas artists record work by Australian songwriters.
Personal, cultural and recreational services An Australian film studio is used to film a 'Hollywood' blockbuster
Communicate
8. The impact on the Australian economy of a 30 per cent increase in Australia's export of services over the
next five years could mean:
(a) jobs will be created in the knowledge economy: IT, bio-technology, finance, education,
engineering, design, etc.
(b) investment will be required in higher education, communications infrastructure
(c) decreased impact on the natural environment with less emphasis on extracting natural resources
(d) exceptional opportunities for Australian businesses as Australia has a strong skills base and innovative
businesses. Australia's small population and tax base for the size of the continent has required
Australians to be 'smarter' with less.