In Table 1.1, utilizing informations from the DFAT ‘s ‘Composition of Trade Australia 2008-2009, ‘ entire bilateral trade between Germany and Australia had a value of $ AUD13.292 billion[ 6 ]. The trade balance, as such, was in Germany ‘s favor, with Australia entering a negative balance of ware trade of – $ AUD8.921 billion[ 7 ]. Australia ‘s exports to Germany in 2008-09 totalled $ AUD2.185 billion[ 8 ]and they were preponderantly exports of natural non-renewable resources and mining products/by-products ( coal, Ag and Pt, gold coin and legal stamp coin, and cherished metals & A ; concentrates excepting gold ) .
These four SITC-3 trade good groupings accounted for a significant proportion of Australia ‘s exports to Germany within the period. In fact, in figure 1.2, these four resource and excavation trade good groupings, accounted for a astonishing 45 % ( or $ AUD986.93million ) of Australia ‘s entire exports of $ AUD2.185 billion to Germany. Subsequently, in figure 1.3, these groupings besides accounted for 68 % ( $ AUD986.93million ) of Australia ‘s top 10 exports to Germany ( $ AUD1.449 billion ) . Australia ‘s most important export to Germany is coal, and coal ‘s portion of entire Australian exports is 24 % or $ AUD523.
Australia ‘s imports from Germany on the other manus are chiefly made up of industries. Harmonizing to the WTO information from March 2010, Australia ‘s imports are to a great extent dominated by industries. Manufactured goods account for 71.5 %[ 9 ]of all Australian imports from the remainder of the universe. An analysis of figure 1.1 besides seems to set up a tendency of fabricating imports from Germany to Australia. The top 10 Australian imports from Germany are ; non surprisingly, all industries. In figure 1.4, These ten SITC-3 trade good groupings ( Passenger motor vehicles, Medicines including veterinary, Civil technology equipment & A ; parts, Revolving electric works & A ; parts, Measuring & A ; analyzing instruments, Specialised machinery & A ; parts, Goods vehicles, Mechanical managing equipment & A ; parts, Pumps excepting liquid pumps & A ; parts and Vehicle parts & A ; accoutrements ) account for 44 % ( $ AUD4.921billion of $ AUD11.106billion ) of Australia ‘s entire imports from Germany. If one were to analyze all 50 or so trade good groupings, one would most likely expect to happen that the portion of fabricating imports from Germany is near to the WTO figure mentioned above. Australia ‘s most important fabrication import from Germany was that of rider motor vehicles, which accounted for 16 % ( $ AUD1.752billion of $ AUD11.106billion ) of the value of Australia ‘s entire imports from Germany.
Is the Pattern of Trade Consistent with H-O?
First, we need to analyze the comparative resources, labour force, physical capital, engineering and labor and capital strength between both the Australia and German economic systems.
Australia is a state busying an full continent, with a coastline of 25 760 kilometer[ 10 ]. Its land country is about 7 741 220 square kilometer[ 11 ], and has a varied terrain and clime. This varied clime and terrain has necessarily left Australia with an copiousness of natural, mineral and agricultural resources. These huge natural resources include bauxite, coal, Fe ore, Cu, Sn, gold, Ag, U, Ni, tungsten, mineral littorals, lead, Zn and diamonds[ 12 ]. Australia is the largest net exporter of coal, accounting for 29 % of planetary coal exports[ 13 ]. The state ‘s oil militias totaled 1.5 billion barrels[ 14 ]in 2008, while natural gas militias ( another important resource export – peculiarly in recent times driven by the growing in the Chinese and Indian economic systems ) totaled 849.5 billion three-dimensional meters in 2009[ 15 ]. In direct comparing, Germany by land country, sums 357 022[ 16 ]square kilometer, and lies approximately in the Centre of Europe. Its land country is comprised of Lowlandss, highlands and cragged countries and woods. Germany ‘s natural resources include coal, natural gas, Fe ore, Cu, Ni, U, building stuffs, lumber and cultivable land[ 17 ]. Yet the two most economically important natural resources of the state are lignite and potash salt[ 18 ].
As the H-O theoretical account predicted the difference in natural resource gift, basically explains why Australia has a comparative and absolute advantage in the primary, excavation and mineral sectors. An absolute and comparative advantage in favor of Australia can be obtained from analyzing proven natural gas and oil militias for both states. Germany ‘s proved oil militias total 3.35 barrels per capita, while in Australia they total 70.5 barrels per capita. Germany and Australia ‘s natural gas militias per capita sum to 2132.89 three-dimensional meters and 39 952.70 three-dimensional meters severally.
Australia ‘s largest export to Germany, coal, high spots this comparative and absolute advantage. As mentioned before 29 % of planetary coal exports come from Australia, and hence it comes as no surprise that coal comprises 24 % of Australia ‘s entire exports to Germany. Since Germany is comparatively resource hapless[ 19 ], the state ‘s strong demand for the four Australian natural resource and mineral trade good groupings ( entirely stand foring 45 % of the entire Australian exports to Germany ) conforms to the H-O theoretical account anticipation that a state will import its scarce resources.
