Impact of APEC trade liberalisation on Sino-Australian Bilateral Trade

Abstract

This paper uses the global trade analysis project (GTAP) model to simulate the effect of APEC trade liberalisation on Sino-Australian bilateral trade. By comparing the development of Sino-Australian bilateral trade in the short run and the long run, the analysis depicts a whole set of bilateral trade determination mechanisms. The results indicate that, as economic cooperation within APEC increases, trade between Australia and China will increase, especially in agriculture and textiles. The bilateral trade pattern may follow the principle of comparative advantage and the terms of trade may improve for both countries. The results for the short term are very different from those for the long term, indicating that bilateral trade in open economies is more than just an ‘external sector’ affair.