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.

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.

Australia-Thailand Free Trade Agreement: Challenges and Opportunities for Bilateral Trade Policy and Closer Economic Relations

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.

Quantitative impacts of alternative East Asia Free Trade Areas: A Computable General Equilibrium (CGE) assessment

Journal of Policy Modeling, 2010

This paper analysis the relative economic effects of four East Asian Free Trade Area (FTA) options. A particular feature of the model, which is an extension from a standard CGE model, is the introduction of unemployment with the intention of assessing the changes in the real wage and unemployment in each region under each of those options. The simulation results suggest that a preferred strategy for member regions is the "East Asia FTA" multilateral agreement, 1 which would yield higher gains in welfare and greater economic impacts than any of the other possible bilateral agreements-ASEAN-China, ASEAN-Japan and ASEAN-Korea. However, such an 'ideal' multilateral economic integration might be deterred by the uneasy relationship between Japan and other East Asian nations, reflecting their economic and political differences.

ESA1998: Australia, ASEAN, APEC, stabilisation and economic growth, 1998 Conference of Economists, 27th Annual Conference of the Economic Society of Australia, Sydney University.

1998

Australia is a small open economy contributing less than two per cent to the total world volume. There has been significant structural change in the trade pattern in the last thirty years. The growth of international trade has been at the core of the achievement of industrialisation of less developed economies. Industrial economies have invested directly in those economies with the skill resources and spare capacity. The cost advantages of globalisation may arise from factor availability or in recent times, from incentives offered by accommodating industrial policy. The recognition of the benefits of efficient international trade has been a basis of the GATT and WTO negotiations. The uniform movement towards lower trade distortions in general is observed as the reduction of tariffs. There is general agreement that this process will continue in the long term. This is an example of government policy, arising from an international forum and being implemented in the home market. The key players of the market operate in government, corporate, financial and labour areas. International firms operate along the lines of scaled up domestic firms, as multinational companies. The international legal code has evolved to account for different rules of origin. We may consider these key issues:

The Impact of ASEAN’S FTAs with China, Japan, Korea and Australia-New Zealand: An Analysis in GTAP Framework

2018

ASEAN is one of dynamic and fast growing economic regionalism. ASEAN has shown rapid growth in trade liberalization with the free trade agreement (FTA), established with China Korea, Japan, Australia and New Zealand. The aim of this research is to investigate the effects of the free trade agreement between ASEAN-China (ACFTA), ASEAN-Korea (AKFTA), ASEAN-Japan (AJCEP), ASEAN-Australia-New Zealand (AANZFTA). The Computable General Equilibrium (CGE) model and the Global Trade Analysis Project (GTAP) database version 9 are applied with the partial and full liberalization scenarios. The GTAP simulations results shows that ACFTA provides a greater positive impact than the other FTAs for each region. In the long run, the welfare of each region has increased, the trade balance has decreased, the volume of exports and imports has increased.

Trade Openness: An Australian Perspective

Australian Economic Papers, 2006

Australia's external trade is relatively low compared with the size of its economy. Indeed, Australia's openness ratio (exports plus imports as a proportion of GDP) in 2002 was the third-lowest among the 30 OECD countries. This paper seeks to understand Australia's low openness by analysing the empirical determinants of aggregate country trade. We begin by estimating a standard gravity model of bilateral trade. Although the model appears to fit the bilateral data very well, it does a relatively poor job at fitting countries' aggregate trade levels, with different methodologies sometimes providing highly conflicting results. The focus of the paper is an equation for country openness. Our equation explains a substantial amount of the variation in how much countries trade using a small number of explanatory variables. We find that the most important determinants of openness are population and a measure of distance to potential trade partners. Countries with larger populations trade less, as do countries that are relatively more remote. Furthermore, after controlling for trade policy there is little evidence of a positive correlation between openness and economic development. While gravity models suggest Australia trades much more than expected, the openness equation suggests that its level of trade is relatively close to what would be expected. The most important factors in explaining Australia's low openness ratio are its distance to the rest of the world, and to a lesser extent its large geographic size.

ORANI-G: A general equilibrium model of the Australian economy

ORANI is an applied general equilibrium (AGE) model of the Australian economy which is widely used by academics and by economists in the government and private sectors. We describe a generic version of the model, ORANI-G, designed for expository purposes.