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Should Australia be concerned by Beijing’s trade threats: modelling the economic costs of a restriction on imports of Australian coal
Author(s) -
Giesecke James A.,
Tran Nhi H.,
Waschik Robert
Publication year - 2021
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.12422
Subject(s) - vulnerability (computing) , economics , trade barrier , economic integration , international trade , value (mathematics) , international economics , capital (architecture) , consumption (sociology) , coercion (linguistics) , international free trade agreement , geography , archaeology , social science , computer security , machine learning , sociology , computer science , linguistics , philosophy
A country’s economic dependence on its trade with various other countries is often expressed in terms of trade values and shares. A country’s vulnerability to economic coercion by the countries with which it trades is similarly expressed in such terms. Using the recent issues relating to Australia’s coal trade with China as an example, we propose a better framework for assessing vulnerability to coercive trade instruments. We argue that the capacity for a given export trade to fund real consumption is a superior indicator of economic vulnerability than the simple value of the underlying trade flow. Our framework takes account of trade diversion, foreign capital ownership, the terms of trade, resource mobility, and capital and production tax rates. Using this framework, we demonstrate that the damage from trade sanction is far less than might be expected from a simple focus on the value of the affected trade flow alone.