Medium and Long-run Consequences for Australia of an APEC Free Trade Area: CGE Analyses using the GTAP and MONASH Models (original) (raw)
The economic impact of the Australia–United States free trade agreement
The Australia–United States free trade agreement (AUSFTA) came into effect in 2005. It was the second preferential trade agreement that Australia signed, after its agreement with Singapore, and marked a departure from the primacy of Australia’s previous trade policy of unilateral and multilateral trade liberalisation towards preferential liberalisation. This paper assesses the economic effects of AUSFTA by applying the Productivity Commission’s gravity model of trade from its Bilateral and Regional Trade Agreements review. The evidence reveals AUSFTA resulted in a fall in Australian and US trade with the rest of the world — that the agreement led to trade diversion. Estimates also show that AUSFTA is associated with a reduction in trade between Australia and the United States.
Trade Policy in Australia and the Development of Computable General Equilibrium Modeling
Journal of Economic Integration, 2008
This paper discusses the early establishment in Australia of CGE modeling as a major policy tool. As background, it provides a short history of CGE modeling and describes the impetus to the field from: (a) the failure of less theoretically formal approaches; and (b) the recognition that this type of modeling can handle policy-relevant detail. The paper then argues that the CGE approach flourished in Australia because Australia had the right issue, the right institutions and the right model. The final section looks to the future of CGE modeling and the challenge of demonstrating that it really works.
General Equilibrium Assessments of Trade Liberalization in APEC Countries
1999
At the turn of the millenium, most of the APEC countries have embarked upon an ambitious plan for open multilateralism. Using an 18-region, 16-sector dynamic computable general equilibrium (CGE) model of the global economy, we evaluate the effects of APEC trade liberalization on member-country real GDP, sectoral output, exports and imports by the year 2020.
Building a better trade model to determine local effects: A regional and intertemporal GTAP model
Intertemporal CGE models allow agents to respond fully to current and future policy shocks. This property is particularly important for trade policies, where tariff reductions span over decades. Nevertheless, intertemporal CGE models are dimensionally large and computationally difficult to solve, thus hindering their development, save for those that are scaled-down to only a few regions and commodities. Using a recently developed solution method, we address this problem by building an intertemporal version of a GTAP model that is large in dimension and can be easily scaled to focus to any subset of GTAP countries or regions, without the need for 'second best' recursive approaches. Specifically, we solve using a new parallel-processing technique and matrix reordering procedure, and employ a non-steady state baseline scenario. This provides an effective tool for the dynamic analysis of trade policies. As an application of the model, we simulate a free trade scenario for Vietnam with a focus on the recent Trans-Pacific Partnership (TPP). Our simulation shows that Vietnam gains considerably from the TPP, with 60 of the gains realised within the first 10 years despite our assumption of a gradual and linear removal of trade barriers. We also solve for intertemporal and sector-specific effects on each industry in Vietnam from the trade agreements, showing an added advantage of our approach compared to standard static and recursive GTAP models.
2004
The signing of the long-awaited Australia-Thailand free trade agreement (ATFTA) on 19 October 2003 at the APEC Meeting in Bangkok, the emergence of new Asian regionalisms such as ASEAN+1 (China) and ASEAN+3 (China, Korea and Japan), and other bilateral, plurilateral and multilateral FTAs worldwide in recent years pose challenges and, at the same time, offer opportunities for member countries. These FTAs require not only ministerial or senior official dialogues or casual heuristic causation on their acceptability and viability but also serious analytical and historical data-based research into these important developments including their underlying fundamental trade-growth and growth-of-trade causation and impact on trade and closer economic relations. Existing methodologies (eg, CGE/GTAP and gravity theory) for this kind of study have their serious coverage and data restrictions. The paper focuses on the empirics of the ATFTA above by using a novel empirical approach that avoids the CGE/GTAP pitfalls and to provide (if any) supporting evidence, emerging challenges and promising opportunities for Australia and Thailand. Implications of the findings for economic integration, trade policy and prospects for trade and welfare improvement for Australia and Thailand in the medium and long terms will also be discussed.
Economic Record, 2003
An inter-temporal general equilibrium econometric model is developed for the Australian economy and used to simulate a trade policy. The model treats the prices of non-traded goods as endogenous and takes account of the inter-temporal optimality conditions implicit in the determination of saving, capital formation and the price of new investment. Utilising quarterly Australian data, the model is estimated by the method of full information maximum likelihood. Estimates of supply and demand elasticities are presented and discussed. Finally, the model is used to simulate the effects upon the economy over time of anticipated and unanticipated changes in the tariff rate.
A general equilibrium analysis of the China–ASEAN free trade agreement
We simulate the effects of the China-ASEAN free trade area (CAFTA) with a recently developed global trade, applied general equilibrium (AGE) framework. This AGE model is different from other comparative-static models in two important aspects: we explicitly model transnational supply chains and export processing zones in China. The CAFTA was signed in November 2002. China and ASEAN began lowering barriers to trade in 2005. Under the CAFTA, China, Indonesia, Thailand, the Philippines, Malaysia, Singapore and Brunei removed almost all tariffs in January 1, 2010. Some agricultural products and parts for motor vehicles and heavy machinery will still face tariffs in 2010, but those will gradually be phased out. ASEAN's newest members — Cambodia, Laos, Vietnam and Myanmar — will gradually reduce tariffs in coming years and must eliminate them entirely by 2015. Our analysis will focus at the sectoral and macro implications of CAFTA for China, selected ASEAN countries (i.e., Malaysia, th...
Non-tariff barriers in a non-tariff world Insights and Results from GTAP simulations
2006
With ever diminishing tariffs, especially in developed countries’ markets, the focus of trade policy makers and analysts is logically turning towards non-tariff barriers. There much remains to be done, both in terms of policy decisions to dismantle these barriers – the current WTO negotiations have hardly touched upon the subject –, and in analysing the impact of this on the economy, where arguably more has been attempted. It is well know that tackling non-tariff barriers poses many additional challenges for the analyst because of their diverse and complex nature, and the lack of available evidence, which all make modelling their effects more complicated. This poses also particular difficulties to Computable General Equilibrium (CGE) modelling, traditionally more comfortable in dealing with policies that have direct effects on prices. This paper contributes to fill up this analysis gap. It provides a quantification of the impact of liberalisation of non-tariff barriers (NTBs) at the...
The Singapore Economic Review
This paper uses the Global Trade Analysis Project (GTAP) Static model to predict the potential impact of economic growth in China on bilateral trade between China and Australia in 2025, under three different scenarios representing the business as usual, the successful reform and the stagnation cases, respectively. The results show that exports from Australia to China will continue to increase in both absolute and relative terms, irrespective of which economic growth path China takes, partly due to the strong complementary relationship of production between the two countries. The results also indicate that education service exports will become a new engine of bilateral trade in addition to agricultural and mineral products. Furthermore, comparing the results obtained from the three scenarios shows how successful reform will bring more benefits to both China and Australia in trade, which provides useful insights for policy making to facilitate bilateral economic relationship.