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Australia's Recent FTA s: Insights from Theory and Modelling on Rationale, Welfare Gains and Political Heat
Author(s) -
Dixon Peter B.
Publication year - 2015
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12116
Subject(s) - opposition (politics) , china , welfare , economics , government (linguistics) , politics , international trade , international economics , public economics , political science , market economy , law , linguistics , philosophy
This paper uses the theory of efficiency gains and terms‐of‐trade losses to explain the proliferation of free‐trade agreements ( FTA s). It then focuses on Australia's FTA s with Japan, Korea and China in a discussion of gains from FTA s. Continuing that focus, the paper explains why FTA s (and trade policies more generally) are politically divisive. With regard to the China‐Australia FTA the conclusions reached in the paper are: (1) There will be a modest but worthwhile welfare gain for Australia; (2) The gain will be mainly from terms‐of‐trade improvement, not employment; (3) The Government is exaggerating the likely gain; (4) There will be losers as well as winners; (5) The Opposition is well within its rights to question labour‐market aspects of the agreement; and (6) The formation of FTA s is likely to be a continuing process and the Government would best serve the Australian public by encouraging evidence‐based discussion and providing answers to legitimate queries.