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Globalisation Australia
It is now an established fact that it is not sovereign states, but international law that governs trade between nations. This is further elaborated by Jayasuriya (1999: 446) in his journal where he states that, globalisation is ‘rupturing the internal sovereignty of the state’ . Thus, governance and political issues are external factors of porter’s diamond that affect nations, and are perhaps the most important issues outside Porter’s diamond that could have a significant impact upon a nation and its trade. This is apparent in the analysis of Australia and its globalisation.
From the early 1950s Australia had traditionally high levels of protection for many industries, including the textiles, clothing and footwear (TCF) and the agricultural sectors. The Australian government protected its domestic industries from overseas completion by introducing trade barriers such as tariffs and quotas and non-tariff barriers ranging from explicit quotas and licensing schemes to local content requirements and health and safety standards that constitute significant obstacles to trade that are not captured by average tariffs (Edge, 2006 and Dollar & Kray, 2004)
In the 1980s a new era of globalisation and trade liberalisation emerged, changing the way companies around the world engaged in business. Multilateral tariff reductions, the expansion of world financial markets, increasing capital flows and the floating of exchange rates opened up world markets . As hard as Australia attempted to isolate itself from the effects of globalisation, it had few options but to succumb. Gradually, the federal government of Australia began to reduce nominal tariff rates on imports and by July 1996 tariffs on most manufacturing industries were phased down (Edge, 2006) .
When the effects of negotiated tariff reductions expanded world trade and multinational corporations (MNCs) boosted flows of foreign direct investment (FDI), initiating an era of increased international ‘interdependence’. For Australia, federal disputes arose over state government policies to attract foreign investment to exploit and export mineral resources, often at prices deemed too low by the national government (Revenhill, 1990 cited in Klien, 2002) .
Australia’s globalisation challenges are reflected in negotiations on the Uruguay Round trade agreements and new follow-on processes institutionalised in the WTO. Australian states and territories were not significantly involved in the negotiation or approval of these agreements, whose potential impact is beginning to emerge as follow-on implementation through WTO dispute settlement procedures. Several recent cases illustrate how state and territorial interests can be affected by these international agreements. The importation of Canadian Salmon into Tasmania and the importation of New Zealand apples in to Australia are recent examples of this fact (Klien, 2002) .
All federal systems must cope with the stresses that globalisation places on traditional political divisions of power and responsibility. Particular historical and structural features within those systems will help shape each country’s response. (Klien, 2002) .
World Trade Organisation (WTO) law is currently most restrictive for sectors that are now least technologically important or the developed nations, and potentially most important for developing countries. This means that, at least for the more established economies, the global trade rules offer ample room to move where it matters most. While WTO rules allow rich countries enough scope to promote new industry through science and technology programmes. However, for those countries still climbing the ladder of development the WTO agreements on Trade-Related Investment Measures (TRIMS) and Trade-Related Aspects of Intellectual Property Rights (TRIPS) reduces the developmental space that the General Agreement on Tariffs and Trade (GATT) formerly allowed .
One of the features of the 20th century was the emergence of the multinational corporations (MNCs) which made capital mobility possible and the transfer of technology feasible. Consequently, one of the phenomena of the dynamics of the economy of the 21st century is that the process of globalisation has created an environment in which corporations are almost forced to become MNCs and at the same time be able to compete with each other at the international level. Indeed, the movement of capital and technology have been one of the extraordinary developments of the 20th century as foreign direct investment (FDI) as well as investment in foreign financial markets, including stocks and bonds, have intensified. In effect, FDI has become more important than trade. Furthermore, in recent years, the foreign institutional shareholders which are investing in many companies in the developing countries are becoming another source of capital mobility between developed and developing countries. Thus, international capital flows and MNCs operations are making borders irrelevant .
In other words, in the presence of capital mobility and internationalisation of companies and competition, workers’ mobility and their cross-borders are not essential requirements of global integration. Furthermore, a number of studies demonstrate that once the economic and political conditions are favorable, MNCs are willing to invest and develop their business in different parts of the world. For instance, the massive investment in China by MNCs have created a great opportunity for workers to find employment within China rather than Chinese workers having to leave China in search of employment.
One possible explanation for the apparent effect of trade on growth is that it reflects institutional quality which is omitted from the regression (Rodrik, 2000) . According to this argument, improvements in institutional quality make countries more attractive as trading partners and also have direct effects on growth. This argument is neither implausible, nor is it inconsistent with trade also having a direct effect on growth. In (Dollar and Kraay, 2002b)
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