Australia begins FTA negotiations with Pacific Alliance

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Australia and New Zealand will begin free trade agreement negotiations with the Pacific Alliance trade bloc, composed of Colombia, Chile, Mexico and Peru.

How does this relate to the HSC syllabus?

  • A free trade agreement (FTA) is a formal agreement between two or more countries to break down barriers to trade between the countries. (HSC Topic 1)
    • There are two types of free trade agreements: bilateral and multilateral. This would be a multilateral FTA because it involves more than two countries.
    • In the backdrop of Trump’s withdrawal from the Trans-Pacific Partnership, countries like Australia are seeking to negotiate more free trade agreements.
  • The Pacific Alliance is an example of a trading bloc. (HSC Topic 1)
    • A trading bloc is when a group of countries join together in a preferential trade relationship, usually to the exclusion of other countries.
  • This potential FTA will have benefits to the Australian economy. (HSC Topic 1)
    • Currently there are tariffs of up to 80 per cent on Australian beef, 45 per cent on dairy products, and more than 30 per cent for sugar. The successful negotiation of such a free trade agreement will reduce these and make it easier for Australian exporters to sell goods in these Latin American countries.
    • This has other benefits such as increased economic growth and improved standards of living.

Google with $3.6b fine from European antitrust regulators

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The European Commission fined Google 2.4 billion Euros for favouring its own shopping service. Rivals such as Yelp and Tripadvisor complained about Google blocking them from search advertising and systematically placing its own comparison shopping service above those of competitors.

How does this relate to the HSC syllabus?

  • Google is considered a monopoly in search in most countries around the world. (Prelim Topic 3 – Markets)
    • A monopoly is a business which is the only seller in a market. While there are other search engines, many people considered Google a monopoly in the search market because of its dominant market share of over 90 per cent in most countries.
    • If the European Commission’s allegations are true, then this is an example of a company taking advantage of monopoly power. Sometimes, this prevents better products or services coming into the market, making consumers worse off. Vestager said in a statement that Google had "denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation".
  • Typically, governments would regulate monopolies heavily because they can take advantage of their monopoly power. (HSC Topic 4)
    • Competition policy is an important component of microeconomic policy. Competition tends to promote innovation and productivity, which leads to long term increases in economic growth. This provides the rationale of regulating monopolies like Google (HSC Topic 4)
    • In Australia, the Australian Competition and Consumer Commission regulates competition.

Gary Liang GARY LIANG

Gary Liang is the founder and director of Keystone Education. He attended Sydney Boys High and achieved an ATAR of 99.95 in 2012. He achieved 5 state ranks in Mathematics, Mathematics Ext 1, Mathematics Ext 2, Chemistry and Economics. He is now studying Economics and Science (Advanced Mathematics) at the UNSW Australia, where he is the recipient of six scholarships. He has experience at a top tier investment bank and a technology startup.

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