Impact of regional trade agreements on commodity trade between China and Australia

Transcription

1 Impac of regional rade agreemens on commodiy rade beween China and Ausralia Tianshu Liu, Xuean Jiao * May 2006 Absrac This paper aims o analyse he impac of curren regional rade agreemens on commodiy rade beween China and Ausralia. The paper esimaes daa from , using China s commodiy expors and impors o and from Ausralia as dependen variables o do a parial equilibrium analysis. Economic variables ha explain he economic condiion in China are esimaed. Addiional dummy variables ha are relaed wih China s membership in a regional rade agreemen are inroduced as dummy variables ino he model. The regional rade agreemens of EU, NAFTA, CER, ASEAN and APEC are esimaed in he model. The resuls show ha he incepion of a regional rade agreemen, especially NAFTA and APEC, has affeced China s commodiy rade wih Ausralia o some exen. Key words: Regional rade agreemens, commodiy rade, parial equilibrium analysis * Tianshu Liu: School of Economics, Finance and Markeing, RMIT Universiy, Melbourne, Ausralia. ianshu.liu@rmi.edu.au Xuean Jiao: School of Markeing, Monash Universiy, Melbourne, Ausralia. jiaoxuean@homail.com 1

2 1. Inroducion Since he beginning of he weny-firs cenury many counries has ended o pursue regional or bilaeral rade and economic cooperaion wih heir major rading parners. China and Ausralia are also involved in his aciviy. China has srenghened is rade and economic relaionship wih Ausralia since 1973 when he Trade Agreemen beween he Governmen of Ausralia and he Governmen of he People s Republic of China was carried ou (Deparmen of Foreign Affairs and Trade and Minisry of Commerce of China 2005). Furher bilaeral agreemens including reciprocal encouragemen and proecion of invesmens, cooperaion in cusoms, agriculural producs rade, saniary and phyosaniary regulaions, services rade and energy resources have been signed and implemened in he las hiry-wo years which enhance boh counries rade relaionship. This relaionship is furher improved by wo counries commimen in regional rade and economic developmen in he Asia-Pacific Economic Cooperaion (APEC). Wih China s accession o WTO in December 2001, China begins o pursue mulilaeral preferenial rade as Ausralia, represening a furher cooperaion wih Ausralia in he world level. Simulaneously bilaeral rade and economic relaionship beween boh counries has achieved grea success when Trade and Economic Framework beween Ausralia and he People s Republic of China was signed in The expeced fuure success of negoiaion on a bilaeral free rade on he basis of his Framework will furher push wo counries rade and economic cooperaion o a summi. As a resul of he implemenaion of hese agreemens, he wo way rade beween China and Ausralia has increased rapidly in a large amoun. China s oal merchandise rade wih Ausralia has increased from US$1287 million in 1980 o US$8453 million in 2000, averagely increasing percen per annum. China s merchandise expors o Ausralia increase percen annually from US$224 million in 1980 o US$3574 million in 2001; and is merchandise impors from Ausralia increase percen per annum from US$1063 million in 1980 o US$5024 million in s is he fases growing period for wo counries rade, wih an average annual increase in China s oal merchandise rade, expors and impors wih Ausralia larger han average per annum increase of hose wih he world. The grea success in wo counries merchandise rade improves boh of hem as a major rading parner o each oher. In 2003 China has become Ausralia s hird rading parner, second expors desinaion, and hird impors source; and Ausralia is China s welfh rading parner, welfh expors desinaion and elevenh impors source. I is imporan for boh counries o make heir merchandise rade a furher success in he fuure. As China and Ausralia ends o develop regional rade and economic cooperaion, his paper sudies wha is he impac of curren regional rade agreemens on merchandise rade beween China and Ausralia. Secion 2 explains a parial equilibrium model ha is sudied in his paper and is explainable variables. Secion 3 explains regression resuls, and Secion 4 concludes. 2

