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

Yinhua Hua Mai (), Philip David Adams (), Mingtai Fan, Ronglin Li and Zhaoyang Zheng

Centre of Policy Studies/IMPACT Centre Working Papers from Monash University, Centre of Policy Studies/IMPACT Centre

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.

Keywords: China; Australia; FTA; investment liberalisation (search for similar items in EconPapers)
JEL-codes: D58 F15 F21 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp, nep-cna, nep-int, nep-reg and nep-tra
Date: Written 2005-10
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