Both the German and Australian economic systems are modern market economic systems. In 2009, the Germany economic system was the fifth largest in PPP para footings with a GDP of $ USD2.81trillion[ 20 ]while Australia was the 18th largest with a GDP of $ USD851.1 billion[ 21 ]. Both states have an educated work force. Literacy rates in both states were estimated at 99 %[ 22 ]in 2003. The labour force in Germany in 2009 was estimated at 43.5[ 23 ]million workers, while in Australia it was estimated at 11.45[ 24 ]million workers. Both states have big service sectors accounting for greater than 65 %[ 25 ]of GDP and similar economic sector composings of industry and agribusiness. The Australian labor force employed in agribusiness, industry and services is 3.6 % , 21.2 % and 75 %[ 26 ]severally. Australian portion of GDP by sector in 2009 was as follows ; agriculture 3.8 % , industry 24.9 % and services 71.3 %[ 27 ].
The German labor force employed in agribusiness, industry and services is 2.4 % , 29.7 % and 67.8 %[ 28 ]severally. Respective German portion of GDP by sector in 2009 was as follows ; agriculture 0.9 % , industry 27.1 % and services 72 % . On closer analysis, it can be observed that the Australian agribusiness and industry sectors are more so capital intensive, while its services sector is more so labour intensifier in production. The German economic system is comparatively more labour intensifier in the agribusiness and industry sectors, while its services sector is more so capital intensive than labour intensive in production. Both states have high GDP per capita ( in PPP ) footings. Australian GDP per capita in 2009 was estimated at $ USD40 000[ 29 ], while Germany ‘s GDP per capita was estimated at $ USD 34 100[ 30 ]bespeaking high ratios of capital per worker and life criterions in both states. Investing outgo in 2009 in Australia constituted 28.5 %[ 31 ]of GDP in 2009, while in Germany it constituted 17.9 %[ 32 ]of GDP over the same period.
The Germany economic system as such has been markedly more affected by the GFC than Australia, but its investing and R & A ; D outgo has long given it a comparative advantage compared to Australia in sectors such as R & A ; D, engineering and technological merchandises, machinery, cars and chemicals. Germany besides has an absolute advantage in industries and industrial production and a figure of comparative advantages in certain fabrication sectors ; such as the rider motor vehicles sector. Hence, it can be observed from the form of trade that this historical comparative advantage continues today, as all of Australia ‘s top 10 imports from Germany constituted industries. The H-O theoretical account anticipations can be observed besides in Australia ‘s imports from Germany. Since Germany has comparative advantages in the fabrication sector, Australia imports many of these high value manufactures – yet Australia exports to Germany its minerals and resources in which it has an copiousness of but are frequently of lower trade value, taking to a continued skewed trade balance in favor of the German economic system. The state ‘s technological advantage can be exhibited by the figure of internet users per capita. In 2008, 0.75 people per capita were internet users in Germany, while in Australia this figure stood at 0.71 people per capita.
Trade between Australia and Germany reflects non merely the differences in natural resources between the two states, but degrees of engineering, the varying size and strength of sector sizes and besides labour and physical capital differences.
As evidenced from the information, and construction of the Australian economic system, Australian bilateral trade with Germany can be explained by its abundant natural and mineral resource gift. This copiousness of natural and mineral resources gives Australia an absolute and comparative advantage in many resource based industries in comparing to Germany ‘s natural and mineral resource scarceness. Australian imports of German goods can be explained due to Germany ‘s absolute and comparative advantages in the size and range of fabrication, peculiarly in SME industries, and its tradition of exporting high value technological and R & A ; D merchandises.
In decision, German and Australian bilateral trade exhibits the H-O theoretical account anticipations that a state will prosecute in trade and export their abundant and inexpensive factor gifts, while importing those goods that require high chance costs to bring forth and which are finally scarce. Below: Table 1.1 Australia ‘s chief Imports and Exports with Germany in 2008-09[ 33 ]
Exports ( $ A million )
Imports ( $ A million )
Vehicle parts & A ; accoutrements
Cherished metal ores & A ; conc ( ecl gold )
Pumps ( excl liquid pumps ) & A ; parts
Silver & A ; Pt
Mechanical managing equip & A ; parts
Measuring & A ; analyzing instruments
Specialised machinery & A ; parts
Medical instruments ( incl veterinarian )
Measuring & A ; analyzing instruments
Electrical circuits equipment
Revolving electric works & A ; parts
Non-ferrous waste & A ; bit
Civil technology equipment & A ; parts
Gold coin & A ; legal stamp coin
Medicines ( incl veterinarian )
Passenger motor vehicles
Entire for top 10 exports
Entire for top 10 imports
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