3 2. Theoreical analysis 2.1 Deermined facors Several facors reflecing a counry s economic condiion have been considered affecing rade value o some exen, including gross domesic produc (GDP), oal populaion, disance beween wo counries, and exchange rae changes. As larger economies could rade more han smaller ones, rade flows are considered o be larger beween counries wih higher or increased gross domesic produc and per capia GDP, as wealhier economies could produce and rade more han poorer ones. Hence GDP is a crucial deerminan of a counry s rade volume. I is considered posiively impaced on rade, i.e. a large GDP will enable China o rade more wih Ausralia. An increase in populaion is expeced o reduce rade due o a large domesic marke ha will enable he realizaion of producion economies of scale. Thus populaion has a negaive impac on rade, which indicaes ha a counry ends o rade inside wih a large populaion. Physical disance beween pairs of counries is considered anoher crucial facor affecing rade flows. The reason is ha long disance incurred higher ransporaion cos will increase producs price ha reduce heir compeiiveness, hus has a negaive impac on rade volume. Frankel (1997) highlighed his problem in his sudy and discussed is impac in his model in analysing he impac of RTAs. A relaive change in exchange rae is hough o affec a counry s impor and expor volumes because i can increase or decrease commodiy prices couned in eiher naional or foreign currency. Depreciaion of a counry s currency can enable his counry o expor more and impor less; on he oher hand, appreciaion can enable a counry o expor less and impor more. Furhermore, exchange rae can also be uilised o analyse a hird counry effec, which indicaes ha he compeiiveness from a hird counry will pu an addiional effec on wo counries bilaeral rade besides heir economic siuaions (Bayoumi and Eichengreen, 1997). In his paper if he exchange rae is geing larger, i means Renminbi is depreciaed compared wih U.S. Dollars. Therefore i has a posiive relaionship wih China s expors o Ausralia and negaive relaionship wih China s impors from Ausralia. Regional rade agreemens end o liberalize rade among heir member counries, eiher cuing off or diminishing cusoms duies. They also pursue o formalize domesic regulaions ha proecing heir rade from ohers and foreign direc invesmen. Thus i is undersandable ha rade beween member counries in a RTA can be increased by he implemenaion of his RTA. Therefore RTAs are seleced o pu in he model as dummy variables o sudy heir impac on changes of rade volume beween heir members and non-members since 1970s. Many researchers, such as Aiken 3

4 (1973) and Braga, Sadafi and Yeas (1994), Bayoumi and Eichengreen (1997), Frankel (1997), Soloaga and Winers (2001; 2004; 1986), have inroduced RTAs in order o achieve his goal. In his paper he RTA dummies of EU, CUSFTA, NAFTA, ASEAN and CER are considered o have a posiive impac on China s rade wih Ausralia, where member counries in hese regions inend o rade wihin he region, while pushing China o rade more wih oher non-members. Therefore posiive coefficiens are expeced for hese RTAs. APEC s developmen will enable China rading more wih oher members; hence a posiive coefficien is expeced. 2.2 Model The model esimaed in his paper is parial equilibrium model, using logarihms of expors and impors as dependan variables in equaion 1 and 2 respecively, and logarihms of GDP, disance, populaion and exchange rae as explainable variables, and RTAs including EU, CUSFTA, NAFTA, ASEAN, CER and APEC as dummy variables. ln( DEXPi ) = c1 + c2 lngdp + c3 ln dis an ce + c4 ln populaion + c5 lnexchangerae + c EU + c CUSFTA + c NAFTA + c ASEAN + c CER + c APECP + ε (1) ln( DIMPi ) = c1 + c2 lngdp + c3 ln dis an ce + c4 ln populaion + c5 lnexchangerae + c EU + c CUSFTA + c NAFTA + c ASEAN + c CER + c APECP + ε (2) In hese wo equaions DEXP and DIMP are China s expors and impors by commodiy o and from Ausralia respecively (adjused by GDP deflaor). GDP is China s gross domesic producs a consan 1990 price. Disance is he disance beween capial ciies of China and Ausralia. Populaion is China s populaion. Exchange rae is defined as one U.S. Dollar equals o a number of Renminbi. T is ime period, and i sands for differen classified commodiies. EU, CUSFTA, NAFTA, ASEAN and CER are regional economic inegraion excluding China as heir member. They ake he value of 1 when hey form a regional economic agreemen, indicaing he impac of heir aggregaion on China s rade wih Ausralia, and zero oherwise. APEC is he only RTA China paricipaes in. I is defined differenly from oher RTA dummies. As China became a member of APEC in 1991 and he available commodiy rade daa is from 1992, i is incredible o esimae he impac of APEC when i is defined he same as oher RTA dummies. Therefore a subsiue dummy definiion is adoped here. Lu poins ou ha APEC s developmen over hese fifeen years (unil 2004) can be separaed ino wo periods: he firs period is prosperous developing period from 1989 o 1997, and he second period is adjusing slow developing period from 1998 up o now. The 1997 Asian financial crisis is he separaed year. During he firs eigh years, APEC acively promoed liberalizing rade and invesmen in Asia- Pacific region pushed by 1994 Bogor Goals, 1995 Osaka Acion Agenda, and 1996 Manila Acion 4

