Reference no: EM132993403

MAE 213 International Trade

Please read the following article by Peter Martin: "The Election Campaign's Other Big Lie: the Coalition Hasn't Delivered ‘Export Agreements". The paper can be found following the assignment's questions. 1

The article criticizes the Coalition government for claiming during the recent election campaign that the free trade agreements with Japan, Korea and China the Coalition government signed had created exports.

Question 1. In the article Peter Martin, the author, criticized the Coalition government by making the following important statement:

"In every case for which we have clear evidence, our trade agreements seem to have boosted imports more than exports"

From the UN Comtrade Database please use real data of Australia's bilateral trade with the following three countries: New Zealand, Thailand, and the US to evaluate if the critique made by Peter Martin above is justified by the data.

A few important notes:

(i) The article by Peter Martin mentions Japan, Korea and China. Yet, the free trade agreements with Japan, Korea and China became effective only recently, which prevents us from having the data for a few years following those agreements in order to evaluate the argument made by Peter Martin. That's why you are asked to evaluate the argument using data of Australia's trade with New Zealand, Thailand and the US.
(ii) Australia and New Zealand Closer Economic Relations Trade Agreement (ANZCERTA), under which all tariffs and quantitative import and export restrictions on trade in goods originating in Australia and New Zealand were removed, became effective on 1 July 1990. The Australia's free trade agreements with Thailand and the US became effective on 1st January 2005.

(iii) You are asked to get the data from UN Comtrade Database and not from any other source. It is the purpose of this exercise to ask students to learn how to collect data from UN Comtrade Database, the largest dataset of international trade at the country-sector- product levels.
(iv) In order to evaluate the statement above by Peter Martin please collect the data from UN Comtrade Database. Students need to take the following steps:
Step 1: use the following link to log into the UN Comtrade Database
Step 2: click on Legacy Annual under Legacy.
Step 3: select Express Selection under Data Query

Step 4: get the data by making the following selections:
• For Classification choose SITC1 for New Zealand and SITC 2 for Thailand and the US.
• For Commodity Codes/ Text type AG0 (i.e. you want to get the country-level aggregate export and import data and not disaggregate trade data at sector level). Note that it is AG0 (AG Number Zero) not AGO (AG Letter O).
• For Reporters Codes / Text use Lookup to select Australia (UN numeric country
code: 36).
• For Partners Codes/ Text use Lookup to select New Zealand (UN numeric country code: 554), Thailand (UN numeric country code: 764), and the USA (UN numeric country code: 842) .
• For Years please enter 1995, 1996...to 2015 for Thailand and the US and 1980,
1981...to 2000 for New Zealand.
• Select both Import and Export.
• Submit your selections.
• Download the data.

Notes: Please use Lookup to look for countries of your selection.
If for some reason, Lookup does not work, please use the following country codes: Australia (36), New Zealand (554), Thailand (764) and United States (842).

Please note that you are encouraged to use graphs and diagrams in your answer.

NOTE: Questions 2 to 3 below do not relate to the article by Peter Martin

Question 2.

Assume that the world consists of only two countries: Australia and Indonesia. Australia's demand curve for A4 copy paper and Australia's supply of A4 copy paper are

Q = 100-20P (Demand) Q = -20+20P (Supply)

Indonesia's demand curve for A4 copy paper and Indonesia's supply of A4 copy paper are:

Q = 80-20P (Demand) Q = 40+20P (Supply)

where Q and P denote quantity and the price in Australian dollars, respectively.

Assume now that Indonesia is currently provides a specific export subsidy of AU$ 0.5 to its domestic producers of A4 copy paper.

Please identify the trade patterns between Australia and Indonesia in presence of the export subsidy. Specifically, which country will be the exporter of A4 copy paper? What is the price of A4 copy paper in Indonesia and in Australia? What is the volume of their bilateral trade? What is the export subsidy payment? How much does the export subsidy help Indonesian producers to increase their exports of A4 copy paper to Australia? Please be elaborate in your answers.

Question 3

Assume that world consists of two countries: A and B.

Country A's demand curve for wheat and Country A's supply of wheat are: QD =200 - 40P

QS = 40 + 40P

Country B's demand curve for wheat and country B's supply of wheat are: QD = 160 - 40 P

QS = 80 + 40 P

Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade?

Country A imposes a specific tariff of 0.5 on wheat imports. Determine and graph the effects of the tariff on the following: (1) the price of wheat in each country; (2) the quantity of wheat supplied and demanded in each country; (3) the volume of trade.

Determine the effect of the tariff on the welfare of each of the following groups: (i) Country A's import-competing producers; (ii) Country A's consumers; (iii) country A's government.

Attachment:- International Trade.rar