Dynamic Gains and Market Access Insurance: Another Look at the Australia–US Free Trade Agreement
Richard Harris and
Peter Robertson ()
Australian Economic Review, 2009, vol. 42, issue 4, 435-452
We revisit the benefits of the Australia–US Free Trade Agreement (AUSFTA) and, in particular, evaluate the insurance value of this agreement in the face of regional and global trade wars. The insurance benefits are quantified by comparing the AUSFTA against alternative scenarios where some or all regions raise tariffs by 10 percentage points. Issues regarding expectations and the timing of potential trade wars are considered by using a dynamic model. The potential gains relative to these alternative trade war status quo scenarios are found to be as much as four times larger than the traditional efficiency gains.
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