5 Plan. However as he 1997 Early Volunary Secoral Liberalizaion ha ends o liberalize rade in secor level was negaively affeced by he 1997 Asian financial crisis, APEC eners slowly developing period, slowing down is rade and invesmen liberalizaion progress. Up o now APEC has no ye come ou of he low ide. In regard o differen developing period, I choose o separae APEC developmen ino wo periods as a dummy variable, i.e , and I akes he value of 1 for he former period and zero for he laer period, indicaing he high speed developmen of APEC has a posiively significan impac on China s rade wih Ausralia. Thus a posiive relaionship is expeced beween he dummy and dependen variables. 2.3 Daa source China s merchandise rade wih Ausralia daa are obained from SourceOECD Inernaional Trade by Commodiies Saisics from 1992 o 2004 in housand U.S. Dollars. The daa are classified according o Sandard Inernaional Trade Classificaion sysem Revision 2. In his paper 1-digi subheading including 10 broad classified commodiies and 2-digi subheadings commodiies are esimaed in he model. GDP and exchange rae daa are colleced from Unied Naions Naional Aggregae Daabase. The disance (measured in kilomeres) beween Beijing and Canberra is obained from Direc-Line Disances (Inernaional Ediion) of Fizparick and Modlin. Expors, impors and GDP are deflaed by GDP deflaor which is obained from Unied Naions daabase. 3. Empirical resul The daa are esimaed using pooled leas squares mehod from 1992 o Boh expors and impors are esimaed as a whole and by commodiy separaely. In he model esimaion, only five variables can be worked ou, including GDP, populaion, exchange rae, NAFTA and APEC; oher variables are finally excluded from final regression of he model. Consequenly he resuls show only hese five variables. When regressions are made by using he whole pooled daa, i is clear ha here are no any paricular facors ha have any saisical significan impac on China s expors o and impors from Ausralia, including he formaion of NAFTA and differen developmen of APEC (Table 1 and Table 2). However when considering deailed classified commodiy, he resuls can be shown and explained by he following. 3.1 Empirical resuls of China s expors o Ausralia Generally speaking, he coefficiens of GDP are found o have expeced posiive sign in nine ou of en 1-digi commodiies, including classificaion 0 Food and live animals, classificaion 2 Crude maerials, inedible, excep fuels, classificaion 4 Animal and vegeable oils, fas and waxes, classificaion 5 Chemicals and relaed producs, classificaion 6 Manufacured goods classified 5

