Trade policy

Executive Summary
The Trade policy also refers to commercial policy and international trade policy. Trade policy is
the set of rules and regulations which are intended to change the international trade flows and
particularly to restrict the reports. The trade policy defines the goals, regulations, standards, and
rules that relates and applicable to trade relations between the countries. The document discusses
about all the trade policies in Australia and United States. The introduction makes clear to
understand the topic. The topic is mainly focuses on Tariff of both the United States and
Australia. The features of tariff in Australia and US, applied MFN tariffs, structure of the tariff,
bound tariffs, and tariff concessions were clearly explains in this document. The aggregate
supply and aggregate demand are taken to explain in the document. The description consists of
all about the supply and demand of the products and resources with graphs and diagrams. The
trade and tariffs polices explains by comparing and contrasting the policies in both the countries
Australia and United States. By comparing all the policies of trades, it tells which is more
effective and exclusive among both the countries. The United States tariff maintains and follows
the strict rules and regulations while dealing with other countries. Relatively the policies of tariff
in US are increasing and improving year by year.

Table of Contents
Executive Summary.................................................................................................... 2
1.

Introduction.......................................................................................................... 3

2.

Trade Policy of Australia....................................................................................... 4

3.

Trade Policy of US................................................................................................. 6

4.

Aggregate demand and Aggregate supply...........................................................7

5.

Compare and contrast the trade policy of Australia and America......................11

6.

Conclusion.......................................................................................................... 12

References................................................................................................................ 14

1. Introduction
Trade policy plays an important role in international exports and imports of Goods and services.
A set of rules and regulations that are intended to change the international flow of trade flows
particularly to restrict the imports is known as trade policy. Goods, services, dispute settlements,
intellectual property and trade monitoring are topics of world trade organisation. In Australia
trade policy tariff is the main device, albeit is the negligible source of tariff revenue. The

introduction of HS2012 has decreased tariff rate 3.1% to 3% from 2012 to 2014 (Australian
Government Department of Foreign Affairs and Trade, n.d). In America trade, policy chemical
manufacturers are main exports in American trade market. The gross domestic product of US is
16.77 trillion USD per capita is 53,041.98 in 2013. Australia offers concessions to support the
local existing industry (Washington DC, 2016). The structure of customs tariff remains
unchanged but in 2014. Aggregate demand or domestic demand is the total demand for Goods
and services in the economy in given time. It specifies the amount of goods and services that will
be purchased at all possible price levels. Aggregate supply or final total supply is the total supply
of Goods and services in the national economy plan during a time period. It is the total amount of
goods and services that company are willing and able to sell at a given price in an economy.
Aggregate demands are used to increase the exports and decrease the imports of particular
country Goods. Each and every country tries to increase the exports and decrease imports.
Australian trade policy has restriction and prohibitions in import to protect human, plant and
animal life and environmental securities. The aims and objectives of present document are to
study the trade policy of Australia and America and compare both countries tariff rates, import
and export process, rate of tax, bindings, features and excise taxes.

2. Trade Policy of Australia

The Trade policy in Australia defines as, the collection of all rules and regulations which are
related to trade. Sometimes the safety makes issues in trade policy. In many group of nations and
regions people work together for creating mutual benefits in trade policies. The main purpose of
dealing with trade policy was to help the nations and international trade that should be run more
smoothly. Security also makes an issue in maintaining relation with foreign frequent trading
partners. The things like export taxes and import taxes inspection regulations, quotas, and tariffs
these all are a part of nations trade policy (McMahon & Wallace, 2016).
Tariffs
The Tariffs refers to paying the tax on a particular set of imports and exports. The applied MFN
tariffs in Australia remain relatively low. The rate of customs duty does not change in review

