The Economic Impact of the Australia-United States Free Trade Agreement
AJRC Working Paper Series No. 01/2015
24 Pages Posted: 2 Feb 2015
Date Written: January 29, 2015
The Australia-United States free trade agreement (AUSFTA) came into effect in 2005. It was the second preferential trade agreement that Australia signed, after its agreement with Singapore, and marked a departure from the primacy of Australia’s previous trade policy of unilateral and multilateral trade liberalisation towards preferential liberalisation. This paper assesses the economic effects of AUSFTA by applying the Productivity Commission’s gravity model of trade from its Bilateral and Regional Trade Agreements review. The evidence reveals AUSFTA resulted in a fall in Australian and US trade with the rest of the world — that the agreement led to trade diversion. Estimates also show that AUSFTA is associated with a reduction in trade between Australia and the United States.
Keywords: Preferential trade agreements, Australia-US free trade agreement, trade diversion, investment agreements
JEL Classification: F13, F14
Suggested Citation: Suggested Citation