Do Free Trade Agreements Increase Australian Trade: An Application of Poisson Pseudo Maximum Likelihood Estimator?

Abstract

This article examines the effects of Australia's free trade agreements on trade creation and export diversion of the total as well as sectoral trade. The empirical analysis implemented through Poisson pseudo maximum likelihood estimator with time and country-specific effects. Results showed the standard gravity variables are highly significant with the expected signs. Overall, the trade creation effects were greater than intra-block export diversion effects of FTAs on Australia’s total trade. The trade creation effects of FTAs on the agricultural sector seems higher than the nonagricultural sector in Australia after deducting intra-block export diversion effects in the respective sectors.

Keywords:

• Australia
• dynamic effect
• gravity model
• panel data
• sectoral effect
• trade agreements

Disclosure statement

This paper has no any conflict of interest.

Data availability statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

Notes

1 It is a free trade agreement (FTA) between Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam.

Additional information

Funding

This study was made possible by the generous support of the Australian Government, Department of Education and Training under Endeavor Research Fellowship (Post-doctoral), recipient ID number [6636-2018]. The contents are the responsibility of the authors and do not necessarily reflect the views of the Australian Government.