6 chiefly by maerial, classificaion 7 Machinery and ranspor equipmen, classificaion 8 Miscellaneous manufacured aricles, and classificaion 9 Commodiies and ransacions no elsewhere classified; only he coefficien of classificaion 3 Mineral fuels, lubricans and relaed maerials is negaive. Excep classificaions 1 and 3, he coefficiens of GDP of oher classificaions are saisically significan a 1 percen or 5 percen level. The resuls indicae ha mos of China s expors o Ausralia are highly relaed wih China s GDP changes, i.e. a higher GDP in China pushes more expors o Ausralia. However when considering regression resuls for impac of GDP on 2-digi commodiies, no all deailed commodiies are posiively affeced in China s expors o Ausralia. When China s GDP increases hose commodiies are inended o fulfill domesic demand and serve Chinese marke firs. They are goods of basic food for human being and animals and resources from classificaions 0, 1 and 2, including mea, cereals, feeding suff, obacco, crude maerials, pulp and wase paper; energy in classificaion 3, including coal and peroleum; medicines and dyeing maerials in classificaion 5; and phoographic apparaus and waches in classificaion 8. Mos of hese goods are inpus or semi-producs in manufacuring process and are highly relaed wih Chinese people s daily life. They will be in large demand when China s GDP is growing larger. In he 1-digi commodiy regression, he coefficiens of populaion have expeced negaive sign in eigh ou of en classified commodiies; while he coefficiens of classificaions 1 and 3 show posiive signs. The negaive coefficiens are saisically significan a 1 percen level excep classificaion 2. The significan negaive sign indicaes ha China inends o produce and exchange hose goods inside he counry insead of exporing hem o Ausralia. I is worh noing ha regression resuls of some goods in 2-digi classificaion show ha he pushing effec of populaion increases o China s expors o Ausralia is quie opposie o ha of GDP growh. All he 2-digi classified goods which are negaively relaed wih GDP growh are posiively relaed wih populaion increases, indicaing China s increasing populaion does no block hese goods from exporing ouside China, especially for resources, crude maerials and energy. This resul is quie puzzling, oally opposie o common concep ha China s large populaion consumes more resources, maerials and energy goods. In he 1-digi regression, mos of he coefficiens of exchange rae are saisically significan a 1 percen level and 10 percen level for classificaion 9. I is expeced o see posiive signed coefficiens in classificaions 7 and 8, which clearly suppors he fac ha when Renminbi is devalued, more machinery, ranspor and various manufacured goods are expored o Ausralia. However oher classified goods are no posiively affeced and seem o expor less when RMB is depreciaed. This may indicae ha hose goods are in large demand in domesic marke; hus hey are lured o serve Chinese marke insead of Ausralian marke. Considering he 2-digi commodiies, he only goods in he res classificaions ha are posiively relaed wih exchange rae 6

7 are hose commodiies of fish and cereals in classificaion 0, crude rubber and pulp and wase paper in classificaion 2, dyeing maerials, medicines, perfumes, manufacured ferilizers and plasic maerials in classificaion 5, leaher and rubber manufacured goods, and paper goods in classificaion 6. In he 1-digi commodiy regression, mos of he coefficiens of NAFTA are saisically significan a 1 percen level and 10 percen level for classificaions 5 and 9. The coefficiens show expeced posiive sign in classificaions 0, 1, 2, 3, 4, 5, 6 and 9, while negaive signed coefficiens are found in classificaions 7 and 8. As China is expeced o become a world facory, is cheap and qualiy manufacured goods are quie compeiive around world marke. I is no a surprise ha hose producs are hindered o Norh American marke afer NAFTA is formed and freely raded wihin he region, where Canada and USA can impor from Mexico afer cuing down heir cusoms duies. This insead affecs China exporing more o Ausralia, enlarging Ausralian marke insead. However in he above broad classificaions here are some kinds of goods ha China does no enlarge is expors o Ausralia when NAFTA marke is no as easy o ener as before. These kinds of commodiies focus on fish, cereals and sugar producs in classificaion 0, pulp and wase paper in classificaion 2, dyeing maerials, medicines, perfumes, manufacured ferilizers and plasic maerials in classificaion 5, leaher and paper goods in classificaion 6. They are eiher largely needed in Chinese domesic marke or Ausralia has oher beer imporing sources. In he 1-digi regression, he expeced posiively signed coefficiens for APEC dummy variable are found in classificaions 0, 2, 3, 5, 8 and 9, while negaive coefficiens occur in he classified goods of classificaions 1, 4, 6 and 7. The coefficiens of classificaions 1, 8 and 9 are no saisically significan; ohers are significan eiher a 1 percen or 5 percen level. The resuls indicae ha China inends o expor more goods in broad classificaions 0, 2, 3 and 5, and fewer goods in classificaions 4, 6 and 7. Considering deailed 2-digi commodiies, China expors fewer goods in obacco, cork and wood, mealliferous ores and meal scraps in classificaions 1 and 2, coal, coke and briquees in classificaion 3, dyeing maerials, manufacured ferilizers, explosives and pyroechnic producs in classificaion 5, apparel and clohing accessories in classificaion 8, arms of war in classificaion 9; while a he same period China enlarges is expors o Ausralia in goods of cork and wood manufacures, paper aricles, manufacures of meal in classificaion 6, machinery specialized for paricular indusries, mealworking machinery, office machines and auomaic daa processing equipmen, and road vehicles in classificaion Empirical resuls of China s impors from Ausralia In he 1-digi commodiy regression, posiive coefficiens of GDP are found expecedly in he firs eigh classified commodiies, wih classificaions 8 and 9 negaive coefficiens. Mos coefficiens are saisically significan a 1 percen level; he coefficien of classificaion 3 is significan a 10 percen level. The resuls show ha mos goods China impors from Ausralia increase when 7

