What is global trade?
In this chapter:
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Global trade is the exchange of goods between different countries.
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Through trade, countries are able to obtain goods they need from other countries. Countries can also earn money by selling goods or services.
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Originally, trade involved swapping items. This was known as bartering.
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The idea of using money was developed around 2500 years ago.
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Originally, most of Australia's imports came from Britain. Today, Australia imports goods from all over the world.
Introduction
Trade is the exchange of goods or services of value between groups or individuals. Global trade is the exchange of goods or services between different countries.
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Some countries have more supplies and resources than they need, others do not have enough. Through trade, countries are able to buy the goods and services they need from other countries (imports). Countries can also earn money by selling goods to countries (exports).
Australia produces more goods, such as meat, grain, wool, coal, gold and wine, than it needs. The goods that are not needed here are sold to other countries. Other countries produce more goods than they need, and sell things such as machinery, fuel, clothing and motor vehicles to Australia. This is global trade.
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The history of trading
In the past, tribes swapped one item for another. This was known as bartering and did not involve any money. Australian Aboriginal tribes used to trade with tribes from different areas.
Around 2500 years ago, some civilisations developed the idea of currency (money). Initially, money was any object that people agreed had a specific value, such as a precious stone or a shell.
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A certain number of shells could be exchanged for items. The number of shells each item cost was agreed upon by both the seller and the buyer.
In some European countries, metals such as gold were used as currency. These metals were sometimes formed into coins, and later on, paper notes were used to represent different values of money.
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The early Australian settlers used barter (sugar, tobacco, rum, wool) and money for trade within the colony. Today most goods are bought with money. Trade between countries is known as international trade.
International trade
International trade is the exchange of goods and services between different countries. In most countries, it represents a significant part of the gross domestic product (GDP) of a country. The GDP of a country is the market value of all final goods and services produced within a country in a given period of time.
Sometimes trade sanctions (penalties) are imposed against a country. Sanctions are imposed for reasons such as human rights violations. If a country has sanctions imposed against it, that means that it is restricted in the type and amount of goods it can trade with other countries.
An embargo is a blockade of all trade by one country on another. The United States, for example, has had an embargo against Cuba for about 40 years.
International trade is usually regulated by governments in the form of quotas and restrictions. This is to make sure that local producers are able to sell their products. If bananas from Jamaica, for example, are much cheaper than bananas from Queensland, the government can impose a restriction on how many bananas Jamaica can sell to Australia so that Queensland banana growers are able to earn a living.
Another way that governments can protect local producers is by placing tariffs on imports - that is they will charge the Jamaican banana growers a fee for trading with Australia. All of these are called trade barriers. If a government removes all trade barriers, a condition of free trade exists.
What are some of the benefits of international trade?
Trading benefits Australia's economy and community in several ways. Firstly, workers are needed to make the goods that are exported; this means more jobs. Exporting goods to countries overseas creates opportunities for Australians overseas. Exporting Australian-made goods promotes international competition and this, in turn, encourages businesses to grow stronger by becoming more innovative (using new ideas) and using new technology.
The most important benefit of international trade is that exports add to Australia's income sources. The more countries that Australia has to sell exports to, the more protected Australia is at times when the global economy is not very strong.
Australia's first exports
During the early years of settlement in Australia, most goods came from Britain. Everything that was produced in Australia, such as food, wood and timber, was needed by the people of the ever-expanding colony.
This left very little for trade. The only trade during this period was in the form of imports (goods coming into the country), mainly from Britain as well as Africa and Indonesia.
Eventually, Australia began to export goods such as seal skins, seal and whale oil and timber. These products were mainly sent to Britain, India and China.
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In 1794, Lieutenant John Macarthur and his wife Elizabeth began importing grain and sheep and started producing wool. They shipped their wool back to Britain. The Macarthur's success led to many others settlers deciding to produce and export wool.
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Trading today
Today Australia trades with many nations and global trade is a very important part of the economy. This means it brings a lot of money into the country, while at the same time allowing Australia to buy goods from overseas.
International trade allows Australia to produce many goods for export due to the availability of natural resources such as coal and the many skills of our people.
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