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             Trade with Australia from the point of view of Sri Lanka – 2003

 Australian Economy

 During the three quarters from January to September of the year 2003, the Australian Economy evident a slow down when compared to the year 2002 particularly after the heated period in the previous years.  However, the economy continued to grow forward but with lesser percentage due to a number of external and domestic factors.  Internationally an economic down turn had been evident due to the September 11 attack and the War in Iraq.  The Australian involvement in the Iraqi invasions had mixed repercussions in the economy and at the end , the plus factors set off against the minus factors and the growth momentum was continued with a lesser speed.  However, towards the end of 2003, as a result of rising Australian dollar against other major currencies, the Australian exports started declining and the trade deficit reported a considerable increase.  Throughout the year, the rate of the rising dollar against the major currencies was about 39%, which was an unprecedented phenomenon in the history of the Australian dollar.

 In the farming and agriculture sector, due to bad weather, the crop failures and diminishing agriculture output effected the rural income and the economic growth of the Eastern States reduced as much as a full percentage point.  However, with the 1.4% of growth during the last quarter of 2003, the economic growth for 2003 reported as 4% and it is the fourth highest economic growth compared to the rest of the world.

 China, India and US which reported 9.9%, 8.4% and 4.3% economic growth respectively are ahead of Australia but being an already developed country, Australia 4% growth is a very high figure which is only behind US growth of 4.3% .

 Australian Trade Policy

 Australia trade policy is in many aspects blended with its foreign policy objectives.  Ironically, though there are two Ministers for Foreign Affairs and Trade, there is only one Institution at federal level to handle the matters related to foreign affairs and trade, which is known as the Department of Foreign Affairs and Trade.  The foreign policy objectives have been designed taking into consideration, the ground situation and the realities in the present global scenario.  To understand the fundamentals of policies, it is important to note that Australia is a large country with only 20 million people, which is inadequate in its defence purposes.  It is largely of a migrant origin country, which has accepted a national policy of multiculturalism.  It has identified itself as a “western country” located in the Asian Pacific region with close ties and affinities with North America and Europe and with history of active engagements through out Asia”. 

With the above background the “economic globalization” has substantially influenced its foreign trade policies.  Australia is managing economic globalization well.  It follows market oriented and outward looking economic policies.  While globalization has brought benefits to Australia, it is mindful of vulnerabilities to trans-national threats such as terrorism.

 Multilateral Trade Negotiations through WTO

 Negotiations in the World Trade Organization (WT0) remains Australia’s best hope for better market access for their goods and services in global market.  Australia is a firm believer and is hopeful of substantial benefits through Doha Development Agenda and subsequent Cancun discussion.

APEC

 Australia is committed to APEC principles and APEC being an unwritten arrangement supporting trade liberalization, is providing a forum to discuss matters for Australia with its major trading partners.

 Tariff

 Tariff is the main instrument in the Australia’s trade policy measures.  Average tariff, is around 4.3% and out of all the tariff lines 92% of the Tariff lines are bound.  This gives a large degree of predictability.

 Average tariff on agricultural products is around 1.2% and industrial product is 4.7%.  Out of all the tariff lines 80% is within the range of 0% - 5% and tariff on motor vehicles, textiles, clothing and footwear and tobacco and alcohol are 2 to 3 times higher than the tariff on industrial products.

 Standards and Quarantine Requirements

 Though the bound tariff is in the lower region, Australia’s standards quarantine and technical requirements on agricultural, livestock and food products is a discouraging factor to its trading partners.  The argument for stringent quarantine requirements is that the agricultural product sector is one of the strategically important sectors of the economy and there is no any other incentive to the sector apart from some drought relief measures from time to time.  Agricultural sector is one of the largest export earners of Australia.

 While maintaining its commitment to the multilateral approach towards the international trade policy environment, Australia is embarking on number of free trade and preferential trade agreements with its major trading partners.  During the year 2003, Australian authorities have concluded most important milestone of the Australian trade policy, which is the Free Trade Agreement with USA.  In addition to the US – Australian Trade Agreement, they have signed a FTA with Singapore.  Their trade agreements with Thailand was already concluded and trade agreements with Japan, China are in progress and most of the negotiations were completed and the authorities are hopeful to complete those in 2004.

 Australian Interest in South Asian Market

 Australian interest in South Asian Market is mainly on the Indian market and particularly towards the growth of IT Industry.  India has created an interest in Australian authorities and business as a resource base for cheaper technology and manpower for the new knowledge base industries.

 The fastest growth in the Indian economy at the rate of 8.4% created an unprecedented trade and economic opportunities in India and a number of Australian companies have established their presence in India. India’s large English speaking middle class population, legal system and property ownership rights may have given an edge compared to their competitors such as China.  It is expected that the spill over effect will bring benefits to Sri Lanka as well.

 Sri Lanka – Australia Trade

        IMPORTS & EXPORTS – MAJOR ITEMS

Table 1 - Imports

Table 2 - Exports

The above statistics clearly shows a change of the trend in the overall trade between the two countries. It appears that in 2003, Sri Lanka`s imports from Australia has declined while our exports has gone up compared to the previous years. The rising Australian Dollar would have been the major reason for the declining of imports. As mentioned earlier the appreciation of   dollar was 39% in 2003 and Australian exporters may have lost a portion of their market in Sri Lanka to their competitors due to high prices of Australian products.  On the other hand, the strong dollar has given Australia a higher purchasing power and end result was increasing imports from her trading partners.

 Tea being the number one item exporting from Sri Lanka, is enjoying around 16.5% of the Australian tea market out of which Dilma is the majority market shareholder who exports tea bags and leaf tea from Sri Lanka.

 Second most interest from trade was for coconut coir products, which includes coco peat, brushes and other coir related products.  Brushes and brooms, doormats were in high demand and the market share is on the increase. 

 Third most important item of Sri Lanka’s export list is floor tiles, wall tiles and other related items followed by garments.

This page was last updated on 10/25/07.