The proposed Australia-China Free Trade Agreement: global and country-specific effects

Abstract

Australia has signed Free Trade Agreements (FTAs) with Singapore, Thailand and the USA. This paper analyses the economic effects of the proposed FTA between Australia and China, drawing lessons from simulations undertaken using the GTAP model. The paper provides quantitative evidence concerning the welfare impact of the FTA with special reference to trade creation and trade diversion. Examining responses of various production sectors identifies the structural changes that may take place in the two economies over the long run. The findings may shed light on the debate over the potential incentives to participate in the agreement.