The Trade Effects of Preferential Arrangements: New Evidence from the Australia Productivity Commission
Dean A. DeRosa
ADR International, Ltd.
IIE Working Paper No. 07-01
This paper critically examines "new" evidence from the gravity model that indicates the majority of preferential trading arrangements (PTAs) today are predominantly trade diverting. This new evidence on trade diversion was presented in a recent Australia Productivity Commission (APC) working paper. Although no major faults are found in the methodology of the APC study, the present analysis finds the opposite conclusion - that the majority of current PTAs are predominantly trade creating - when a variant of the gravity model formulated by Andrew Rose is applied to up-to-date regression data using a variety of econometric methods, including the Tobit regression method employed by the APC study.
Number of Pages in PDF File: 61
Keywords: trade policy, preferential trading arrangements, free trade agreements, gravity models
JEL Classification: F13, F15, F17working papers series
Date posted: May 24, 2007
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