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Modelling the Potential Benefits of an Australia-China free Trade Agreement

Author

Listed:
  • Yinhua Mai
  • Philip Adams
  • Mingtai Fan
  • Ronglin Li
  • Zhaoyang Zheng

Abstract

In this study, we simulated three potential scenarios of an Australia-China Free Trade Agreement (FTA): removal of border protection on merchandise trade, investment facilitation, and removal of barriers to services trade. The analytical framework is a multi-country, multi-sector computable general equilibrium model, the Monash-Multi-Country (MMC) model. The FTA is found to deepen the two-country's economic partnership developed in the past fifteen or so years. On one hand, it sharpens the competitiveness of the Chinese manufacturing sector by reducing its costs of intermediate inputs. On the other hand, it raises the welfare of Australian consumers through improved terms of trade. In achieving a better utilisation of resources, adjustment of labour between sectors does occur. However, such adjustment is small in scale compared with what is occurring in the two countries amid globalisation without an FTA.

Suggested Citation

  • Yinhua Mai & Philip Adams & Mingtai Fan & Ronglin Li & Zhaoyang Zheng, 2005. "Modelling the Potential Benefits of an Australia-China free Trade Agreement," Centre of Policy Studies/IMPACT Centre Working Papers g-153, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-153
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    References listed on IDEAS

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    1. Elena Ianchovichina & Terrie Walmsley, 2005. "Impact of China's WTO Accession on East Asia," Contemporary Economic Policy, Western Economic Association International, vol. 23(2), pages 261-277, April.
    2. Mai, Yinhua & Horridge, Mark & Perkins, Frances, 2003. "Estimating the Effects of China’s Accession to the World Trade Organisation," Conference papers 331081, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Terrie L. Walmsley & Thomas W. Hertel & Elena Ianchovichina, 2006. "Assessing The Impact Of China'S Wto Accession On Investment," Pacific Economic Review, Wiley Blackwell, vol. 11(3), pages 315-339, October.
    4. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    5. Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Springer;Society for Computational Economics, vol. 9(2), pages 83-127, May.
    6. Yin Hua Mai, 2003. "Effects of Reducing Tariffs and Endogenous Productivity Growth," Centre of Policy Studies/IMPACT Centre Working Papers g-139, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    Cited by:

    1. Yinhua Mai, 2006. "Removing border protection on wheat and rice: effects on rural income and food securities in China," Centre of Policy Studies/IMPACT Centre Working Papers g-160, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Xiang, Hongjin & Kuang, Yanxiang & Li, Chenhua, 2017. "Impact of the China–Australia FTA on global coal production and trade," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 65-78.
    3. Chunding Li & Jing Wang & John Whalley, 2014. "Numerical General Equilibrium Analysis of China's Impacts from Possible Mega Trade Deals," NBER Working Papers 20425, National Bureau of Economic Research, Inc.
    4. Shunli Yao, 2007. "Chinese agricultural reform, the World Trade Organization and preferential trade negotiations," STUDIES IN TRADE AND INVESTMENT, in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 187-210, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    5. Russel Kingshott & Piyush Sharma & Peter Hosie & Nebojsa Davcik, 2019. "Interactive impact of ethnic distance and cultural familiarity on the perceived effects of free trade agreements," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 135-160, March.
    6. Mahinda Siriwardana & Jinmei Yang, 2006. "Economic Effects of the Proposed Australia-china Free Trade Agreement," EcoMod2006 272100084, EcoMod.
    7. Mahinda Siriwardana & Jinmei Yang, 2008. "GTAP Model Analysis of the Economic Effects of an Australia-China FTA: Welfare and Sectoral Aspects," Global Economic Review, Taylor & Francis Journals, vol. 37(3), pages 341-362.
    8. Wainio, John & Gehlhar, Mark J. & Dyck, John H., 2011. "Selected Trade Agreements and Implications for U.S. Agriculture," Economic Research Report 102754, United States Department of Agriculture, Economic Research Service.
    9. Yinhua Mai & Philip Adams, 2005. "Trade Liberalisation Scenarios for Wool Under an Australia-China Free Trade Agreement," Centre of Policy Studies/IMPACT Centre Working Papers g-156, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. Plummer, Michael G., 2006. "Toward Win-Win Regionalism in Asia: Issues and Challenges in Forming Efficient Trade Agreements," Working Papers on Regional Economic Integration 5, Asian Development Bank.

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    More about this item

    Keywords

    China; Australia; FTA; investment liberalisation;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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