Analyse the expected development of trade forms between Australia and the EU after the expansion with 10 states.

Executive Summary

The intent of this study is to analyze the expected development of trade forms between Australia and the EU after the expansion with 10 states ( Turkey, Croatia, the former Yugoslav Republic of Macedonia, Albania, Bosnia and Herzegovina, Serbia and Montenegro, Kosovo, Iceland ) as per the European Commission.

In a clip of economic uncertainness around the universe, it is highly hard to analysis the expected developments of trade forms, as trade is affected by assorted factors some of them are listed below: –

Global Financial Crisis ;

Currency Fluctuations ;

Global Warming and Climate Change ;

Government Policy i.e. Political, Economic, Legal etc. ;

Trade Barriers i.e. Duties and Non-Tariff Barriers, Subsides, Import Quotas, Voluntary Export Restraints, Local Content Requirements, Administrative Polices, Antidumping Policies etc. ;

Issues within the EU i.e. Sovereignty of Nations, Greece Debt Crisis and other issues with Spain, Italy and Portugal, the clip and complexness to go a EU member, Common Agricultural Policy ;

Bilateral, Multilateral and Regional Trade Agreements ;

Degree of Unemployment, GNP, GDP, GNI ; and

Trade Creation vs. Trade Diversion.

Australia ‘s bipartisan trade ( imports & A ; exports ) with these enlargements states is comparatively little compared with other trade spouses i.e. EU-27, USA, China, Japan etc. but by no agencies any less of import particularly in this clip of uncertainness.

Harmonizing to the WTO World Trade Report 2010 “ trade slowed from 6.4 per cent in 2007 to 2.1 % in 2008, but the 12.2 per cent contraction in 2009 was without case in point in recent history ” , this has affected every state some worse so others and disrupted trade forms across the universe.

From Australia perspective trade will be simplified when the 10 enlargement states become portion of the EU as we will merely hold one currency the Euro to cover with and non 8 different currencies as 2 already use the Euro despite non being a member province of the EU yet.

Trade has been independently affected by the Global Financial Crisis and the resulting recession, turbulency in the fiscal markets,

Table of Contentss

Topic page 1

Title page page 3

Background

“ Expand ”

Statement of the job ( s )

“ Expand ” Analyse the expected development of trade forms between Australia and the EU after the expansion with 10 states.

Boundary lines

We have the undermentioned restrictions on this study listed below: –

The study will merely look at trade between Australian and the 10 European enlargement states ( campaigner and potency ) as highlighted by the European Commission ( hypertext transfer protocol: //ec.europa.eu/enlargement/index_en.htm ) , which are Turkey, Croatia, the former Yugoslav Republic of Macedonia and Iceland ( Candidate Countries ) and Albania, Bosnia and Herzegovina ( considered two states ) , Serbia, Montenegro and Kosovo ( possible campaigner states ) but we acknowledge that Norway, Switzerland, Ukraine and Russia could besides be future enlargements states harmonizing to European Policy Centre Chief Executive Hans Martens in a presentation delivered at ESSAM 2010 ;

We will non be looking at the trade between the 10 enlargement states and the bing 27 EU member provinces ( i.e. Inter state trade between the EU, EEC, EFTA and Custom Union ) ; and

Merely secondary informations will be used in the study which will include but non limited to Websites, Industry Associations, Books, Journal Articles, New Paper Articles, etc.

Definitions and Acronyms

Acronym

EC = European Commission ;

EU = European Union ;

European Economic Community ;

EFTA = European Free Trade Association ;

DFAT = Australian Department of Foreign Affairs and Trade ;

WTO = World Trade Organization ;

IMF = International Monetary Fund ;

WB = World Bank ;

UN = United Nations ;

GNP = Gross National Product ;

GDP = Gross Domestic Product ;

Gross National Income ;

Introduction

The European Union ( EU ) is an economic and political brotherhood which presently consists of 27 member provinces which include Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom ( refer map below ) .

