Providing Duty-Free Access to Australian Markets for Least-Developed COuntries: a General Equilibrium Analysis

Xiao-guang Zhang and George Verikios
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Xiao-guang Zhang: Australian Productivity Commission

No 06-09, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: The Doha ministerial declaration commits industrialised countries to liberalising access for least-developed countries (LDCs) to their markets. Preferential trade policies have diverse impacts on the initiating country and its trading partners. These effects are of concern to scholars and policy makers. We use Australia as a case study to quantify the direct and indirect effects of providing preferential access to LDC imports entering Australian markets, using a global general equilibrium model of the world economy. LDCs are projected to benefit; Australia is predicted to lose, reflecting the dominance of trade diversion over trade creation effects and adverse terms of trade effects. However, the magnitude of the adverse effect on Australia is small. If one was to view this initiative as an exercise in foreign aid, it suggests that Australia can provide a significant benefit to the poorest nations with which it trades, at almost no cost to itself.

Keywords: economic development; numerical simulation; preferential trading arrangements; trade policy (search for similar items in EconPapers)
JEL-codes: C68 F14 O24 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006
New Economics Papers: this item is included in nep-cmp
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