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Providing Duty-Free Access to Australian Markets for Least-Developed COuntries: a General Equilibrium Analysis

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Author Info

  • Xiao-guang Zhang

    (Australian Productivity Commission)

  • George Verikios

    () (Department of Economics, The University of Western Australia)

Abstract

The Doha ministerial declaration commits industrialised countries to liberalising access for least-developed countries (LDCs) to their markets. Preferential trade policies have diverse impacts on the initiating country and its trading partners. These effects are of concern to scholars and policy makers. We use Australia as a case study to quantify the direct and indirect effects of providing preferential access to LDC imports entering Australian markets, using a global general equilibrium model of the world economy. LDCs are projected to benefit; Australia is predicted to lose, reflecting the dominance of trade diversion over trade creation effects and adverse terms of trade effects. However, the magnitude of the adverse effect on Australia is small. If one was to view this initiative as an exercise in foreign aid, it suggests that Australia can provide a significant benefit to the poorest nations with which it trades, at almost no cost to itself.

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File URL: http://www.biz.uwa.edu.au/home/research/discussionworking_papers/economics?f=147012
File Function: First version, 2006
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Bibliographic Info

Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-09.

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Length: 24 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:uwa:wpaper:06-09

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Keywords: economic development; numerical simulation; preferential trading arrangements; trade policy;

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  1. McDougall, Robert, 2002. "A New Regional Household Demand System for GTAP," GTAP Technical Papers 942, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Bhagwati, J. & Panagariya, A., 1996. "Preferential Trading Areas and Multilateralism: Strangers, Friends or Foes?," Discussion Papers 1996_09, Columbia University, Department of Economics.
  3. repec:fth:coluec:9596-04 is not listed on IDEAS
  4. Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Society for Computational Economics, vol. 9(2), pages 83-127, May.
  5. Robinson, Sherman & Thierfelder, Karen, 1999. "Trade liberalization and regional integration: the search for large numbers," TMD discussion papers 34, International Food Policy Research Institute (IFPRI).
  6. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June.
  7. Brown, Drusilla, 1989. "A computational analysis of Japan's generalized system of preferences," Journal of Development Economics, Elsevier, vol. 30(1), pages 103-128, January.
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