Evaluation Of International Trade Patter Of Italy & Nepal
Question
Task:
Detailed requirements of the assignment
You are a group of advisors to the working in the Department of Trade and Foreign Affairs in Australia. As advisors you are first, required to write a research on “Pattern of Trade”
- Choose Nepal and Italy. For each country, describe its pattern of trade over the last 30 years using relevant data
- Identify and analyse factors responsible for a changing trade pattern in the chosen countries
- In your opinion, discuss if your findings conform with what the trade theories predict
- Examine the effects of the pattern of international trade on Australia (Only applies if the countries do not include Australia. However, if the countries include Australia explain the effects of the pattern of trade on other countries)
Answer
Executive Summary
The report is based on the evaluation of international trade pattern of Italy and Nepal. It has been evaluated that the Europe agreement has been an essential reason being the changing trade pattern in the case of Italy. At the same time General Agreement on Trade in Services was signed by Italy has been a profound reason for the change in the trade pattern in the country. Nepal has been a land lock country and trade has been one of the essential sources of occupation for the countrymen. The woollen products, as well as Nepal papers, were the major products that were exported from Nepal. This has been evidence that the trade has not been much profitable for the country in the last 30 years. The influencing factors such as trade agreements, tariff strategies and mode of transportation are evaluated for the Trade pattern of Italy. On the other hand, geographical location, difference between Export and Import as well as lack of trade diversifications is identified as the factors influencing trade pattern in Italy. Theories relevant to trade pattern of Italy and Nepal are evaluated with the effects to Australian trade.
Introduction
The economy at the global level has been increasing continuously after the occurrence of the Second World War. The growth has been due to the change in the pattern of trade. This is also effective in highlighting the global economic structure. The regional trading blocs are showcasing their efficient trading attributes and have been dealing with the global power for the export and import of the goods. In the last 30 years, the global trading pattern has undergone huge changes. The small and less powerful countries are trading with the global leader like the USA and UK in efficient manners. The free trade deals as well as setting reasonable tariffs have been an essential reason for the development of trade in countries like Nepal and Italy. The concern report shed light on the trade pattern of Nepal and Italy over 30 years of time along with the factors responsible for the change on the trading patterns. The reason for change in trade patterns are also compared to that of the trade theories, and thus lights are shed on the effects of the trading pattern on Australia in a vivid manner.
Body
Trade over the last 30 years
Italy
The Europe agreement has been an essential reason being the changing trade pattern in the case of Italy. The agreement of trade has been formed between France, Germany and Italy. This has constrained trade relationship of Italy with other nations. At the same time, till the year 2017, the country imported products mainly from Germany, China and France. This accounted to around 33% if the countries total import. The export of the products from Italy also targeted 3 major markets including Germany, US and France. This has been accounting to the countries around 35% of total exported materials (Tradingeconomics.com, 2020). In the year 1995, a General Agreement on Trade in Services was signed by Italy has been a profound reason for the change in the trade pattern of the country. The refined petroleum with value 25040 million USD has been the most exported material followed by pharmaceuticals.
Figure 1: Trade patter in Italy
(Source: Oec.world, 2020)
The fluctuation in the trade patters has been identified over the last three decades in Italy. The county has been able to develop strong trade bond with the few countries and has been executing trade practices with them with development of the locality (Oec.world, 2020). The year 2000 has been most prosperous years for the country the export of the refined petroleum has been in demand at the global level (Oec.world, 2020). Moreover, the drop in trade has been evaluated in the year 2010. It has been identified that the trade relationship and commitment deals made by the country with different countries like Germany, France as well as China has been the reason for the fluctuation of the trade patter in an effective manner.
Figure 2: Trade data of Italy
(Source: Tradingeconomics.com, 2020)
The demand for the manufactured product is huge in the global markets. The efficient quality of the goods manufactured in Italy is considered to be effective measures in the increment of the rate of trade within the country. The county has been able to show a positive growth pattern with the export of the products like consumers good and metal products (Worldbank.org, 2020). Italian chemical and electrical equipment has been the main reason for the growth of the trade relationship within the country.
Figure 3: Pattern of Trade in Italy
(Source: Tradingeconomics.com, 2020)
The poor perception of global trade has been the reason for poor trade strategies within the country. The above graph is effective in the identification of the fact that the country in the last three decades has been dealing with trade decisions in a restricted manner. The exploration of global trade has been limited in the case of Italy (Tradingeconomics.com, 2020). The country has been facing a huge fluctuation of trade in recent times as well. The export of durable goods has a huge market in Germany and France. It is evaluated to be an essential reason for the development of the trade pattern in the country.
Nepal
Nepal has been a land lock country, and trade has been one of the essential sources of occupation for the countrymen. It is evaluated that until the year 1951, the sole trade pattern of Nepal has been India and Tibet. The decline of the Rana Region has been one of the influential factors to promote foreign trade in Nepal (Oec.world, 2020).
Figure 4: Growth in the foreign trade of Nepal
(Source: Worldbank.org, 2020)
The above table mentions that the country has been having more import than that of export. This is so because the country has fewer products that are applicable to exports. On the other hand, the demand for the imported product was growing tremendously with in the country.
