top of page

Free Trade and Protection

Positives of Trade Liberation

Topic Menu
Content Contributors
Christian Bien Portrait_edited.jpg

Christian Bien

Learning Objectives

tutorial.png

one.png
Positive #1: Trade Allows Consumption to be Greater than Production
Slide1.jpeg

The law of comparative advantage states that when countries compete in trade, all participants will be able to consume more resources. By specialisation, nations can expand their consumption possibilities.

two.png
Positive #2: Importing Goods and Services Lowers Inflation
Slide2.jpeg

Countries only import when the world price is lower than the domestic price. By importing, households have access to lower priced goods and services with no or minor changes in quality.

two.png
Positive #3: Importing Goods or Services Increases the Variety of Goods and Services Accessible by Households
Slide2.jpeg

There are limitations to what goods and services countries can produce. Through trade, households can access goods and services that cannot be produced in Australia or is too costly to produce.

two.png
Positive #4: Trade Increases Real Income and Living Standards
Slide2.jpeg

The fast period of world economic growth was during periods of high world trade growth. Australia's GDP rose substantially due to radically trade reforms equating to increases in real incomes. In addition, trade allows for a higher consumption of resources, increasing living standards.

two.png
Positive #5: Trade Increases Competition and Resource Efficiency
Slide2.jpeg

Trade forces domestic producers to be more efficient or change production. Trade forces inefficient resources to join expanding sectors of the economy. Although this creates structural change and unemployment in the short term, this is outweighed by gains in long-term output and employment.

two.png
Positive #6: Trade Creates More Higher Paying Job Opportunities
Slide2.jpeg

Trade creates more new and higher paying jobs. Trade has forced the structural change in Australia's economy from a manufacturing country to a resources and services based economy. Jobs in resources and services industries provide higher incomes in contrast to manufacturing.

two.png
Slide2.jpeg
two.png
Slide2.jpeg

Positive #1: Trade Allows Consumption to be Greater than Production


The law of comparative advantage states that when countries compete in trade, all participants will be able to consume more resources. By specialisation, nations can expand their consumption possibilities.


Think about all the products you can buy today, how many of them are produced overseas?

  • Toyota Car - Japan

  • IKEA Meatballs - Sweeden

  • Apple iPhone - China

  • Nike Shoes - Vietnam


Positive #2: Importing Goods and Services Lowers Inflation

Countries only import when the world price is lower than the domestic price. By importing, households have access to lower-priced goods and services with no or minor changes in quality.


A country's comparative advantage in production will ensure lower-cost goods and services for the world market.



Positive #3: Importing Goods or Services Increases the Variety of Goods and Services Accessible by Households

There are limitations to what goods and services countries can produce. Through trade, households can access goods and services that cannot be produced in Australia or is too costly to produce.


Positive #4: Trade Increases Real Income and Living Standards

The fast period of world economic growth was during periods of high world trade growth. Australia's GDP rose substantially due to radically trade reforms equating to increases in real incomes. In addition, trade allows for a higher consumption of resources, increasing living standards.


China's GDP Per Capita (1960 - Current)

Trade's role in increasing living standards can be seen evidently in China, where in 1978, China began a series of trade reforms to open the country to trade and commerce. Now China has one of the largest economies in the world.


Positive #5: Trade Increases Competition and Resource Efficiency

Trade forces domestic producers to be more efficient or change production. Trade forces inefficient resources to join expanding sectors of the economy. Although this creates structural change and unemployment in the short term, this is outweighed by gains in long-term output and employment.


Positive #6: Trade Creates More Higher Paying Job Opportunities

Trade creates more new and higher-paying jobs. Trade has forced the structural change in Australia's economy from a manufacturing country to resources and services-based economy. Jobs in resources and services industries provide higher incomes in contrast to manufacturing.


No greater example can be shown by mining, where trade stimulates global demand for commodities, resulting in high-paying mining jobs of over $100k per year.

Significance of Trade to the Australian Economy
Sources of Comparative Advantage
Calculating Comparative Advantage
The Principle of Comparative Advantage
Forms of Protectionism
Demonstrating Gains in Trade
Tariff Model
Subsidy Model
Positives of Trade Liberation
Negatives of Trade Liberation
Trade Agreements, Blocs and Organisations
bottom of page