Free Trade and Protection

Trade Agreements, Blocs and Organisations

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Christian Bien

Learning Objectives


What are Free Trade Agreements?

Free trade agreements are agreements between two or more countries that involve mutual reduction or elimination of barriers to trade between member countries. There are two types of free trade agreements: 

  1. Bilateral trade agreements: Between two countries 

  2. Multilateral trade agreements: Between three or more countries.

Bilateral Trade Agreements

Bilateral trade agreements are agreements between two countries. Australia has several bilateral trade agreements such as:

  • ChAFTA: China-Australia Free Trade Agreement

  • JAEPA: Japan-Australia Economic Partnership Agreement

  • KAFTA: Korea-Australia Free Trade Agreement

  • ANZCERTA: Australia-New Zealand Closer Economic Relations Trade Agreement

Multilateral Trade Agreements

Multilateral trade agreements are agreements between three or more countries. Australia has several multilateral trade agreements such as: 

AANZFTA - ASEAN-Australia and New Zealand Free Trade Agreement: ASEAN stands for the Association of South East Asian Nations and includes the nations of Indonesia, Malaysia, the Philippines, Singapore, Thailand, Burma and Laos. 

Transpacific Partnership (TPP): a free trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States and Vietnam. 

Australian and the European Union Free Trade Agreement: Still under negotiation, the free trade agreement promises reduction of barriers to trade between Australia and the 28 members of the European Union.

Trading Organisations

Several trade organisations exist to promote freer movement of goods and services between its members. Example trade organisations include: 

World Trade Organisation (WTO): The World Trade Organisation is a global organisation with 160 members that account for 97% trade, whose main role is the promotion and liberalisation of world trade by lowering trade barriers and discounting unfair trade practices amongst member countries. The WTO replaced the GATT (General Agreement on Tariff and Trade) in 1995. 

European Union (EU): Formed to promote economic and political union of the 27 European member states, the EU operates its own Central Bank, political system and currency. The EU was formed when the Maastricht Treaty came into force in 1993. 

African Union (AU): Formed in 2002, the purpose of the African Union is to promote economic and political union of the 55 member states. The AU is also in the process of establishing financial institutions including The African Central Bank, The African Investment Bank and the African Monetary Fund. 

Asia Pacific Economic Cooperation (APEC): Formed in 1989, this group is an inter-government forum that aims to promote free trade for the 21 member countries throughout the Asia-Pacific region. The notable member countries include Australia, China, Vietnam, Japan, Indonesia and South Korea.

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
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