The Economic Impact of the Australia-United States Free Trade Agreement

AJRC Working Paper Series No. 01/2015

24 Pages Posted: 2 Feb 2015

See all articles by Shiro Patrick Armstrong

Shiro Patrick Armstrong

Australian National University (ANU) - Crawford School of Public Policy

Date Written: January 29, 2015

Abstract

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

Armstrong, Shiro Patrick, The Economic Impact of the Australia-United States Free Trade Agreement (January 29, 2015). AJRC Working Paper Series No. 01/2015, Available at SSRN: https://ssrn.com/abstract=2558855 or http://dx.doi.org/10.2139/ssrn.2558855

Shiro Patrick Armstrong (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

HOME PAGE: http://www.crawford.anu.edu.au/staff/sarmstrong.php

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