Export diversification crucial to economic resilience and supporting trade

Increasing export diversification is important to ensure WA has a resilient economy and seizes emerging trade opportunities, a Bankwest Curtin Economics Centre (BCEC) report finds.

In 2021-22, merchandise exports accounted for 59% of WA’s gross state product (GSP), while in the year to April 2023, 45% of GSP ($273 billion) comprised merchandise goods.

Graphic courtesy of Bankwest Curtin Economics Centre.

“The relative scale of WA’s export sector emphasises just how much the State benefits from – and depends on – its economic relationships with trading partners,” says report co-author and BCEC Director, Professor Alan Duncan.

“The WA economy benefits from natural endowments, product specialisation and market integration as well as economies of scale, and its resilience through the COVID pandemic owes much to border protections that allowed mine sites and ports to maintain product cycles.”

From 2013 to 2022, WA’s primary export markets for goods were:

  • Iron ore and concentrates: China, Japan, Republic of Korea and Taiwan
  • Gold: Hong Kong, United Kingdom, China and Singapore
  • Wheat: Indonesia, Republic of Korea, Japan and the Philippines
  • Crude petroleum: Singapore, China, Republic of Korea and Indonesia
  • Precious metal ores and concentrates, excluding gold: Republic of Korea, Philippines, Germany and Japan
  • Crude minerals (not elsewhere specified): China, Belgium, Malaysia and Republic of Korea

Graphic courtesy of Bankwest Curtin Economics Centre.

From 2013 to 2022, WA’s main goods import partners were:

  • Gold: Papua New Guinea, Japan, New Zealand and the United States
  • Refined petroleum: Singapore, Malaysia, India and Brunei
  • Crude petroleum: United Arab Emirates, Malaysia, PNG and Indonesia
  • Civil engineering equipment: US, Republic of Korea, Japan and China
  • Passenger motor vehicles: Japan, Republic of Korea, Thailand and Germany
  • Goods vehicles: Thailand, US, Japan and Germany

Graphic courtesy of Bankwest Curtin Economics Centre.

Adversity led to diversified markets

When China introduced several tariffs and embargoes on Australian exports during the COVID pandemic, exports to China dramatically halted for barley, wine, coal, lobsters and other goods.

Some markets managed to adapt and find new avenues to compete with the prices China offered, such as barley, but other commodities suffered, including lobsters.

The report shows the diversification of Australia’s barley exports, with a notable increase in shipping barley to established markets including Saudi Arabia, Japan and Vietnam, and emerging markets in Mexico and South America.

At the launch of the report on 22 July, CCIWA CEO Chris Rodwell spoke on a discussion panel, saying diversifying export markets has had a positive impact on WA’s and Australia’s prosperity.

“If we think about diversification of our economy, it’s not only about the sectors we build out, but the markets that we’re in. Trade agreements are great for deepening the robustness of the Australian and WA economies,” he says.

Free trade agreements delivering benefits

Australia’s free trade agreements (FTAs) with countries including China, Japan and the US contributes to major financial gains for exports, the report states.

Overall, FTAs with China, Japan, Republic of Korea and Thailand led to about $472b of Australian exports since each agreement was enacted.

From 2000 to 2022, Australia signed 17 FTAs, including with India (Economic Cooperation and Trade Agreement). Additionally, in May 2023 an FTA with the UK was enacted and a second FTA with India (the Comprehensive Economic Cooperation Agreement) is targeted for the end of this year.

FTAs can lower tariff rates, making imported goods more affordable for consumers, stimulate international trade and foster growth.

The report highlights the difference in trade intensity with FTA partners and the rest of the world. Trade intensity with WA FTA partners was more than six times (about 60%) the rest of the world (around 10%). Since 2008-09, WA’s trade intensity with FTA partners increased by 84%.

However, the report foreshadows an increasing level of protectionism among various trading partners and preferential domestic economic support for key industry sectors.

“The rising level of protectionism poses risks to open economies like Australia, particularly export-oriented states such as WA,” Duncan says.

“This emphasises the importance of the government’s ongoing work to deepen relationships with key partners and secure free trade agreements that are to our mutual benefit.”

Benefits of trade on households

Trade directly benefits Western Australians through higher income, more jobs and lower prices, the report states.

In 2022, trade was attributed to $17.9b of real disposable WA household income or $16,200 per household. It also reduced prices by 4.3% compared to a counterfactual situation of no trade.

According to the report, WA consumers enjoy a lower cost of living by consuming imported goods at prices lower than they would be if they were produced domestically.

FTAs are important during times of high inflation rates and household purchasing power falls when prices of goods and services increase.

CCIWA’s International Trade and Investment Centre (ITIC) helps businesses reduce the time, cost and risk of going global. Contact the team for a free consultation on (08) 9365 7620 or via [email protected].

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