Political Economy in the Asia Pacific

The policy-making de sufferrance of countries empennage be considered interdependent, as they influence apiece early(a) and experience change simultaneously. This interdependence modifys the level of sparing offbeat of countries, including the sparingal conditions and stability of a rural ara. The g everyplacenmental sparing of a ground encompasses the policy-making, sound and frugal carcasss influencing the states economy. Jevons (1880) described political economy as the wealthiness of a verdant and the reasons contributing to differences in wealth between countries (p. 7).The political system of a country heavily influences the sort in which a country operates, and a good deal motivates new(prenominal) countries that it actively deals with. Differing intelligent systems, fair plays and regulations of countries git too impact new(prenominal) countries. Similarly, the economic systems and changes in a countrys economic position drive out impact some some other countries, and at times, their economic well- macrocosm. Whilst the political, legal and economic systems of some countries atomic number 18 interdependent, disruptions to interdependency must likewise be considered when assessing those countries assurance on each other.Several factors cease hinder their interdependency, including proportional advantage non universe followed, a unfluctuating focus on regionalism and ineffective throw in the towel throw agreements. political decisions oblige by regimes git affect the political economy and often the welfare of countries. Government decisions, including rights and policies, affect society as a whole ( hillock, Cronk, & Wickramasekera, 2011, p. 236). thither are two main forms of political systems democracy and totalitarianism.Democracy is a system where the citizens govern the country through their elected representatives (Hill et al. , 2011, p. 245). Examples of democratic countries in the Asia peace-lovi ng line of credit region include Australia and siamese connectionland ( department of unconnected Affairs and Trade, 2008) (U. S Department of State, n. d. ). Totalitarianism refers to a system where one person or political party has control over all citizens, determineing political exemption (Hill et al. , 2011, p. 245). Totalitarianism is impinge onn in mainland China and North Korea (Jianming, 2010, p. 2) (Lim, 2009, p. 10-114). These differing political systems can affect economic transaction between countries. An pillowcase of this is the view that democratic countries are more willing to interchange and participate in international phone line with other democracies, than with totalitarianism countries. Democracies share similar set and laws on gifted property rights. It is also believed that peace is more prevalent in democracies, modify a senior higher ease of tack (Rosendorff, P. 2000). We see this in Australias preference for trade with the US rather than w ith China.In September 2010, the Department of Foreign Affairs and Trade reported that Australia had an economic relationship (measured on trade in commodities, operate and two-way investment funds) with the US worth over AUD$860 billion, compared to slight than AUD$100 billion with China. The strength of the economic relationship between Australia and the US is believed to relate to each countries salubrious democratic quantifys and from the US and Australia being strong allies, due to similar political practices (Sheridan, 2011). The varying political decisions and policies make by Governments can also impact other countries.With globalisation being so prominent today, the interdependency of a countrys political decisions is apparent. Globalisation dramatically increase after World War II, with some of the humans major merchandise countries heavy trade barriers, including tariffs and quotas, after socio-economic classs of favoring topical anaesthetic anaesthetic industr ies (Griffin & Pustay, 2010, p. 38). According to Friedman (2000) globalisation is defined as the inexorcapable integration of markets, nation-states, and technologiesin a way that enables individuals, corporations and nation-states to get ahead around the world farther, faster, deeper, and cheaper than ever out front (p. ). This integration of economies suggests that Government decisions affect the economic wellbeing of other countries. An example of this is the recent temporary ban of live cattle exports by the Gillard Government in Australia, in response to comprehend animal cruelty towards Australian cattle in Indonesian abattoirs. David Farley, CEO of the Australian Agricultural Company, Australias largest beef company, reported that the ban cost the company up to AUD$8 million. He also stated that Australias reputation in the international trading market was damaged by the temporary ban (OBrien, 2012).The political decision to temporarily ban live exports to Indonesia cause d financial firing for the Australian cattle industry and affected Australias political relations with Indonesia, with the Indonesian Government stopping imports of live cattle from Australia in December. Bayu Krisnamurthi, the Deputy tillage Minister of Indonesia, commented that Australia had discriminated against Indonesia by imposing new standards of animal welfare, as the similar standards were not imposed on other countries importing live cattle.He peril to file a claim with the World Trade Organization if inconsistency