The Australia—China Free Trade Agreement: Some Modelling Issues

Abstract

General equilibrium modelling has been used to analyse many policy proposals. This article aims to help non-modellers assess general equilibrium analyses, particularly of a potential Australia—China free trade agreement (FTA). General equilibrium modelling is effective in studies of unilateral tariff reductions. However, most general equilibrium modelling assumes given technologies and information. For issues where the essence is technology transfer and new information, general equilibrium models can only produce results after most of the analysis has been done outside the model. In an Australia—China FTA, tariff cuts may be only a small part of the package. The main part may be goodwill, technology transfer and increased mutual awareness. Thus, for analysing FTAs, general equilibrium modelling is of limited value. The only conclusion for Australia that general equilibrium modelling of an Australia—China FTA can deliver with any certainty is that such an agreement will cause significant contraction in the Australian clothing industry.

Interactive impact of ethnic distance and cultural familiarity on the perceived effects of free trade agreements

“…In line with the first objective of the research (scale development and assessment) an initial battery of 44-items were identified and generated through an extensive search of the literature that provided guidance to potentially reflect perceived consequences of FTAs for organizations and its employees (e.g. Alam, 2015;Beyondblue, 2016;Chia, 2015;DFAT, 2005DFAT, , 2016bDixon, 2007;Frenk, et al, 1994;Gray & Slapin, 2012;Hayakawa, 2015;Islam & Islam, 2010;Jain & McCarthy, 2016;Kim, 2011;Leahy et al, 2008;May et al, 2005;Santos, 1992) Items in the well-being sub-scale represent the key outcomes from the internationally recognized Australian organization Beyondblue (https://www.beyondblue.org.au) that promotes good mental health and tackles stigma and discrimination (Beyondblue, 2016). For each item in the FTA consequences instrument, respondents were asked their views using a seven-point Likert type scale about the extent they agreed or disagreed with each item, using 'strongly disagree' [1] and 'strongly agree' [7] as anchors.…”

“…While existing studies model the impact of FTAs mostly from an economic perspective (e.g. Baier & Bergstrand, 2004;Dixon, 2007) this research establishes that they comprise a wide array of perceived consequences for an economy, and, its industries, organizations and/or individuals. These include both positive (advantages) and negative (disadvantages) dimensions that have a bearing upon various attitudes towards these forms of agreements.…”

“…We conduct a systematic review of selected and representative studies in this domain to take a stock of the current knowledge base and identify the gaps (Gaur & Kumar, 2018). Prior research generally uses an economic perspective to reveal how 'trade flows' stemming from FTAs benefit particular sectors, industries and/or national economies (Dixon, 2007;Hertel et al, 1997;Li, Wang, & Whalley, 2016). Typically, these and other studies have shown how the introduction and/or success of FTAs are largely a function of the political and economic benefits that can be extricated from entering into such arrangements.…”

“…Hertel et al, 1997;Li, Wang, & Whalley, 2016). This powerful quantitative technique can be used to trace connections between different parts of an economy and is based upon a range of assumptions and factor inputs that need to be identified and quantified (Dixon, 2007). These inputs generally include the awareness of FTA benefits, understanding between the concerned parties in both countries, and, trust and reliance directed towards the partner countries and their respective organizations.…”

“…Gaur, Delios, & Singh, 2007;Klein, Ettenson, & Morris, 1998;Shimp & Sharma, 1987). Moreover, these could possibly account for the many 'subjective factors' that also need to be taken into account when assessing FTAs' but can only occur "outside of the model" (Dixon, 2007;p.632).…”