period. When nomenclature HS2012 was introduced, the MFN tariff rate was drop down slightly,
from 3.1% in 2010 to 3% in 2014. This is due to combining and splitting of tariff lines.
Features of Tariffs
Up to January 2012, the Australias tariff system was been based on HS2012
nomenclature.
The tariff applies at HS eight-digit level which consists of 6,185 lines
In previous HS2007 the custom tariff is consisted of more than 177 lines
Australia submits all the trade and tariff data regularly and continues to the World Trade
Organization data base
MFN comprises all the customs tariffs and the several preferential rates which are granted
under the plurilateral and bilateral agreements and also unilateral concession schemes
Structure
During the tariff review period, structure of custom tariff remains unchanged. In 2014, according
to 6,168 lines that are around 99.7%, the tariff lines are subjected to four rates those are zero,
4%, 5%, and 10%. Same as in 2010, it ensured high degree of the tariff transparency, nearly
48.3% is subjected to 5% rate and 10% remain at 3.7%.
Bound tariff
The concession is remained on the basis of harmonized commodity coding and description in
Australias tariff schedule. Australia is one of the two members that submit all the relevant files
within the agreed original deadline.
Tariff concessions
The Australia consists of number of tariff concessions for supporting the local industry.
Sometimes the complexities creates a lot of burdens on the business sectors with costs that
passes to customers, also they may result in the inappropriate usage of concessions (World Trade
Organization, 2015).

3. Trade Policy of US
The United States foreign trade comprises the international exports and imports, it is one of
worlds most significant markets in economic. The countries trade is among top three global

exports and imports. The trade policy of United States has widely varied through the various
American industrial and historical periods.
Tariffs

The United States published the tariff schedule as Harmonized Tariff schedule (HTSUS) and was
maintained by the United States International Trade Commission (USITC). Regularly the USITC
update the HTSUS to reflect the changes in tariff rates or some other provisions. A latest version
of HTSUS is issued in Jan 2014. HTSUS is concerned mainly with tariff provisions and contains
the legal provisions such as consulting a favor and rules of origin. The United States strengths
the system of multilateral trading by reducing the remaining trade barriers.
Nomenclature

There was no change in nomenclature of HTSUS legal text. The USITC has implemented the
relevant changes which are backdated to 2012 for providing duty-free treatment as it uses
infrared transmissions. The HTSUS follows WCOs nomenclature harmonized system. The
United States has different types of tariff rates such as; Non reciprocal preferences, Special rates
of duty FATAs, MFN rates of duty, and also the special programs like civil aircraft or
pharmaceuticals. The majority of tariffs are concentrated mainly in agriculture, fishes, foot
wares, fuels, and textile sectors. The United States also assesses the duties on the basis of f.o.b.
The current version of HTSUS contains over 10,000 and the 8 digit tariff lines that is only small
percent (1.9%) which is pertained to tariff rates quotas.
Bindings

In WTO, the tariff commitments result in 100% with statistical binding coverage. Whatever the 2
tariff lines penetrates to crude petroleum and remains unbound. The charges and other duties
were bounded at zero with seven lines, which are in higher levels.
Excise taxes

In United States the excise taxes were assessed at federal level on variety of goods and services.
Some of the excise taxes were allocated to trust the funds for all specific purposes and the other
funds are generally available for the expenditure (World Trade Organization, 2014).
Features of free trade policies

Generally the free trade policies promote the following features;

Unregulated market access

Unregulated market information access
Free trade encourages the trade agreements
The trade without service taxes and other trade barriers
The goods can be traded without taxes (Council Foreign Relations, 2015).

4. Aggregate demand and Aggregate supply

Aggregate demand is the amount of goods and services (net GDP) purchased at each possible
price level by the domestic customers, business, government and foreign buyers. Aggregate
supply is the level of domestic output generated by the country at the possible price level. The
aggregate demand curve is affected by many factors such as changes in consumer spending,
changes in investment spending, changes in government spending and changes in net export
spending.
The increase in exports or imports has a multiple effect on the countrys economy this can be
understand from aggregate demand and supply diagram if the exports increases demand curve
will shift from A to B shown in the below figure and at the same time GDP and price level
increases, suppose if the Australian products costs less expensive than US products then
Australian and US people will show interest to buy Australian products as a result Australia
exports will raise and imports will fall adding to aggregate demand.

