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Assistance Conferred by Preferential Trading Agreements - Case study of the Australia-New Zealand CER Trade Agreement

Conference paper

This paper was presented by Paul Gretton and Jyothi Gali at the Industry Economics Conference 2005, Latrobe University on the 29 to 30 September 2005. The paper is based on Industry Assistance in Australia and New Zealand under the CER Agreement, a supplement to the research report, Rules of Origin under the Australia—New Zealand Closer Economic Relations Trade Agreement.

A preferential trade agreement such as the Australia–New Zealand Closer Economic Relations (CER) Trade Agreement affords preferential access to goods produced within the area of preference. The trade preferences expand the protected market available to domestic producers in both countries. Duty free access available to Australian producers in New Zealand can extend New Zealand tariff protection to Australian producers and vice versa.

This paper modifies the standard effective assistance framework to quantify the impact of tariff preferences on assistance to industry. Using this new methodology, it shows how preferences have increased the effective assistance to manufacturing industry on both sides of the Tasman. With tariff reductions in Australia and New Zealand, the extent of assistance has declined over time. The greatest advantage remaining accrues to TCF activities.

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Contents

1 Background

2 Framework for assistance measurement
Standard framework
Choice of benchmark price

3 Estimation of the assistance effects of CER
Estimating the impact of CER on assistance to outputs
Estimating the potential impact of CER on assistance to inputs
Estimating the impact of CER on effective assistance to industry

4 Results
Standard estimates of assistance to manufacturing
Impact of CER on tariff assistance to industry

5 Summing up

References

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