Question 1
Pattern of Trade for Tasmania
The Department of Foreign Affairs and Trade (2013) reveals that over the period, the pattern of trade for Tasmania has evolved due to technological changes, trade dynamics globally, changes in demand, especially for Tasmania exports, and economic policies. In the late 20th century, Tasmania Island was recognized for increased agricultural exports such as dairy products and livestock. For example, wool exports increased over the years, as evidenced by export statistics in 1871, which show that wool exports generated a return of approximately 208 160; in 1880, they generated about 542,214. Also, it had forested areas and utilized them to supply timber exports. The mining sector provided resources such as copper and zinc, although it was a less prominent sector in Tasmania. The trade balance in Tasmania was attributed to the tourism sector, which was crucial to the economy’s thriving. The island’s natural beauty, historic sites, and national parks attracted a broad base of visitors. However, despite the positive progression of the trade in Tasmania, in recent centuries, there have been changes in the trade pattern influenced by various external factors.
Evidence of change of pattern
Tasmania’s traditional industries have decreased, such as the timber and forestry sectors. Some of these traditional industries were influenced by sustainable and environmental issues whereby the demand and need for sustainable practices increased (Gaughwin, 1992). This affected the conventional ways of trade and contributed to the rise of modern industries. The tourism sector pattern change is attributed to increased service exports. It was influenced by marketing efforts using current strategies, hence the growing growth of the sector. There has been an improvement in infrastructure and demand for excellent travel experiences (Department of Foreign Affairs and Trade, 2013). The agricultural industry in Tasmania has shifted to premium agrarian products that match consumers’ demands and changing behaviors. For example, the global market developed an increasing demand for organic foods. Technological trends have contributed to changes in the demand and production processes.
Question 2
Model of Trade
In 1870, the government of Tasmania strived to intervene in its economy due to a decline in overseas investment, reduction in capital flow, and standards of living. The model of scale of economies and imperfect competition could be applied in Tasmania in the 1870s because, in previous years, trade on the island was booming at a higher rate. For example, the agricultural sector gained momentum due to the restructuring of the economy, and small-scale factories were established to boost production further (Turnbull, 2005). Based on the scale of economies and imperfect competition, a country can export and import similar products because countries producing common commodities can engage in trade. Basu (2009) says trade gains are acquired from two primary sources. First, consumption of varieties of products and second, large-scale production of products. Therefore, Tasmania could have utilized this opportunity to create and build meaningful relationships with countries producing similar products overseas. By doing this, it could achieve trade benefits such as the exchange of technologies. Technologies evolve rapidly; thus, associating with overseas countries helps identify trends in technology and apply them to increase the speed of production and efficiently complete production activities. In addition, since Tasmania was a British colony in 1870, it could emphasize international trade together for comparative advantages. Tasmania performed well in the agricultural sector due to its fertile land and favorable climate. These factors were ideal for satisfying international and domestic demand for agricultural products. The colony had natural resources such as coal, timber, and fisheries, which could be used for trade. This represents an opportunity for trade between the countries and to achieve maximum control over the decline in wages and standards of living for Tasmania people through producing in large quantities. Tasmania could practice imperfect competition by increasing production in its firms. According to the scale of economies and imperfect competition theory, a monopoly maximizes profits by determining output and setting prices as desired (Basu, 2009).
Assumptions of the scale of economies and imperfect competition concept
First, an industry can have several firms that influence product demand and price (lecture 5). Although reducing product prices is assumed to increase demand, the differentiation of products by various firms surpasses the price concept. Consumers are willing to pay more for differentiated and high-quality products. Second, firms decide to enter an industry and can exit freely, causing zero profits for monopoly firms in the long run. Third, each firm experiences a downward demand for its commodities, and it has control over the products’ prices.
Question 3
Trade partners
Victoria, New Zealand, and the United Kingdom share colonial ties with Tasmania; they all belong to the British Empire (Varian, 2016). These nations have similar governance structures, making it easy to engage in trade. The colonial ties made capital and labor movements easy among the countries. Based on the movements of capital and labor, a country can increase its production and consumption by exchanging products with other countries that have resources to produce other products at a cheaper cost (Robert, 2012). In this context, efficiency is achieved through access to labor, especially from regions of low returns. The movement of factors ensured that International trade between these countries thrived without contraction of production in some countries and expansion in others. The trading partners of Tasmania are geographically located, making it easy and convenient to trade. The transportation costs were low, thus easy transportation of products from one country to another (Henning,1992). Also, trade between Tasmania, New Zealand, Victoria, and the UK poses reduced trade barriers since the countries have similar legal and institutional frameworks (Varian, 2016). Common business practices and legal systems provide the countries with a stable environment for trade. Also, their products are protected by shared property rights, thus making it easy for successful economic transactions. They have well-defined trade routes for transporting products without restrictions. This assists the countries in importing and exporting the desired products to satisfy the demand in the countries. Moreover, no cultural barriers can hinder trade between the countries. Language and cultural similarities improved trade relations between these countries through effective communication and negotiations.
References
Basu, B. (2009) Economics of scale and Imperfect Competition – EOLSS. Available at: https://www.eolss.net/Sample-Chapters/C13/E1-23-01-03.pdf
Department of Foreign Affairs and Trade (2013) Structural change in the Tasmanian Economy – Information Paper. Available at: https://www.treasury.tas.gov.au/Documents/Structural-Change-in-the-Tasmanian-Economy-Info-Paper.pdf
Gaughwin, D. (1992) Trade, capital and the development of the extractive industries of … Available at: https://www.asha.org.au/pdf/australasian_historical_archaeology/10_04_Gaughwin.pdf
Henning, G. R. (1992). The demise of the Tasmanian Steam Navigation Company, 1888–1891. Australian Economic History Review, 32(2), 112-136.
Robert, M. (2012) International Factor Movements: Labor and capital – scholars at Harvard. Available at: https://scholar.harvard.edu/files/frankel/files/cave.6607.cp09.p151-166.pdf
Turnbull, P. (2005) Companion to Tasmanian history, Economy of Tasmania 1850-1930 – Cultural Artefact. Available at: https://www.utas.edu.au/tasmanian-companion/biogs/E000104b.htm#:~:text=Overseas%20investment%20in%20Tasmania%20steadily,in%20intervening%20in%20the%20economy
Varian, B.D. (2016) Varian British capital and merchandise exports. Available at: https://eprints.lse.ac.uk/68925/1/Varian_British%20capital%20and%20merchandise%20exports.pdf
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