Estimating the impact of an Australia–China trade and investment agreement: 2009 economic modelling update
21 May 2009 publication
In late 2008 TheCIE was commissioned by the Australia China Business Council to investigate the possible economic impacts arising from Australia and China entering into a trade and investment agreement that saw comprehensive — in both pace and scope — trade and investment liberalisation.The economic modelling suggests that a bilateral trade and investment agreement would have a beneficial impact on both economies. For Australia, the economic impacts are estimated to be quite significant, with Australia’s GDP being estimated to be around 0.7 per cent higher than otherwise over the longer term, equivalent to around A$146 billion over 2010–30 in net present value terms. China’s GDP is estimated to be around 0.1 per cent higher than otherwise.
These gains reflect the liberalisation of barriers to bilateral merchandise and services trade and liberalisation of foreign direct investment. Importantly, the economic modelling takes into account the so-called ‘dynamic productivity’ effects of liberalisation. Greater import competition, increasing exports and learning by doing in export markets, and technology/know how transfer associated with increased foreign direct investment are all thought to drive productivity gains in the local economy. The dynamic productivity gains are thought to account for around 65 per cent of Australia’s GDP gains, and nearly 70 per cent of China’s GDP gains.
The full report can be downloaded from the Australia China Business Council website.
For further information about this work please contact Lee Davis at TheCIE Sydney.
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Sydney: TheCIE, Suite 1, Level 16, 1 York Street, Sydney NSW 2000
Photography by Image Makers