Figure 5: Trade commodities in Nepal
(Source: Ceicdata.com, 2020)
The woollen products, as well as Nepal papers, were the major products that were exported from Nepal. The country has been exporting its products to countries like India, USA, Chain, UK and Germany. The exports of the classified by materials, categories rank in the first position in respect of the highest exported material from Nepal. This includes around 47% of the total exported material from the country (Worldbank.org, 2020). On the other hand, food and live animals are ranking in the second position.
Figure 6: Trade pattern in Nepal
(Source: Tradingeconomics.com, 2020)
The huge difference between the exports and import products is also identified from the above-presented chat. It is nasality identified that the total important amount is 141240.60 million NPR. On the other hand, the total highest export is 11337.80 million NPR (Tradingeconomics.com, 2020). This has been evidence that the trade has not been much profitable for the country in the last three decades, and they need to take up measures in competing with the advanced global trade measures.
Figure 7: Trend of trade of Nepal
(Source: Tradingeconomics.com, 2020)
Over times that trade has been growing in case of Nepal. Although the growth has not been profitable, the steady up-gradation of the trade relationship is evidence. It has been evaluated that the lands lock country from just having one main trader India and underwent a lot of transformation in their trade strategies (Tradingeconomics.com, 2020). The drop in the trade is identical in the year 2016, but the good tariff policies have been influential in developing the export and import approaches as adopted by the country.
Factors responsible for a changing trade pattern
The identification of the faction leading to the change in the trade pattern is considered to be essentials. This is evaluated that the countries can take up measures in the reduction the cons and elevating the pros of the trading patterns and thus ensure that the country is able to increase their GDP rate with the earning of their trading measures. Moreover, the responsible factors for the trade pattern measures differ from one country to the other.
Italy
The factors that are contributing to the change of trade pattern in Italy are listed below under different points:
Trade agreements
The agreements that are made by the county and their trading patterns from time to time have been the vital reason for the constant change in the trading pattern of the country. The membership of the World Trade Organization in the year 1995 has been a boost to the trade deals executed by the country. Moreover, the GATT agreement in the year 1950 has been efficient in developing new measures in trade (Lucarelli et al., 2018). The evaluation in the trade balance is also evaluated in an effective manner. At the same time, the Free Trade Agreement between Europe Union as well as the Republic of Korea was forced entered in the year 2015 has boosted current trade pattern of Italy. The Canada Comprehensive and Economic Trade Agreement have been efficient in developing a trade relationship with the country (Puccinelli, 2016). Partnership agreement with Japan, West Africa, and Vietnams well as Singapore has been helpful in the development of the trade-related measures of the country.
Tariff strategies
The adaptations of the correct tariff measures are considered to be helpful in the maintainers of the stabilities. The implication of the European Union’s Common Customs Tariff has been implicated by the country. The import duty rate in the case of Italy is ranging from 0 to 17%. The dependency of the import duty is associated with the item threat is imported by the country (Schütz and Palan, 2016). At the same time, the common duty products that are free in Italy include the laptop, video games, camera, as well as mobile phones. The import duty that is charged by Italy on the import of the manufacturing goods ranges from 5% to 8% (Puccinelli, 2016). It has been evaluated that the country of Italy has been able to flourish their trade relationship with the trading partners so that they are able to deal with the factors trade patterns.
Mode of transportation
The transpiration is considered to be essential barriers to the smooth execution of the trade. The country like Italy has been expanding with the help of sea transport with the initiation of the Sea highway project. It has been helpful in the development of the Trans European transport network. At the same time, the other transportation like road and rail is also used for the trade execution among the neighbouring countries in an effective manner (Madeira, 2016). 87 million tonnes of products are imported in Italy each year. At the same time, the railway to contributing to the transformation of 12436 million tonnes. The transportation strategies are the inflexion factor for the development of the trade pattern in an effective manner.
Nepal
The confined location of the country and slow-growing economy has been the main reason for the slow not efficient trade pattern in the country. The factors that are contributing to the change in the trade pattern are listed below:
Geographical location
Nepal being the land lock country is having a very poor prospect of a trade. It has been conducting trade with neighbours like India and Tibet. The issues have been elevated due to the poor economic development of Nepal. Nepal markets have been captured by imported products from India. The relationship of Trade between India and Nepal has been profound from time important (Murton and Lord, 2020). However, the country didn’t have many opportunities to execute their trade stagiest in other countries. The poor prospects of products that are having the ability to be exported to other nations are the main barriers to the smooth trade measures of the country (Narain and Varela, 2017). The county in recent times has been able to create a good trade relation with a country like China. The electronic products of China have been the reason for the per trade activities of the country.
The huge difference between Export and Import
The poor economic component is essential for a positive balance of rate as evaluated in the case of Nepal. The country has been having a huge difference between the importation value as well as the exportation values (He et al., 2018). Demand for foreign products is increasing in India, but the Nepali products are unable to create their distinct identity in the global trade scenario. This has been a major barrier in the elevating trade pattern of the country.
