"IMF
Marks Down US Free - Trade Deal"
November 17, 2003, Australian Financial
Review, By Mark Davis
As negotiations for a free-trade deal
with the United States move into their final stages, research by the
International Monetary Fund has concluded that such an agreement would
be a negative for the Australian economy.
Economic modelling by IMF researchers
showed that a free-trade deal with the US would shrink Australia's gross
domestic product marginally because of the loss of trade with Japan,
other Asian countries and Europe.
In a working paper published last month,
IMF researchers Alvin Hilaire and Yongzheng Yang estimated that an FTA
that dismantled all trade barriers between Australia and the US would
boost Australian exports to the US by $US2.97 billion ($4.11 billion)
a year.
But they also found that an FTA would
increase US imports to Australia by $US5.25 billion a year and would
cut imports from other countries by $US2.9 billion.
The total impact on the Australian economy
was predicted to be a small 0.03 per cent cut in GDP, while the impact
on the US economy was negligible.
"In the context of fairly low existing
tariffs, the simulations point to relatively small overall welfare and
output effects of an Australia-US agreement on the partners," the
paper said.
"The slightly negative impacts
on Australia are related to trade diversion from Japan, Asia and the
European Union in machinery and equipment, basic manufactured products
and textiles."
But the paper said that despite the
overall negative impact on theAustralian economy, local agricultural
producers stood to gain a significant new export market in the US, especially
for processed crops and meat and dairy products.