In this study we will merely be looking the campaigner and possible campaigner states to the EU that are listed by the European Commission ( hypertext transfer protocol: //ec.europa.eu/enlargement/index_en.htm ) which are listed below: –

Turkey ( candidate state ) ;

Croatia ( candidate state ) ;

Iceland ( Candidate Country ) .

Other Balkan mountainss

the former Yugoslav Republic of Macedonia ( candidate state ) ;

Albania ( possible campaigner state ) ;

Bosnia and Herzegovina ( possible campaigner state ) ;

Serbia ( possible campaigner state ) ;

Montenegro ( possible campaigner state ) ;

Kosovo ( possible campaigner state ) ;

( Beginning: – hypertext transfer protocol: //europa.eu/abc/maps/index_en.htm accessed Tuesday 03rd August 2010 at 12:24pm )

We will be looking at these 10 EU enlargement states in peculiar the following four in line to accession to the EU which are Turkey, Croatia, the former Yugoslav Republic of Macedonia and Iceland and trying to analyze the expected development of trade forms between them and Australia.

The European Union is complex with four chief establishments the European Commission, the Council of the European Union, the European Parliament and the Court of Justice non to advert the other stakeholders, makes trade a complicated issue, trade between states can be affected be many factors some of them are listed below: –

Global Financial Crisis ;

Currency Fluctuations ;

Global Warming and Climate Change ;

Government Policy i.e. Political, Economic, Legal etc. ;

Trade Barriers i.e. Duties and Non-Tariff Barriers, Subsides, Import Quotas, Voluntary Export Restraints, Local Content Requirements, Administrative Polices, Antidumping Policies etc. ;

Issues within the EU i.e. Sovereignty of Nations, Greece Debt Crisis and other issues with Spain, Italy and Portugal, the clip and complexness to go a EU member, Common Agricultural Policy ;

Bilateral, Multilateral and Regional Trade Agreements ;

Degree of Unemployment, GNP, GDP, GNI ; and

Trade Creation vs. Trade Diversion.

Australia ‘s chief trading spouses are the European Union dwelling of 27 states as a individual market, USA, China, Japan, China and Republic of Korea, our trade with these enlargement states are comparatively little but by no agencies any less of import.

Harmonizing to the International Monetary Fund ( IMF ) World Economic Outlook April 2010 and July 2010 ( hypertext transfer protocol: //www.imf.org/external/ ) the World Output in 2008 was 3.0 % it dropped to -0.6 % in 2009 as the GFC and the recession talk clasp which affected trade, the undertakings for universe end product for 2010 and 2011 are 4.5 % and 4.25 % severally.

Real GDP %

Description

Value ( 1000000s of US dollars ) 2009 GDP all other World Bank

Average 1992 – 2001

2008

2009

2010

2011

2015

World Output

58,113,309

3.2

3.0

-0.6

4.6

4.3

4.6

European Union 27

16,447,259 ( IMF 2009 )

2.3

0.9

-4.1

1.0

1.6

2.1

Euro Area

12,455,979

2.1

0.6

-4.1

1.0

1.5

1.7

Australia

924,843

3.8

2.4

1.3

3.0

3.5

3.2

Hrvatska

63,034

2.4

-5.8

0.2

2.5

3.0

Turkey

617,099

3.0

0.7

-4.7

5.2

3.4

4.0

FYROM

( Macedonia )