Lack of trade diversifications
The Nepal trade deficit has been effective during the year 2003 and 2010. The weak export performance, as well as the buoyant imports, is due to the lack of diversity among the Nepal exported material (McBennett et al, 2019). The papers and handlooms are the one major product that has been contributed to the extraction of global attraction. The country is unable to produce the products taught are having high demand in the global markets and thus are unable to develop a positive term of trade leading to the poor pattern of trade in case of Nepal.
Trade theories prediction with findings
The theory of trade has been efficient in understanding the trading scenario of different countries from time to time. It is evaluated that the theories are bases on the assumption. The relicenses to the real scenario is very common. There are numbers of theories of trade that are having a huge relevance to the trade pattern of the countries. Some of the close connectivity of the trade theories is identified that is having an identical concept to that of the trade patterns of Italy and Nepal.
Theories relevant to trade pattern of Italy
Linder’s theory of representation demand
The trade pattern is derived from the overlapping of demand. The production of the goods is mainly done for the domestic market and then the surplus the goods are exports in the global markets. The demand for the exported products in the international market is also considered being essential (Leonardi, 2017). In the case of the trade pattern of Italy, the demand for the manufactures product in markets like Germany and France are identical. The product, such as textile and metal products that are products in Italy is also able to develop a huge market demand elevating the trade pattern of the country.
New trade theory
The less lowered trade barriers are helpful in the development of trade relationship stimulating competition at the global scale. The trade pattern of Italy resembles the assumption of the identified theory. The adoption of the free trade agreement of Italy and its active membership as the members of the European Union has been helpful in stabilization trade pattern in the country (Lanzini et al., 2016). Italy has been effective in targeting different global stable countries so that the country is able to stimulate a global scale.
Theories relevant to trade pattern of Nepal
Theory of comparative benefits
The theory highlights that fact that the countries executing trades among themself needs to have the almost same economical condition. This is effective in ensuring that both countries are able to take active participation in the trade execution process (Hurlbut, 2019). The huge difference between the export and import rate is due to the economical differences among both countries. As identified in the case of Nepal, the country is not economically strong, and thus they are able to exports the same amount of product as they are importing. Deflect is generated due to the gap of exportation values and importation values.
Gravity Model Approach
The model is effective in evaluating the fact that the trade between the two countries is mainly based on the assize of the countries and the distances between them (Maciejewski, 2019). The theory is the most traditional theory and has been effective in the evaluation of factors in the trade strategies of Nepal. Nepal is a land lock country, and the country has been smaller in size. Thus the trade relationship of the country remained confined to just India and Tibet for a long duration. The poor trade growth has been relevant to that of the Gravity model approaches.
Effects of the pattern of trade on Australia
Effect on the trade of Australia due to the change in Italy trade pattern
The inclusion of the Common External Tariff is implicated on the county of Australia by Italy. This is adding on the prices of the products, and thus the Australian products are sold at higher market price in Italy. On the other hand, there are some goods that are not charged Tariff by the Italian government (Madeira, 2016). This includes the agricultural or health and safety programmers. The Australia companies associated with the export of wool, confidential items, leather and Beef are able to acquire a huge market in Italy. The trade relationship between both countries has been profound in elevating the profitability margin. The positive trade pastern is identified, and the company is able to deal with the situation in an effective manner. The prosperity to the Australian trade is identical due to the efficient cover of the Italian market by the Australian firms. The products exported from Italy are also having huge demands (Wu, 2019). The machinery is able to satisfy the demand of the Australian to a great extend. It is contributing to the development of both countries trade pattern in an effective manner.
Effect on the trade of Australia due to change in Nepal trade pattern
The effects of Nepal trade pattern to Austria a much consisted of nature. The potential growth in the hydropower, infrastructures, as well as tourism development, is identical. The exports puff food and wine is exported from Australia to Nepal (Paudel, 2019). The two ways merchandise is around A$32 million is identical. On the other hand, the exported value of Nepal to Australia is A$25 million valuations. Refined petroleum and vegetables are exported to Australia from Nepal. The importation of floor covering as well as clothing is done from Nepal as well (Paudel, 2019). However, as the country of Nepal is not much strong, and thus the effect of trade impacts of Australia is limited in natures. Both the dominating as well as economical position of the country like Nepal has been less dominating to the trade attributes of the country like Australia.
Conclusion
Thus, it can be stated that the trade pattern of a country is considered to be effective in reflecting economical and global position of the country. The association with the powerful nations is also helpful in promoting the trade pattern in positive manners. The factors such as the location of the country as well its connectivity to the trading partners are foremost. The other factors, such as demand for the exported products and exchange rate, are also considered to be identical. At the same time, the connectivity of the trade theories to that of the trading pattern of Italy and Nepal is helpful in the validating the assumption used in the selected theories. It is identified that the trade pattern is impacting Australian trade pattern directly and indirectly. The less impact of Nepal is identified as the country is unable to develop a strong trade relationship with Australia. On the other hand, the country of Italy being members of the European Union is able to develop a strong impact of Australian trading pattern due to huge dependency.
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