What is Trade Intensity?

Trade intensity measures an economy's integration with the world economy. A higher trade intensity means an economy is more susceptible to external shocks in the world economy. I.e. the higher the figure for trade intensity, the more it is dependent on trade. Trade intensity is derived from the above formula, it is the value of exports plus imports over total GDP.

Australia's Historical Trade Intensity

Australia's overall trade intensity has been on a positive trend since the 1960s, however, the rate of trade growth has slowed in recent years due to the ongoing COVID-19 pandemic. There are positive correlations between Australia's rate of economic growth and trade intensity.

Growth of Trade During the 1970s to 2000s

This period saw trade as % of GDP increase from under 25% to a peak of 44%, a growth of 76%. This increase in trade was due to radical trade reforms, with unilateral action to remove protections, especially in manufacturing industries such as textiles, clothing and footwear. A report by the treasury labelled Australia's Future Tax System, stated from 1990 to 2000 the following changes in tariffs: 

• Tariffs on personal motor vehicles fell by 62.5% from 40% to 15% 

• Tariffs on textiles, clothing and footwear fell by 61.5% from 39% to 15% 

• Tariffs on general imported products fell by 67% from 15% to 5%.