occurred (Vasek & AAP, 2011). Whilst live exports to Indonesia has resumed, their imports are d stimulate by 50 percent and relations between Australia and Indonesia are affected. The incident damaged Australias economy and squeeze beef prices to rise in Indonesian markets (Nirmala, 2012). This illustrates the interdependency of Australia and Indonesia, with disruptions to trade affect the political economy of both countries.It is evident that the politic al risk of Australia and Indonesia has increased. Political risk is the likelihood of political groups (Government and non- governing body groups) causing changes in a countrys ability to successfully participate in line of credit activities, which may affect get and finiss of local and international parentagees (Hill et al. , 2011, p. 266). Animals Australia and the Gillard Government both contributed to the live cattle export ban (Animals Australia, 2011), which in turn affected the profits of Australian beef companies.Businesses in the beef industry (or similar) may re-consider wrinkle dealings with Australian beef companies as they re-assess the political risk of trading with Australia. This may also result in Australia seeking markets elsewhere to ingest a profitable beef industry. As Governments implement differing political systems and decisions, other countries are affected, often in an unfavorable way. The differing legal systems between countries can impact dealings between countries and international businesses.The legal system of a country reflects the rules and laws imposed to manage society and behavior (Hill et al. , 2011, p. 253). A household conducting business in a exotic country must take in the laws of the host country are followed, as well as chronic to meet the legal requirements of the home country (Griffin & Pustay, 2010, p. 78). Four main legal systems are prominent today common law, civil law, religious law and bureaucratic law (Griffin & Pustay, 2010, p. 79). Common law is present in many countries is the Asia Pacific business region, including Australia, India, New Zealand, Hong Kong and Malaysia.Common law is based on resolve decisions, creating legal precedents which assist in creating new laws and making future judgments (Griffin & Pustay, 2010, p. 79). accomplished law is a legal system based on laws that fuddle been set in a code system. It is different to common law, as judges do not switch flexibility to interpr et the law as the laws are already prescribed in the code system. well-mannered law is currently present is Japan (Hill et al. , 2011, p. 254). Religious law, or theocratic law, is a legal system that is based on the rules of a feature religion.Religious law is not common in the Asia Pacific region (Griffin & Pustay, 2010, p. 79). bureaucratic law is a legal system where decisions are made by the countrys bureaucrats, often without taking the laws of the country into consideration. Communism and other forms of dictatorships are regularly compared to bureaucratic law. China is an example of a country where bureaucratic law is imposed (Griffin & Pustay, 2010, p. 81). It is apparent in that respect are strong differences between the legal systems of countries in the Asia Pacific, which can affect businesses operating internationally.For example, in a recently merged Australian and Chinese company, King & woodland Mallesons, Stuart Fuller, the companys chief executive, stated that C hinas Ministry of judge requirement for all lawyers to pledge allegiance to the Chinese Communist political party will not affect the companys business dealings or clients (Sainsbury, 2012). However, this could affect lawyers who have not previously worked under the Chinese Communist Party, as they are pledging to uphold communist laws, which differ from Australian laws and values.This could also affect the perception of the company by international clients, whose values may differ from that of the Chinese Communist Party. Hence, it is evident that differing legal systems potentially influence operations between international businesses. New laws can also influence business dealings between countries. Indian companies have uttered concerns over the Australian carbon and mining revenuees that are set to be implemented in 2012. Naveen Jindal, Indian parliamentarian and head of Jindal Steel and Power, believes the taxes will deter Indian companies from investing in Australian minin g (and similar) companies.He stated, The carbon tax is as much of a concern to Indian companies as it is to Australian companies (Doherty & Ker, 2012). Thus tax laws in one country can also affect some other countrys economy, with a potential loss of investment opportunities and profits for both parties. It can also be seen that bandage a law designed for one purpose (in this case, the taxes are to do stop climate change) (Clean Energy Future, 2012) it can ultimately affect another area of a countrys economy in this case, foreign investment. at that place have been circumstances where legal requirements imposed for one purpose have in truth been seen as an excuse for deterring trade or investment. In 2009, the Malaysian Palm Oil Council, on behalf of the biggest palm oil producers in the world Malaysia and Indonesia filed a case against the European Union (EU) for introducing sustainability criteria for palm oil imports. The Council believed that the criteria was actually a ba rrier to the trade of biofuel, based on the EU missing