9,221

-0.8

4.8

-0.7

2.0

3.0

4.0

Albania

11,834

5.5

7.8

2.8

2.3

3.2

5.0

Bosnia and Herzegovina

17,122

5.4

-3.4

0.5

4.0

4.5

Srbija

42,594

5.5

-2.9

2.0

3.0

5.0

Crna gora

4,086

6.9

-7.0

-1.7

4.6

4.0

Iceland

12,133

3.0

1.0

-6.5

-3.0

2.3

3.4

Kosovo

5,352

5.4

4.0

4.8

6.3

5.3

USA

14,256,300

3.5

0.4

-2.4

3.3

2.9

2.4

China

4,909,280

10.3

9.6

9.1

10.5

9.6

9.5

Japan

5,067,526

0.9

-1.2

-5.2

2.4

1.8

1.7

Republic of Korea

832,512

6.0

2.3

0.2

5.7

5.0

4.0

India

1,296,085

5.7

7.3

5.7

9.4

8.4

8.1

( Beginning: – Own Calculations, IMF / WTO / DFAT / World Bank )

Harmonizing to the European Commission to go a member of the EU the 14 states listed supra must run into the Copenhagen European Council of June 1993 standard which is defined as follows: –

the stableness of establishments vouching democracy, the regulation of jurisprudence, human rights and regard for and protection of minorities ( political standard ) ;

the being of a working market economic system every bit good as the capacity to get by with competitory force per unit area and market forces within the EU ( economic standard ) ;

the ability to take on the duties of rank including attachment to the purposes of political, economic and pecuniary brotherhood ( standard refering acceptance of the Community acquis ) .

In kernel the above standard is based on Smith ‘s, Ricardo and Heckscher-Ohlin theories which can assist explicate the form of international trade that we observe in the universe economic system, as we need democracy and a free market economic system for trade which are outlined above.

In general states that adopt a more unfastened stance to international trade enjoy higher growing rates compared to states that close their economic systems to merchandise, this leads to higher income degrees and life criterions which in bends supports a higher degree of domestic ingestion and a more efficient use of resources that simulates economic growing and the creative activity of wealth.

In this subdivision we will look at trade between Australia and the single enlargement states the primary beginning of trade figures is DFAT and it is to summarize the chief trade in Goods, Services and Investment: –

Turkey ( candidate state )

Australia and Turkey have long standing relationship that dates back to 1915 and we have a good trading relationship and have several bilateral understandings in topographic point to spread out trade and investing between the two states, in peculiar the Agreement on Economic Co-operation 1988 and Investment Promotion and Protection Agreement June 2009.

Harmonizing to the World Development Indicator database, World Bank, 1 July 2010 Turkey is presently the 17th largest economic system in the universe in footings of its entire GDP, which is US $ 617,099,000,000 ( refer to postpone above ) .

Australia ‘s bipartisan trade ( Imports & A ; Exports ) with Turkey in 2008 was around A $ 1 billion dollars ( Exports A $ 655 million and Imports were A $ 404 million ) this was. In 2009 trade was reduced to around A $ 722 billion dollars in bipartisan trade ( Exports A $ 303 million and Imports were A $ 468 million ) this was due to the GFC.

Australia ‘s exports to Turkey consisted of Coal, Medicaments ( including veterinarian ) , Aluminium and Butter. Our imports from Turkey consisted of refined crude oil, fruit & A ; nuts, veggies prepared or preserved and lime, cement & A ; building stuffs.

In 2008 the degree of bipartisan investing between Australia and Turkey is comparatively little at a sum of A $ 272 million which consisted of Stocks, Australia has A $ 255 million invested in Turkey and Turkey has 17 million invested in Australia.

Croatia ( candidate state )

Australia and Croatia have a good trading relationship albeit comparatively little at A $ 56 million in bipartisan trade ( Export of A $ 15 million & As ; Import of A $ 41 million ) , in 2009 this consisted of Australian exports to Croatia of Coal and Medicaments ( including veterinarian ) and Australian imports from Croatia of electric power machinery & A ; parts, sauces & A ; nutrient readyings, meat prepared or preserved and electrical machinery & A ; parts.

In 2008-2009 trade was merely over A43 million ( Export of A $ 18 million & As ; Import A $ 25 million ) .

Australia ‘s trade in services with Croatia is negligible and Croatia ‘s investing in Australia is A $ 1 million which consisted of Stocks as of 2008.

