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International Trade (Unit 3 Topic 1)  

Australia Composition of Trade 1963 - 2026 :: interactive graph

What is "composition of trade"?

Composition of trade refers to the mix of goods and services that a nation exports and imports.

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How is it represented in data and graphs?

The graphs generally reflect the data as the percentage (%) that a particular industry constitutes as a total of export or import trade. You will most often see time series graphs, which help us to interpret changes over time ("temporal change" if you want to use some fancy words). Sometimes you might see a pie graph which will give you the information for a point in time. 

It is important to remember that this shows the industry share of exports and imports. It doesn't show the total export volumes (which are likely rise across time aross out industries).

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Why is understanding the composition of trade important? 

Interpreting temporal change in composition of trade helps us to identify structural changes in the types of industries in global economies. We can spot emerging industries, as well as industries in decline. We can also identify changes in demand for different types of exports and imports, as well as changes in supply. So then we can identify the industries where a nation may have a comparative and / or competitive advantage. 

Creating discerning explanations of economic data in a written response (exam or research report)

Imagine you have to answer this question: Explain the effects of the changes in Australia's composition of trade over time

In QCE (Queensland) economic syllabus,  there is a grading criteria for  'discerning explanation of economic relationships'. This idea is important in all economics written responses. So let's try and get 'discerning': 

  • What are the theoretical positive effects of the changes that you have identified in the data? 

  • What are the theoretical negative effects of the changes? 

  • And then what data could help you to expand your response and provide a deep discussion and justification of outcomes? 

 
Example: Australia has high share of total exports in resources. Most likely flowing to China as the major customer.

  • Positive: Likely increase in productive capacity and output, utilising our abundance of 'land' factors of production, which creates employment and increases national income in high productivity industries. 

  • Negative: Heavy reliance on a particular export industry - what happens to our total export volume when demand for resource exports decreases? How does that affect GDP? (Hint: have a look at the decline in Australia's GDP around 2016 when the Chinese economy experienced contraction (or 2020 during the Covid pandemic). 

  • What other positives and negatives can you think of, and what additional economic information would you need to access to help to expand your response and provide deep discussion of outcomes?

 

Now over to you:​
Use the method of analysis demonstrated above for export composition of trade and make the analysis for the import data. 

  • Identify trends, patterns, similarities and differences

  • Make sure that you are clear on the big changes and compare and contrast to the small changes ('discerning')

  • Quantify and calculate (eg % change, range, $ values, rate of change, volatility etc)

  • Explain the positive and negative effects (both theoretical effects, and any effects reflected in data).

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