International trade policies are made that provides equal income gains to all the nations through
efficient allocation of production across the world. However the policies made by the
international trade have major effect on the particular domestic industries and the employment,
the openness to international trade in the Australia has made the imports to increase by reducing
the barriers to other countries. Actually the main aim of trade is to transfer the goods and services
from one country to another country where the opportunity costs are lower which provides
benefits to both the countries because each country has capacity or specialized in one area means
they are producing more so they are more capable to supply for the demand that may not be
available in another countries and at the same time consumers can purchase the goods at the
lowest prices so it is understand that through efficient implementation of trade policies every
country will sustain economically. Australias trading system after the post Second World War
was one of the highest regulation involves policy tools such as tariffs, quotas, price controls and
production subsidies to protect the Australian producers from import competing firms from
international competition (Lippoldt, 2012).

Aggregate demand of Australia (Baumol & Blinder, 2009)

Through Australias recent expansion in mining activity has brought a large rise in Australia
terms of trade which is not happened in the past Australian history by driving increase in demand
for exports and decreasing import prices, so the Australian market seen sustained increase in
prices in minerals. In addition to this China Effect made the combined increase in demand for the
Australian exports and decrease in the cost of Australian imports which changed the structure of
prices of Australian producers and consumers resulting to price of exports increased nearly 20%
and the price of imports fell by 10%.
In United States while preparing the budget the federal analysis estimated the potential output of
the US for the purpose of federal budget analysis so while evaluating shown US potential output
is steadily increased from 1990 to 2007 but after 2007 its potential output is drastically reduced
which can be observed from the below shown graph (Baumol & Blinder, 2009).

Aggregate demand and supply of US (Krugman & Wells, 2012)

In the above graph orange line is the estimated US potential output by the Federal budget office
and blue line actual aggregate output generated by the US from 1990 to 2011. US observed a
huge short fall from 2007 due to the recession. It is observed that as the US potential output is
steadily rises then that country expects long run aggregate supply curve is shifted to right wards
this shift is may be due to the change in commodity prices, change in normal wages and the
changes in the productivity for the longer run growth and other factors such as increase in human
capital, physical capital and technology progress. During the long run aggregate supply the size
of the labor, productivity of the labor will also rise so the level of the GDP that the economy is
capable of producing also increases.
From the economist Blog it is observed that the higher unemployment that US is experiencing
causes severe shortfall of aggregate demand, the major cause for this unemployment is the
economy is producing below its capacity, so the federal reserve is continuously striving to
improve the aggregate demand by providing more employment opportunities to the people by
directly employing them by providing job oriented skills and undertaking in the public works
projects. Since the rise in aggregate demand will depend on the consumers potentiality of
spending but it is difficult as long as the unemployment remains high because during this period
households save heavily to rebuild their wealth so the saving by the house holds during this
recession period directly affects the countrys aggregate demand (Bartlett).

