Basically, this research paper is conducted and developed in order to understand the concepts, role and importance of economics to make effective and specific decision making. In addition, this research paper also focus on international trade business and provides significant opportunities to lean the importance of developing trade with other nation. In addition to this, it should also be noted down that, this research paper also provides discussion about the nature of trade in the area of international market. In the same way, it can be said that, this research paper is more valuable, significant, and effective for the readers, students, researchers in understanding the concepts in the area of international trade and business effectively. This paper evaluates China and India country nature of trade and relationship with Australia to measure the best appropriate country for the company to enter in international market. It is identified that India would moreappropriate to fulfill need of the company related to employ semi-skilled labor and highly labor intensive and less exchange risks, so India is better option for the investment for the Australian companies as compare to China.
Table of Contents
Executive Summary. 2
Context and Background Information: 4
Explanation of the Report Organization. 5
Nature of Trade and Status of Relationships of the Two Countries with Australia and Existing Free Trade Agreement 5
Exchange Rate between Australia and the Two Countries (China and India) 6
Context and Background Information: In today’s more challenging, globalized, competitive and fast growing business era, it is essential and important for the nations or countries to develop trade relationships with the other nations of the global world for the economic development. Due to this, different kinds of strategies, methods, and ways are used by the nations in order to develop trade agreements to the other nations. These trade agreements help the companies as well as nations in reducing certain costs associated with the trade or business. Moreover, it is also important to know that, trade agreements helps the economy of a nation in reducing a wide range of challenges such as unemployment, and helps in utilizing the available resources properly (Breidenbach & Nyíri, 2009). In this paper, a company is planning to move its factory to one of the two biggest international markets of the company in mid-2015, so it evaluates China and India for enter in the market. In this plan, the output of the production will then be sold in that country with the intention that at least 80% of net profit generated from sales will be repatriate back to Australia. China and India able to fulfill the company need to employ semi-skilled labor and highly labor intensive, so these countries should be appropriate for this plan.
Purpose: The main aim or purpose of this research paper is “to provide an opportunity to research and analyze two trading partners of Australia” In addition to this, the other objective of this research paper is to develop a clear understanding about how to develop effective and significant trade relationships among the selected nations (China and India).
Scope: this research paper has wider scope because it provides discussion about the nature of trade and status of relationships of the two countries (China and India) with Australia. Moreover, it also discusses role and importance of free trade agreement..
Explanation of the Report Organization: Generally, in the context of this research paper, China and India is selected as a trading partner of the Australia. In addition to this, the nature of trade and status of relationships of China and India with Australia would be discussed in this research paper. Moreover, this research paper would also provide a discussion about the existing free trade agreement among the nation. On the other hand, this paper would also provide an assessment of the exchange rate between Australia and the two countries China and India. Moreover, this paper would also provide discussion about the movements in these exchange rates over the next 6 months- 1 year. These are the associated objectives that would be achieved in order to get the valid outcomes of this paper in an effective and proper manner.
Nature of Trade and Status of Relationships ofthe Two Countries with Australia and Existing Free Trade Agreement
The trade and status the relationships among these two are well known closest affairs that is characterized as well as marked by different elements including, society, dialects, firms, and wide connections of persons to persons. In the meantime, these countries shares values, standards, vital standpoint and hobbies with every others. Strong relationships among these two is additionally helping the both the countries in evacuating of diverse worldwide problems and obstructions effectively. For instance, this is likewise helping the nations in uprooting the issues connected with the overall security, financial and money related issues and multilateral collaboration. In the same way, universal exchange and speculation is additionally advanced by the countries viably that is more critical for the change in the economy of the countries (Kluyver, 2010). Additionally, with the assistance of offer and regular standards qualities, norms and standpoint, nation’s monetary and money related assets are used by the countries so that the general development and rate of GDP can be expanded on the proceeds and consistent inclination (Blanchard &Milesi-Ferretti, 2012). Besides, an “Australia-China Free Trade Agreement (“ACFTA”)” understanding is likewise framed in the year of 2005 by the both countries that give further arrangement and channel to existing solid teamwork in the middle of Australia and the China on security matters (Brockhoff, & Verweij, 2006).
Aside from this, Australia and China likewise consented to an arrangement with a specific end goal to accommodate science and development participation in backing of shared counter-terrorism and national security intrigues. The ACFTA encourages collaboration between a scope of accomplices, including government offices, research associations and industry. Furthermore, Australia has numerous critical two-sided concurrences with the China incorporating in the ranges of tariff, wellbeing administrations, criminal examinations and relocation. Late years have seen noteworthy development in the exchanging relationship in the middle of India and Australia, fuelled by the numerous complementarities between the two economies. In the course of recent years, respective exchange products and administrations has expanded by 24% yearly to US$16 billion in 2008-09. Two-way venture is additionally noteworthy, evaluated at over US$1.5 billion incorporating portfolio interest in 2008. Against this background, Australia and India concurred in April 2008 to attempt an attainability study for a conceivable two-sided organized commerce assention (FTA) to investigate the degree for building a significantly more grounded monetary and exchange relationship. A FTA in the middle of India and Australia would be required to address duty and non-tax obstructions. It would go past every nation’s responsibilities in the World Trade Organization (WTO) and cover generously all exchange merchandise (Carson, Thomas, & Hecht, 2005).
Exchange Rate between Australia and the Two Countries (China and India)
Basically, an exchange rate can be defined as an exchange rate in which which one currency is swap for other. Moreover, an exchange rate is mostly and commonly known as the foreign-exchange rate. Simply, it can be said that, an exchange rate is a significant and innovative tool and measurement technique which the value of a currency is compare to others in order to know the exact value of the money (Moomaw, Olson, McLean,& Applegate, 2009). In addition to this, it should also be noted down that, by taking the example of China, the alteration or modification in the exchange rate among the stralian Dollar per 1 Chinese Yuan Renminbi in the past one year indicates in the below graph (Hepple, 2002).
The above graph also reflects that there is very high growth trade of exchange rate among the China and Australia. In the same manner, this is more risky and costly situations for the companies or firms of Australia those are looking to expand their business in China or enter into China market. Hence, it is predicated that, China is most costly options for the companies of the Australia. On the other hand, by taking the example of India as exchange rate, the modification in the rate of exchange among Australian Dollar per 1 Indian Rupee in the past one year indicates in the below graph. Moreover, the given below graph also suggests that, the fluctuation in the trade exchange rate between Australia and India is much less risky as compare to China. In the same way, it can be said that, to enter into the Indian market is more effective and beneficial for the Australian companies. Finally, it can be said that, India for the purpose of trade would be a good options for the Australian companies so they should enter into Indian market in order to earn more profit and to take the competitive advantages (Samii, 2004).
Moreover, in the current time, developing and maintaining the trade relations is essential for the economic and organizational growth. In addition to this, it is also concluded that, India is good option as compare to China in order to enter into the market for the profit and utilize of resources. On the other hand, it can also be concluded that, India is best options in term of exchange rate as compare to China. Moreover, due to low exchange risk in India, the company would effectively able to achieve its objective that is at least 80% of net profit generated from sales will be repatriate back to Australia.
On the basis of above discussion, it can be recommended that, counties should focus on developing effective trade agreements and conditions for the overall development. In addition to this, it can also be recommended that, in term of exchange rate, India is good options for the investment for the Australian companies as compare to China. So it is recommended that, Australian companies should invest in the India and should enter into the Indian market to make more profitthat will be repatriate back to Australiain the context of exchange risk, free trade agreement (FTA), and relationship between government(Schaffer, Agusti, & Earle, 2008).
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