Explain the bilateral trade flow between China and Australia through Essay

Explain the bilateral trade flow between China and Australia through the traditional and modern trade theories - Essay Example (Chambers, 2006). On the other hand, Australia’s economy has turned out to be extremely prominent and so the bilateral trade between China and Australia. The economic boom in China cannot be ignored world wide and constitutes a number of opportunities to trade with Australia. The gas treaty between the two countries had established as the predecessor in order strengthen their trade relationship. However, China needs to have raw materials and is an eminent buyer of liquid gas and minerals from Australia. The Prime Minister of Australia John Howard and President Hu Jintao of China decided on a Free Trade Agreement (FTA) as well. Hence china has become Australia’s chief customer whether it is Australia’s natural possessions or it the iron ore, which has made Australia expand its seaport to export more iron to China. The international relationship of China with Australia has been progressing since the year 1973 when the two governments signed the trade agreement and the bond between these two countries is growing even stronger day by day. The joint accords have been established since past 32 years related to numerous commodities such as dairy products, agriculture, raw materials, natural gas, iron ore, energy, hygiene guidelines along with capital protection and support for traditional aspects that have developed the business association of the two countries. *Footnote: Thomas Nicholas, Re-orienting Australia- china relations 1972 to the present, Great Britain, MPG Books LTd.2004. The relationship has further enhanced due to their combined Participation in APEC (Asia Pacific Economic Cooperation). The study also focuses on the Free Trade Agreement (FTA) and the challenges along with opportunities for Australia and China where the involvement of WTO (world trade organization) also plays a vital role. Initially the conciliation tool place in Sydney in 2005, May and continued till the beginning of year 2008 and had 11 negotiable meetings. A free t rade agreement is a contract between two countries where tariffs are excluded from deals and it lies under the rules set by WTO.( Thomas, 2004) A gauge to determine the economic conditions of a country is its gross domestic product (GDP) which refers to a final worth of every product in a particular time frame and is measured in terms of comparison with last year (quarter of full year), e.g. if the current GDP of a country comes out to be 5%, it shows that the economy has raised by 5% in the current year. A negative GDP value indicates a state of recession in a country, leaving the investors in trouble due to economic crisis. A strong economy will lead to good salary increments as the companies stay in profit, while a fluctuation in GDP (up or down) will also affect the stock market and the investors. GDP may be calculated in two ways: first method is to calculate the total earnings and profits, and second way is the calculation of expenditure (amount spent in a year). China is cons idered as one of the largest economies in the world. According to The Economist 2004a, china stood at 3rd number in increasing global GDP and importing goods from the year 2000 – 2003. The country is famous for a wide range of products whether food stuff, machines, toys, plastics goods, electronic products, appliances, industrial goods such as food processing units, rubber goods, furniture, etc. The GDP of China is increasing by seven percent every year since last 5 years. The contribution of China to global economy is growing gradually and trade constitutes as a chief feature in making its