Online published on 15 February, 2014.
Foreign trade has got an important place in the economic development of a country. What is the importance of foreign trade for economic development of country is stated below:
Firstly, foreign trade helps to produce those commodities which have a comparative cheaper cost than others. It results in less cost of production in producting a commodity. If all the countries adopt this procedure to produce these goods in. which they have less comparative cost, it will lead to availability of goods at a lower price.
Secondly, foreign trade increases the scope of market because of domestic demand and foreign demand for the product. So there is mass production. If the production of goods increases, average cost declines and price of goods declines.
Thirdly, foreign trade helps the people to get different varieties of goods both in quantities terms and qualitative terms.
Fourthly, foreign trade helps a developing country like in its economic development. Iron and steel industry, has been established due to stored iron-ore and coal. But for the establishment of this type industry, we have to import technical knowledge from foreign countries. Had there been no foreign trade, then it would not have been only difficult but also too expensive.
Without foreign trade, it is not possible to fulfill the demand for petroleum products and it will retard the economic development of our country. There is also scarcity of consumer goods due to natural calamities or due to any other reason. During the time scarcity of consumer goods, we import these goods from foreign countries and keep prices stable which help people to get their commodities.
Foreign Trade has two aspects direction of trade and composition of trade. Composition of foriegn trade means goods that we are exporting and goods that we are importing. Therefore, composition of trade consists of composition of exports as well as composition of imports. Composition of imports means goods that we are buying from other countries.With the development of economy over the years, there was a marked change in the composition of imports. Economic development required setting up of new industries, modernsation of agriculture and industry. Composition of exports means goods that we are selling to other countries.With the industrialisation of the economy, composition of exports have undergone a change.Thus the main focus of this chapter is to shift in the composition of trade of Australia pre and post reform period. This chapter has been divided into four sections. Section I deals with survey of literature. Section II presents the introduction of trade reforms in Australia.Section III deals with the methodology. Section IV presents the empirical estimation of Australia's comoposition of trade.The main conclusions emerging from the study are presented Section-V