5. Compare and contrast the trade policy of Australia

and America
The Tariff represents the tax on particular import and exports Goods in international trade policy.
Features of Australia tariff are up to January 2012 is based on HS2012 categorization, it applies
for eight digit levels consist 6,185 lines. Previous HS2007 the customs tariff consist more than
177 lines. Australia regularly submits the trade and tariff data and continues the world trade
organisation. MFN comprises all the customs tariff and rate which are under the plurilateral and
bilateral agreements also unilateral schemes. Whereas America anticipated the changes in
HS2007 and HS2012 it enclosed by HS2007 and HS2012 to implement categorization changes.
Features of America trade policy are unregulated market access, information access, free trade
encouraged the trade agreements, trade without services taxes and other trade barriers and Goods
can be traded without taxes. Bindings of America trade policy in world trade organisation tariff
commitments result in 100% with statistical binding coverage. The higher level charges and
other duties were bounded to zero with seven lines. Excise taxes are assessed at the federal level
on a variety of Goods and services. Some are allocated to trust the funds for a specific purpose
and other are for the expenditure. Both countries are enclosed to HS2007 and HS2012 to
implement changes in trade policy(World Trade Organization, 2014).
Australian MFN tariff remains low and customs duty rate does not change during the review
period. When HS2012 categorization is established the MFN tariff rate of Australia slightly
decreased from 3.1% to 3% during the 2010 and 2014 due to a merge of tariff lines and splitting.
American MFN rates are quite different 37% tariff rates are for free duty, 7% tariff rates for
farming, textile and tobacco. Above 25% are for vegetables and footwear. The HTSUS follow
WCO's categorization synchronised system. The United States has different types of tariff rates
such as; Non-reciprocal preferences, Special rates of duty FATA's, MFN rates of duty, and also
the special programs like civil aircraft or pharmaceuticals. The majority of tariffs are
concentrated mainly in agriculture, fishes, foot wares, fuels, and textile sectors. The United
States also assesses the duties on the basis of f.o.b. The current version of HTSUS contains over
10,000 and the 8 digit tariff lines that are only small percent (1.9%) which is pertained to tariff
rates quotas. Both countries have their own tariff rates and MFN tariff. The structure of
Australian custom tariff remains unaffected during the tariff review period. But in 2014

according to 6168 lines the custom tariff is 99.7% and subjected to 0%, 4%, 5%, and 10% four
tariff rate. In 2010, it makes a certain high degree of tariff transparency nearly 48.3% and tariff
rates are 5%, 10% and remain at 3.7%. The structure of America tariff program according to
years 2004, 2007, 2009, 2012 and 2014 the total number of tariff lines are 10304, 10253, 10,253,
10511 and 10514 respectively. Duty-free tariff lines are 37.7, 36.5, 36.3, 37.0 and 36.8
respectively according to years and average tariff rates are 7.8, 7.6, 7.6, 7.5 and 7.6. both
countries have different duty-free tariff lines, tariff rate remains and review(Organisation, 2015)
In Australia import Goods have some and limitations to protect the health and life of human
being, animal and plant, the safety and security environment are considered. Whereas in America
there are three stages in import they are pre-entry, entry and post entry. Undergo following
activities Paperwork, screening, documentation, scanning, inspection and trade. Both countries
have better objectives in the import of Goods and service to protect human, animal and plant life
and the environment. Australia is an observer of WTO committee and works toward acceding of
Government Procurement (GPA). America trade customs and border protection (CBP) as part of
home security as the main role in trade and enforcement. Australia provides concession in tariff
to support the local industry, sometimes the complexities create a lot of burdens on the business
sectors with costs that pass to customers, and also they may result in the inappropriate usage of
concessions. America provides the concessions for MFN duty-free 37% tariff rates. The sources
of concession in tariffs are WTO secretariat, global trade commission, data web and authorities
provide information. Both countries offer the concession for some sources to improve the local
industry. Australia is one of the members of world trade organisation which submit the tariff files
and records to according to agreed deadline. America has the trusted trade policy offers
incentives to importers, reduces FDA target and decrease the number of overseas trade.

6. Conclusion
It is observed that international trade policies are made to promote equal opportunities for
economic growth to all the nations in the world these involves collection of rules and regulations
which are related to the trade such as excise duties, tariffs, quotas, subsidies and import and
export restrictions. In this report it is observed that Australia consists of number of tariffs that
supports the local industries and Unit states foreign trade comprises international imports and

exports it is one of the worlds most significant market in the economy. It is observed that
aggregate demand and aggregate supply the implicit of trade policy which are continuously
affected by the trade restrictions imposed on the country, it is observed that if the country
economy is performing below its economic standard it directly impacts on the aggregate demand
it is observed from US short fall of aggregate demand during the recession period at that time
people in the country unable to spend the money which adds to the GDP since they deserve more
savvy during the recession period so stabilize this situation Federal reserve of US brought many
changes.

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