8 simulaneously China s consumpion abiliy esimaed by GDP increases, while some kinds of goods in classificaions 8 and 9 decrease when China s GDP increases. Considering regression resuls of GDP for 2-digi classificaion, some kinds of commodiies show fewer impors from Ausralia, including dairy and fish, vegeables and frui, sugar and feeding suff in classificaion 0, oil seeds in classificaion 2, peroleum and gas in classificaion 3, animalvegeable oils fas in classificaion 4, dyeing maerials in classificaion 5, cork and wood manufacurers, paper and exile relaed producs in classificaion 6; some of hese goods like fish could be produced by China iself. China also impors a lile more of goods of professional and scienific insrumens in classificaion 8, and coin in classificaion 9. In he 1-digi regression, he coefficiens of populaion are saisically significan a eiher 1 percen or 5 percen level. They have expeced negaive sign in classificaions 0, 1, 2, 4, 5, 6 and 7, and posiive signs are found in classificaions 3, 8 and 9. I indicaes alhough China ends o impor fewer goods from Ausralia when China can produce by iself, China needs more energy goods and elecronic and miliary goods in classificaions 8 and 9 o suppor is economic developmen. In he deailed 2-digi classificaion, China ends o impor more as larger populaion needs more goods o consume, including basic food for human and animals in classificaion 0, oils seeds, crude rubber and exile fibres in classificaion 2, peroleum and gas in classificaion 3, animal-vegeable oils in classificaion 4, inorganic chemicals, dyeing maerials, medicines, perfumes in classificaion 5, cork and wood manufacures, paper, exile yarn, iron and seel in classificaion 6. In he 1-digi regression, he expeced negaively signed coefficiens of exchange rae are found only in classificaions 2, 3 and 6, which are also saisically significan a 1 percen level, indicaing China ends o impor fewer goods in hese classificaions when Renminbi is devalued. The coefficiens of oher classificaions 0, 1, 4, 5, 7, 8 and 9 are all posiively signed and saisically significan a eiher 1 percen or 5 percen level. This resul shows ha China does no decrease impors in hese classificaions from Ausralia alhough he impored cos in Renminbi increases. Considering deailed 2-digi commodiies afer he price of Renminbi changes, China impors more goods of oil seeds, crude rubber, pulp and wase paper in classificaion 2, leaher and leaher manufacures, cork and wood manufacures, paper and paper aricles, non-meallic mineral manufacures, iron and seel in classificaion 6. While China impors fewer goods of mea, vegeables and frui, feeding suff in classificaion 0, fixed vegeable oils and fas in classificaion 4, organic and inorganic chemicals, perfumes, manufacured ferilizers, explosives and pyroechnic producs, chemical maerials and producs in classificaion 5, power generaing machinery, office machines and auomaic daa processing equipmen in classificaion 7, saniary, plumbing, heaing and lighing fixures in classificaion 8. 8

