Economic impacts of an Australia United States Free Trade Area
(Portable Document Format)
Leon Berkelmans, Centre for International Economics, Canberra
Lee Davis, Centre for International Economics, Sydney
Warwick McKibbin, Australian National University and The Brookings Institute
Andrew Stoeckel, Centre for International Economics, Canberra
- A free trade agreement (FTA) between Australia and the United States has been proposed. This study models the measurable economic gains from trade for this FTA. It should be noted at the outset that this is a study that has not sought to determine Australias negotiating priorities or positions.
- Both Australia and the United States gain from the formation
of a bilateral free trade agreement modelled here.
- Welfare (as measured by real household consumption) and production (as measured by GDP) rise for both countries over time, with the removal of barriers to trade assumed to be over a five year period.
- Using the APG-Cubed model, by 2006, when full implementation of the FTA is assumed, Australian welfare could be nearly 0.3 per cent above what it might otherwise be. This continues to rise to 0.4 per cent by 2010 and 0.5 per cent by 2020. For the United States, welfare peaks in 2006 at 0.016 per cent above what it otherwise might have been.
- Australian GDP could be 0.33 per cent higher by 2006. This gap would then continue to widen, levelling off by 2010 at 0.4 per cent of GDP an annual increase in that year of nearly US$2 billion.
- US GDP, even though rising only by 0.02 per cent above what it might otherwise be, still amounts to an annual increase of US$2.1 billion in 2006.