Explain the impact of globalisation on Australia, the role of major international organisations (WTO, IMF, World Bank), and evaluate the impact of Australia's free trade agreements

What this dot point is asking

QCAA wants you to define globalisation, identify the role of the WTO, IMF and World Bank, and evaluate the impact of Australia's free trade agreements with recent examples. Expect a 6 to 10 mark extended response in the EA.

The answer

Globalisation defined

Globalisation is the process of increasing integration of national economies through cross-border flows of:

• Goods and services (trade).
• Capital (FDI, portfolio investment, foreign exchange).
• Labour (migration).
• Technology (R&D, software, ideas).
• Information (internet, media).

Drivers since 1990:

1. Lower transport costs (containerisation, larger ships).
2. Lower communication costs (internet, mobile, fibre).
3. Trade liberalisation (GATT rounds, WTO, FTAs).
4. Financial deregulation (capital controls removed).

Impact on Australia

Globalisation has been broadly positive for Australia but with significant adjustment costs:

Benefits:

• Higher real incomes. Real per capita GDP doubled between 1988 and 2020.
• Lower consumer prices. Imported manufactures (electronics, clothing) are dramatically cheaper than 30 years ago.
• Export growth. Iron ore, coal, LNG and education services exports grew with East Asian demand.
• Migration gains. Skilled migration lifted the labour force and brought human capital.
• Capital flows. Funded the mining boom and infrastructure.

Costs:

• Industry restructuring. Manufacturing contracted; the last car plant closed in 2017.
• Regional adjustment. Some communities (Geelong, Adelaide, Wollongong) absorbed major job losses.
• Wage compression for low-skilled workers in tradable sectors.
• Vulnerability. Exposure to global cycles (2008 GFC, 2020 COVID-19, 2020-22 China trade dispute).

The World Trade Organisation

The WTO is the multilateral body administering world trade rules. Created in 1995 as the successor to GATT. 164 member economies.

Three pillars:

• Trade in goods (GATT 1947, updated).
• Trade in services (GATS).
• Intellectual property (TRIPS).

Functions:

• Negotiation rounds to lower trade barriers.
• Dispute settlement. Members can challenge alleged breaches.
• Trade policy review. Surveillance of member trade policies.

Successes. Average tariffs on manufactures fell from around 40 percent in 1947 to under 5 percent by 2020. Dispute Settlement Body ruled on more than 600 cases.

Challenges. The Doha Development Round (launched 2001) has effectively stalled. The Appellate Body has been paralysed since 2019. Members have shifted to bilateral and regional FTAs.

The International Monetary Fund

The IMF was established at the 1944 Bretton Woods conference. 190 member countries. Three core functions:

1. Surveillance. Article IV consultations with each member; the World Economic Outlook.
2. Lending. Short-term loans to countries facing balance of payments crises, conditional on policy reform.
3. Capacity development. Technical assistance.

Lent around USD 250 billion during COVID-19. Criticised for austerity conditions in some programs (Greece, Argentina).

The World Bank

The World Bank Group is the multilateral development finance institution. Five constituent organisations; IBRD and IDA are the largest. Funds long-term infrastructure, health, education and governance projects, around USD 100 billion per year.

Publishes the World Development Indicators, Doing Business (until 2021), and the World Development Report.

Australia's free trade agreements

Australia is party to 17 FTAs as of 2026:

Bilateral:

• ChAFTA (China, 2015). The largest bilateral by trade volume. Eliminated tariffs on most goods over 10 years. Strained 2020-22 by Chinese restrictions; restored 2023.
• JAEPA (Japan, 2015). Eliminated tariffs on most manufactured exports.
• KAFTA (South Korea, 2014). Similar to JAEPA.
• A-UKFTA (United Kingdom, 2023). Post-Brexit bilateral.
• AUSFTA (United States, 2005). Largely tariff-free; services and investment focused.
• A-IECTA (India, 2022). First major FTA with India.

Plurilateral:

• CPTPP (Trans-Pacific, 11 members, 2018).
• RCEP (Regional Comprehensive Economic Partnership, 15 members, 2022). Largest FTA by GDP, covers around 30 percent of world GDP.
• AANZFTA (ASEAN-Australia-NZ, 2010).

Evaluating the impact of FTAs on Australia

Positive impacts:

1. Lower tariffs on Australian exports. Beef tariffs into Japan fell from 38.5 percent to 8.5 percent under JAEPA. Australian wine into China grew from $4 million to over$1 billion between 2007 and 2019 under ChAFTA.

2. Investment-friendly rules. Lower foreign investment screening thresholds.

3. Services and digital trade. FTAs increasingly cover services, financial services and digital trade.

4. Risk diversification. Multiple FTAs reduce dependence on any one market.

Limits:

1. Trade diversion. FTAs preference members over non-members, which can lower world efficiency.

2. Rules of origin compliance. Complex paperwork erodes the savings for small exporters.

3. Limited gains for bulk commodities. Iron ore, coal and LNG already faced low or zero tariffs.

4. Geopolitical risk. Bilateral concentration with China created vulnerability when relations soured 2020-22.

Recent developments

China trade dispute (2020-22)

Chinese tariffs and informal restrictions hit Australian barley, beef, wine, lobster, cotton and coal worth around $20 billion per year. Most have been lifted since 2023.

A-IECTA (2022)

First major FTA with India. Phased tariff reductions on wool, sheep meat, barley.

A-UKFTA (2023)

Quota-free, tariff-free access for Australian beef, lamb and sugar to the UK by 2032.

EU FTA

Negotiations stalled in 2023 over agricultural access; remain a long-term objective.

Slowbalisation since 2008

Cross-border trade and capital flows have grown slower since 2008 ("slowbalisation"):

• World trade as share of GWP roughly flat since 2008.
• Cross-border capital flows below pre-GFC peaks.
• Rising protectionism (US-China trade war from 2018; EU Carbon Border Adjustment Mechanism 2026; Inflation Reduction Act subsidies 2022).
• Re-shoring and friend-shoring of supply chains.

For Australia, slowbalisation means slower export market growth and greater pressure to diversify trading partners.

Australia's exposure

Australia's exports are concentrated:

• China: 32 percent of merchandise exports.
• Japan: 13 percent.
• South Korea: 8 percent.
• ASEAN: 12 percent.
• Other: 35 percent.

Concentration in East Asian commodity demand (around 65 percent of exports) creates both opportunity (proximity to the world's fastest-growing region) and risk (geopolitical and economic disruption).

Common QCE traps

Confusing globalisation with free trade

Globalisation is broader, including capital, labour, technology and ideas.

Treating the WTO and World Bank as the same

Different functions: WTO administers trade rules; World Bank funds long-term development; IMF does short-term crisis lending and surveillance.

Overstating FTA benefits

Most gains are in agriculture and services, not bulk commodities.

Forgetting slowbalisation

The trade and capital flow environment has shifted since 2008. Markers reward responses that acknowledge this.