9 In he 1-digi commodiy regression, i is expecedly o find posiive coefficiens of NAFTA in classificaions 2, 3 and 6, while negaive ones are found in classificaions 0, 1, 4, 5, 7, 8 and 9. I indicaes ha under he influence of NAFTA s implemenaion, China begins o impor more from Ausralia in crude maerials, mineral fuels and maerial manufacured goods. Considering deailed 2-digi commodiies afer NAFTA is formed, China impors more goods of mea, vegeables and frui, feeding suff in classificaion 0, hides and skins, cork and wood, crude ferilizers, mealliferous ores and meal scrap, crude animal and vegeable maerials in classificaion 2, coal, peroleum and gas in classificaion 3, fixed vegeable oils in classificaion 4, organic and inorganic chemicals, perfumes, manufacured ferilizers, chemical maerials and producs in classificaion 5, exile yarn, non-ferrous meals, and meal manufacures in classificaion 6, power generaing machinery, office machines and auomaic daa processing equipmen in classificaion 7, saniary, plumbing producs in classificaion 8. In he 1-digi regression, mos of he coefficiens of APECP are found expecedly posiively signed and saisically significan a 1 percen level, while he coefficien of classificaion 5 is negaive and significan a 5 percen level. The resuls indicae clearly ha he quick and prosperous developmen of APEC enables China imporing more goods from Ausralia. Only impors of he following goods in deailed 2-digi classificaion are no growing as expeced in APEC s fas developmen: live animals chiefly for food, feeding suff in classificaion 0, oil seeds, crude ferilizers and crude maerials in classificaion 2, non-ferrous meals in classificaion 6, power generaing machinery, mealworking machinery, office machines, elecommunicaions and sound recording apparaus, elecrical machinery, road vehicles in classificaion 7, foowear in classificaion 8. In classificaion 5, some goods are impored more alhough he whole classificaion is no. They are manufacured ferilizers, explosives and pyroechnic producs. 3.3 Major regression conclusion China s large GDP and is dramaic growh pushes China s rade wih Ausralia, boh in expors and impors. I is a crucial deermined facor in improving rade beween wo counries. Alhough China s large populaion promoes China s rade wih Ausralia in some deailed 2- digi commodiies, i raps manufacured goods expored o Ausralia in 2-digi classificaions 6, 7 and 8. Generally speaking exchange rae does no have a posiive effec on China s rade wih Ausralia. However when considering deailed classified commodiies, he depreciaion of Renminbi pushes China s expors o Ausralia in chemical goods, machinery and ranspor equipmen and miscellaneous manufacured aricles, including clohing and foowear. RTA variables are found posiively affeced China s rade wih Ausralia. The formaion of Norh American Free Trade Area and is rade liberalizaion developmen ends o exclude China s goods ouside Norh American marke, especially USA and Canada markes. Therefore i indirecly pushes China s expors o Ausralia and impors from Ausralia. 9