to continue support for home-grown rapeseed oil, currently subsidised by the EU (Junginger, Dam, Zarrilli, Mohamed, Marchal & Faaij, 2011, p. 028-2042). It can be recognised that the EU may have been wishing to entertain the home industry and jobs, which generally results in increased costs for consumers (Hill et al. , 2011, p. 109). In disguising the true intentions of laws, a countrys trading relationships can be affected. Thus differing legal systems, laws and requirements can affect, and often hinder the progress, of international business dealings. The economic position of one country can impact other countries and international businesses.Economic systems can be described as the system by which a country organises how and what should be produced, whom to produce for and how funds should be distributed (Hill et al. , 2011, p. 203). There are three main economic systems market economies, teaching economies and motley eco nomies. A market economy is when output activities are privately owned, and the criterion to be produced is based on supply and remove and is determined by an individual or business for profit making purposes (Hill et al. , 2011, p. 304).In a neglect economy, the Government determines what goods and function are sold, the prices that items are sold for and the quantities to be produced (Hill et al. , 2011, p. 304). A mixed economy is a combination of both market and command economies, with both private and state ownership controlling the production of goods and operate (Hill et al. , 2011, p. 305). It is believed that a countrys economic system today relates to its economic development and wellbeing and some argue that market economies provide great opportunities for economic development and growth, hence creating a stronger economy (Hill et al. 2011, p. 306-307). This can be seen when comparing Malaysia and Singapore as the countrys systems greatly differ. When the ASEAN an d China agreement was put into effect in January 2010, the Associated Chinese Chambers of commercialism and exertion of Malaysia (ACCCIM) called for a limit of 10 percent in yearbook growth of the amount of imports from China. This was due to protection of Malays as manufacturers found it difficult to compete against cheap Chinese products (Ng, F. , 2010).This shows Malaysias economic system reflects command economy characteristics, as there is control over what is imported, which in turn could limit profits due to restrictions. Singapore is apparently more of a market economy. Singapore is considered a very feed country in relation to trade, therefore depending on international trade (Global Trade, 2012). The World Bank has stated that Singapore is the easiest country to conduct business with, with the openness of trade and aim to attract foreign direct investment (FDI) being contributing factors (The World Bank, 2009).Since signing a free trade agreement with the US, Singapor e has imposed competition laws that restrict anti-competitive regulations. The Ministry of Trade and Industry in Singapore stated that by encouraging competition, they would be able to encourage the efficient functioning of the markets. This move resulted in foreign lawyers and barristers to go after work opportunities in Singapore (Sawyer, D. , 2006). By comparing Singapore and Malaysia, it can be viewed that market economies (such as Singapore) have greater potential for economic growth.Currency fluctuations can affect countries with interdependent economies when a change in the value of one currency affects other currencies. Indonesias economy was considered to be competitively growing from 1966 2007, based on the countrys commitment to lowering poverty through rural development and increased production in the rice industry. However, the Asian Financial Crisis from 1997-2000 caused poverty in Indonesia to rise, while gross domestic product drastically decreased (Fatah, Othman & Abdullah, 2012, p. 291-299).The high economic growth of Asian countries directly contributed to the crisis, mainly through an increase in investment, excess capacity, high levels of debt and increased imports. As borrowing and investments grew, companies were unable to service their debts (Hill et al. , 2011, p. 176). When the Thai Baht shed by 55 percent in 1998, other Asian currencies were late affected, including the Indonesian rupiah, which decreased 76 percent in 6 months. The slide down of the Indonesian economy mightinessd the Government to accept a add of US$37 billion from the International Monetary Fund (IMF) Hill et al. , 2011, p. 177). The consequences of rapidly expanding Asian economies and the impact of decreasing currencies on each country was evident during the Asian Financial Crisis. The economic interdependency between countries had a negative impact on other economies, affecting their economic wellbeing as their economic position declined. Although the poli tical economy of countries is generally interdependent, there are factors that deter interdependency from completely occurring. For interdependency to function best, comparative advantage should be allowed to operate.David Ricardo developed the surmise of comparative advantage in the 19th century and suggested that a country should produce and export goods and services that it is relatively more productive at producing than other countries, and import goods and services that are more productively made by other countries (Ricardo, 1817). with their comparative