Financing Foreign Trade

Financing Foreign Trade

The promising prospects of Asian economies and to be specific China has endeared many business enterprises the world over to trade with it. China's trade volume totals 1.4 trillion U.S. dollars while its export amounts to 762 billion U.S. dollars (Alomar, 2007). This paints a rosier picture of foreign trade. That is not a true representation especially for small businesses that undertake to engage in foreign trade. Such businesses are faced with myriad challenges ranging from tedious paper work, regulatory issues, and inherent risks (Alomar, 2007). Some challenges come in the context of difficulty to secure reasonable credit terms locally, risky payment processes, and supply chain management issues (Alomar, 2007). The essay ventilates the main products traded between Australia and the United States and major issues involved in financing trade between Australia and the United States.

The bilateral trade relationship between United States and Australia is informed by the fact that Australia has interest in U.S. positions just like the United States has Interest in Australian positions. Some of the goods traded between these two countries include chicken, pork, Florida citrus, stone fruits, corn apples, Californian table grapes (Oxley, 2001). These are taken exported to Australia. Other products that are traded include sugar, dairy, cotton, foreign built and owned ships for seaborne commerce, and beef. The Australians producers export Beef, Dairy, Tobacco, Cotton, Peanuts, and Avocados free of duty to the United States (Oxley, 2001). Textile and apparel is also trade between these two countries.

The United States government promotes exports by providing credit, finance, and insurance programs that are administered by the Export-Import Bank, the Department of Agriculture, and the Overseas Private Investment Corporation (OPIC). Department of Commerce through International Trade Administration promotes the exports of United States goods and services (Congressional Research Service, 2011). The Obama administration has since introduced the National Export Initiative (NEI) to look into exportation of goods and services by small and medium sized companies. The NEI seeks to double the U.S. exports to generate new jobs. It improves coordination and funding of federal export promotion activities and provides greater U.S. export financing (Congressional Research Service, 2011). The Export- Import bank provides direct loans, guarantees, and insurance to help finance U.S. imports when the private sector is either unwilling or unable to do so. The OPIC provides political risk insurance and finance to support U.S. investment in developing countries (Congressional Research Service, 2011). The Ex-Im Bank and OPIC address market failures by helping to offset foreign governments (in this case Australia) export promotion efforts. Regarding financing of AUSFTA (Australia United States Free Trade Agreement) a non-discriminatory environment was created. Financing of the foreign trade was defined with respect to all insurance and insurance related services; banking and other financial services; and services incidental or auxiliary to a service of a financial nature (Congressional Research Service, 2011). The scope of application is applied to measures by either country that impact financial institutions located in the territory of the country controlled by persons of other country; investors from let's say U.S. Or Australia who have invested in financial institutions located in either the U.S. Or Australia; the investments of investors of the other country in financial institutions located in that country; and finally, cross-border trade in financial services by service supplies of the other country (Congressional Research Service, 2011).