Other Balkan mountainss

the former Yugoslav Republic of Macedonia [ FYROM ] ( candidate state )

Australia and Macedonia have good trade relationship dating back to 1994, in 2009 the bipartisan trade between the states was A $ 6,296,000 million which consisted of A $ 1,299,000 million in exports from Australia to Macedonia and A $ 4,997,000 million in imports from Macedonia to Australia.

Exports were made up of non-electrical machinery & A ; parts, medical instruments ( including veterinarian ) , pumps ( excepting liquid pumps ) & A ; parts and pharmaceutics merchandises ( excepting medicines ) .

Imports were made up of comestible merchandises & A ; readyings, vesture, veggies ( prepared or preserved ) and cereal readyings.

Australian trade in services and investing with the former Yugoslav Republic of Macedonia is negligible.

Albania ( possible campaigner state )

Australia and Albania have had good diplomatic, political, economic and trade dealingss since 1985, trade between the two states is little at A $ 1,597,000 million entire bipartisan trade ( Export A $ 1,325,000 million & As ; Import A $ 272,000 ) in 2009.

Exports to Albania consisted of fells & A ; teguments, natural ( excepting furskins ) , butter, oleo, perfumery & A ; cosmetics and imports consisted of vesture, crude vegetable affair, prepared or preserved veggies, industries of base metals.

Australian trade in services and investing with the Albania is negligible.

Bosnia and Herzegovina ( possible campaigner states )

Bilateral trade with Bosnia and Herzegovina is modest, with a entire bipartisan trade of about A $ 4.77 million in 2009. Australian exports in 2009 were A $ 2.24 million and consisted largely of meat, while imports of around A $ 2.53 million comprised chiefly furniture and footwear. Bosnia and Herzegovina ‘s chief export finishs and import beginnings in 2009 were Croatia, Serbia and Germany, accounting for 45.1 per cent and 36.7 per cent of exports and imports severally.

Bosnia and Herzegovina was accepted as a member of the Council of Europe in April 2002, a important accomplishment in footings of Bosnia and Herzegovina ‘s desire to be portion of European integrating.

In June 2008, Bosnia and Herzegovina signed a Stabilisation and Association Agreement ( SAA ) with the EU.

Bosnia and Herzegovina became a full member of the Central European Free Trade Agreement in September 2007. Bosnia and Herzegovina benefits from independent trade steps introduced by the EU in September 2000 which allow more than 95 per centum of all exports ( including agricultural merchandises ) to come in the EU responsibility and quota free.

Serbia ( possible campaigner state )

The relationship between Australia and the Republic of Serbia ( once a portion of the province brotherhood of Serbia and Montenegro ) is good. In 2009 the value of ware trade with Serbia was A $ 15,166 million this consisted of Exports to Serbia of A $ 6,539 million and Import from Serbia of A $ 8,627 million.

The exports consisted of nutrient processing machines and parts, civil technology equipment & A ; parts, Edible merchandises & A ; readyings and specialized machinery & A ; parts.

The imports were fruit prepared or preserved, leather, cereal readyings and veggies, prepared or preserved.

The IMF World Economic Outlook April & A ; July 2010 GDP, Inflation and Unemployment

The oncoming of the planetary fiscal crisis stalled farther market reform attempts, saw Serbia ‘s Western European export markets contract aggressively and threw the economic system into recession. After four back-to-back quarters of negative growing, Serbia ‘s GDP grew 0.6 percent year-on-year in existent footings in the first one-fourth of 2010. The IMF undertakings that Serbia ‘s economic system will turn by 1.5 % in 2010 as Western Europe recovers.

Montenegro ( possible campaigner state )

In 2008, the value of Australia ‘s ware exports to Montenegro was about AUD 6.1 million, dwelling chiefly of books, pictures, vehicles and trim parts for vehicles, and fabric merchandises. In the same period, the value of imports from Montenegro was about AUD 1.1 million, dwelling chiefly of furniture, books and pictures.