advantage, countries benefit economically from participating in trade. This also suggests that free and open trade between countries is positive for economic progression (Hill et al. , 2011, p. 65).However, this theory is not always practised since Government political decisions can foil its effectiveness. On 22 March, 2012 automaker Holden received a AUD$275 million government subsidy to continue to operate its Australian f actories, in order to keep jobs (Straits Times, 2012). According to Chris Berg, Less than half of one per cent of the labour force works for the car industry and car manufacturers are not oddly central to the economic structure, cars are nothard to buy from overseas and their manufacturing is not particularly high-tech (Berg, 2012).Thus Australia is not following comparative advantage in the car manufacturing industry, with the reliance of Government subsidies helping to continue production and maintain jobs. This can be compared to Thailand, with car manufacturing production hugely change magnitude due to low labour costs (Bangkok Post, 2011). As export demand has increased, production has increased, with an 11 percent rise in the last year (Bangkok Post, 2012). Surapong Paisittanapong, spokesperson of the Automotive Industry Club under the Federation of Thai Industries (FTI), commented, Were confident that total auto production this year will reach 2. million units (Viboonchar t, 2012). Perhaps Australia ought to increase its imports from Thai car manufacturers rather than providing subsidies to Australian companies, assuming Thai cars are cheaper than the overall cost of producing an Australian car. Although countries can be seen as interdependent, barriers are often imposed to protect local industries and jobs, discouraging the comparative advantage theory and potentially affecting economic progression and wellbeing. Another factor that contributes to countries not reaching full interdependency is the focus on regionalism.Regionalism is a method of opening trade amongst neighbor countries and is viewed positively as not only extending markets to neighboring countries, but as strengthening regional security and delaying globalisation. By forming close regional communities, countries can form trade agreements and other mechanisms that protect the region from the threats of globalisation, and be quiet prevail economically through increased local busines s between countries in the region (Moshirian, 2009, p. 2-8).However, this push for regionalism may be obscuring some Asian countries economys ability to achieve higher profits, as the countries are still heavily reliant on other countries in different regions. We see this in the ASEAN official data release 2010, which shows that Singapore still exports 27. 97 percent of its total exports to countries in the EU (ASEAN Community in Figures (ACIF), 2010). This reliance demonstrates that partner countries are often unable to consume each others goods and therefore must export goods to other markets, outside of their own region.Whilst regionalism is still a form of interdependency between countries, the focus is on increasing business between neighbouring countries rather than all countries. Another exception to the interdependency of countries is when free trade agreements (FTA) are not efficient. The increase in free trade agreements since the end of the cold war across the world, pre dominantly in the Asia-Pacific, suggests countries depend on each others business for economic growth (Suominen, 2009). The Asia-Pacific Economic Cooperation (APEC) began as a forum in 1989, before becoming a regional trade agreement (RTA) in 1993.APECs main goal is to establish free and open trade and investment in the Asia-Pacific (APEC, 2012). However, trade agreements in the Asia-Pacific region have successful the manufacturing sector, with low tariffs and more freedom to trade, as compared to the agriculture sector, which has seen a high degree of protectionism from Governments in order to protect industry and jobs. This suggests that APECs goal is not entirely being reached (Suominen, 2009). Whilst FTAs are effective in theory, Government intervention suggests that complete free trade is not apparent, frankincense obstructing the interdependency of countries to a certain extent.It is evident the interdependency of countries can be attributed to the political economy, that is, the political, legal and economic systems and position, of a country. Decisions made by Governments often affect other countries, and at times have adverse implications. A countrys legal system can both restrict and open up opportunities for other countries. Growing regionalism in areas such as Asia means there are closer economic ties between countries in the immediate region. The fluctuating strength of one economy can affect its regional partners, particularly in relation to currencies and interest rates.Whilst there are clearly benefits to be gained from a strong interdependency and reliance on other countries, there are also factors that hinder complete interdependency. When countries do not follow comparative advantage, or engage in inefficient free trade agreements, some of the potential benefits of interdependency can be lost. Often governments interfere in markets for their own political, legal and economic reasons, and the perceived opportunities that should flow from reg ionalism and other frameworks such as FTAs are not realised.