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The Trade Effects of Preferential Arrangements: New Evidence from the Australia Productivity Commission

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  • Dean A. DeRosa

    ()
    (ADR International Ltd)

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    Abstract

    This paper critically examines “new” evidence from the gravity model that indicates the majority of preferential trading arrangements (PTAs) today are predominantly trade diverting. This new evidence on trade diversion was presented in a recent Australia Productivity Commission (APC) working paper. Although no major faults are found in the methodology of the APC study, the present analysis finds the opposite conclusion—that the majority of current PTAs are predominantly trade creating—when a variant of the gravity model formulated by Andrew Rose is applied to upto- date regression data using a variety of econometric methods, including the Tobit regression method employed by the APC study.

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    File URL: http://www.petersoninstitute.org/publications/wp/wp07-1.pdf
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    Bibliographic Info

    Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP07-1.

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    Date of creation: Jan 2007
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    Handle: RePEc:iie:wpaper:wp07-1

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    Related research

    Keywords: trade policy; preferential trading arrangements; free trade agreements; gravity models;

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