Relationship Between China And Australia

1. Introduction

With the development of the global economy, there is an increasing amount of competitions and opportunities for China and Australia. Global integration becomes a tendency. In order to gain competitive advantages and expand market shares, many countries and regions choose to achieve the international trade agreement. Some famous and successful international trade agreements play an important role in the international environment, such as GATT (General Agreement on Tariffs and Trade) and NAFTA (North American Free Trade Agreement). These trade agreements boost the economic developments in those regions to various degrees.

To strengthen cooperation between China and Australia, the governments of both countries try to make the trade

This competitive rivalry is the reason why so many countries and regions look for the opportunity to cooperate with their rivals. International trade agreements are bridges for countries and regions to communicate their value-producing resources. There is no country on Earth without some sort of a relationship with another country. The Transatlantic Trade and Investment Partnership (TTIP) is the agreement between the European Union and the United States. China and Australia cooperate for the exact same reason: they wish to obtain value-producing resources from each other. Maneschi and Andrea (1998) found that the theory of comparative advantage is an economic theory about the potential gains from trade for individuals, firms, or nations that arise from differences in their factor endowments or technological progress. Because the two nations, China and Australia, have different economic factors, e.g.: labor, technology and market, they have different potential gains from trade. It is not difficult to find that China and Australia have their own comparative advantage in different fields and at different times. MacDougall (1951) made the test for comparative advantage by the Ricardian model (Ricardian, 1817). In this test, MacDougall compared the data on output per worker as well

In 2002, Australia and China negotiated to establish a Trade and Economic Framework to enhance bilateral trade and investment and under this specific framework, a joint feasibility study of a possible Australia-China Free Trade Agreement (FTA) is being conducted (Yinhua, Philip, Mingtai, Ronglin and Zhaoyang, 2005). Real Gross Domestic Product (real GDP) can be a measurement to evaluate a country's output and the development of economy. The Gross Domestic Product (GDP) in Australia was worth about 400 billion US dollars in 2002 and in 2014 the GDP has quadrupled to the staggering amount of almost 1600 billion US dollars in 2014. At the same time, the GDP in China was worth 1450 and 9240 billion US dollars respectively. It is obvious that both China and Australia have enjoyed great improvements in their economies. The amount of trade and investment between China and Australia has also increased dramatically. Since 2009, China has become Australia’s largest export market. The two countries try to neutralize advantage by communicating together in the economy and thus obtain value-producing resources from each other in order to reach the comparative advantages. The latter being the ultimate goal of such Trade