In recent old ages, the gait of economic reform has been slow and the rate of economic recovery has been gradual. Montenegro ‘s GDP growing in 2008 was estimated at 7.5 per cent. Growth to changing grades has occurred in all sectors of the economic system: industrial production, touristry, forestry, building and transit. Industrial growing has been low due to provide jobs in the energy sector.

Montenegro ‘s largest trading spouse is Serbia. The bulk of Montenegro ‘s exports consist of natural stuffs and semi-finished merchandises, including aluminum, steel, intoxicant drinks, baccy, and processed timbers, while the most of import imports were machinery and motor vehicles. Montenegro ‘s foreign trade shortage continues to be a job, as the volume of imports has been more than twice the volume of exports for several old ages in a row. In the first 10 months of 2008, the Montenegrin foreign trade shortage was 18 per centum higher than in the same period in 2007 and amounted a‚¬1.7 billion. This is expected to decline in the coming twelvemonth when the full impact of the planetary fiscal crisis is expected to be felt. Montenegro ‘s debt at the terminal of 2008 stood at a‚¬8.95 billion, or 26.8 per cent of GDP. Internal debt stood at a‚¬413.0 million or 12.4 per centum of the GDP, and foreign debt stood at a‚¬481.7 million or 14.4 per cent of the GDP. Montenegro uses the Euro as legal stamp, but is non portion of the Eurozone.

Kosovo ( possible campaigner state )

No current trade informations exists for trade between Kosovo and Australia from the Australian Department of Foreign Affairs and Trade as the bipartisan trade is negligible.

Iceland ( candidate state )

Iceland is a candidate state for EU accession an applied to fall in the EU on 16 July 2009, is a member of the European Free Trade Association ( EFTA ) and the European Economic Area, which entitles it to entree the EU internal market for trade.

Iceland has been badly affected by the Global Financial Crisis which resulted in the prostration of its banking system in 2008, the authorities took control of three large Icelandic commercial Bankss and need a US $ 2.1 billion deliverance bundle from the IMF, the GFC besides devalued their currency, which saw the beginning of a terrible economic recession. Judging by past experience of other appliers for accession this should reconstruct their concern assurance and brace the economic system which will be good for trade.

The IMF World Economic Outlook April & A ; July 2010 undertakings 500 World IMF prognosis in December 2008 that Iceland ‘s GDP could fall by 10 per cent in 2009. Iceland ‘s authorities expects rising prices to average 13.1 per cent in 2009 and unemployment to average 7.8 per cent for 2009 and near 11 per cent towards the terminal of the twelvemonth.

Australia ‘s bilateral economic and trade relationship with Iceland is good, the bipartisan trade ( Imports & A ; Exports ) totalled A $ 31 million in 2008 but reduced to A $ 13,329 million in 2009.

The major exports in 2008 to Iceland were under A $ 6 million and in 2009 were A $ 1,826 million this included alcoholic drinks, baby buggies, playthings, games & A ; featuring goods, electrical machinery & A ; parts and specialised machinery & A ; parts.

The major imports in 2008 from Iceland were A $ 25 million and in 2009 were A $ 11,503 million this included animate being oils & A ; fats, civil technology equipment and parts, mensurating & A ; analyzing instruments, orthopedic contraptions.

Decisions

Based on the findings of our analysis we have concluded that the effects of the current EU expansion are likely to be reasonably benign on Australia ‘s trade with the EU enlargement states and the EU as a whole, due to the comparatively little nature

Australia already trades with the EU enlargement states all be it on a little graduated table and has good trading relationships and bilateral understandings in topographic point with the EU-27, due to the current uncertainness in the universe economic system

We may lose out on trade

EU expansion and integrating will do the EU consumers richer, and this will lend to them purchasing more Australian goods & A ; services