10 The quick developmen of APEC before 1997 pushes China s expors o Ausralia in resources, energy, animals and chemicals, and impors from Ausralia in mos goods excep chemicals. 3.4 Modeling issues The rade daa ime series are only from 1992 o 2004, which are no refleced he developmen of he wo counries rade before and afer 1991 when China paricipaed in APEC for he firs ime. The daa also could no reflec he condiions before and afer EU, ASEAN and CER s esablishmen. Therefore he impac of hese regional rade agreemens could no be esimaed in he pooled model. The posiive and negaive effec from NAFTA and APEC on China s rade wih Ausralia could no reflec horoughly if all RTAs have a definie impac. 4. Conclusion This paper sudies he impac of regional rade agreemens on China s commodiy rade wih Ausralia in discussing curren China s expors o and impors from Ausralia in SITC lised commodiies. The paper uses parial equilibrium model o esimae he relaionship beween China s rade wih Ausralia and oher deermined facors, including China s GDP changes, populaion changes, changes of Renminbi prices, he formaion of NAFTA and he developmen of APEC. The increases of China s GDP enable Chinese consuming more goods from Ausralia and producing and exporing more o Ausralia. However he large populaion of China discourages China s rade wih Ausralia o some exen, which indicaes ha China has he endency of rading inside he counry if more populaion is expeced in he fuure. The devaluaion of RMB does no bring more rade o China from Ausralia as expeced, while decreasing rade beween wo counries o some exen. I migh indicae ha China s currency depreciaion policy does no reflec corresponden effec. The incepion and implemenaion of regional rade agreemens have a crucial impac on China s commodiy rade wih Ausralia. The Norh American marke is inegraed by NAFTA in 1990s, where Canada and USA can impor cheaper manufacured goods from Mexico. China as a major exporer o USA is severely impaced by his aciviy. Thus China divers o oher counries o enlarge is expors and impors, making Ausralia become China s hird major rading parner in A he same ime he quick developmen of APEC has pushed boh counries commodiy rade o some exen as well. Therefore under he developmen of regional economic inegraion around he world, i is possible and necessary for China and Ausralia o involve in bilaeral free rade, which in urn encourages rade beween he wo counries. Acknowledgemen This paper is suppored by Endeavour Ausralia Cheung Kong Awards The auhor would like o hank he Cheung Kong Enerprises and he Ausralian Governmen for he financial suppor and 10

11 Insiue of World Economics and Poliics of Chinese Academy of Social Sciences of Beijing China for academic suppor and proper supervision. 11

12 Reference Aiken, N. D., The effec of he EEC and EFTA on European rade: a emporal cross-secion analysis. American Economic Review, 63, pp Bayoumi, T. and B. Eichengreen, Is regionalism simply a diversion: evidence from he evoluion of he EC and EFTA, In: Regionalism Versus Mulilaeral Trade Arrangemens. (eds Io, T.&Krueger, A. O.), pp Chicago: Universiy of Chicago Press. Braga, P., R. Sadafi and A. Yeas, Regional inegraion in he Americas: deja vu all over again? World Economy, 17, pp DFAT (Deparmen of Foreign Affairs and Trade, A. G. and C. Minisry of Commerce, Ausralia-China Free Trade Agreemen Join Feasibiliy Sudy. Fizparick, G. L. and M. J. Modlin, Direc-Line Disances (Inernaional Ediion). The Scarecrow Press, Inc.. Frankel, J. A., Regional Trading Blocs in he World Economic Sysem. Insiue for Inernaional Economics: Washingon, DC. Lu, J., APEC facing five challenges -- wrien before he APEC leaders meeing in Inernaional Economic Review (in Chinese), 9-10, pp. Soloaga, I. and L. A. Winers, Regionalism in he nineies: wha effec on rade? The Norh American Journal of Economics and Finance, 12, pp hp:// 1/2/29ac670d3b30cf8095bf845628e55beb. 12

13 Appendix Impac of deermined facors on China s rade wih Ausralia Table 1 China s rade wih Ausralia 1-digi commodiy oal rade Variable China s expors o Ausralia China s impors from Ausralia Coefficien -Saisic Coefficien -Saisic C LNGDP LNPOPULATION LNEXC NAFTA APECP R-squared Adjused R-squared F-saisic Prob (F-saisic) Included observaions Table 2 China s rade wih Ausralia 2-digi commodiy oal rade China s expors o Ausralia China s impors from Ausralia Variable Coefficien -Saisic Coefficien -Saisic C LNGDP LNPOPULATION LNEXC NAFTA APECP R-squared Adjused R-squared F-saisic Prob(F-saisic) Toal panel (unbalanced) observaions

14 Table 3 China's expors o and impors from Ausralia -- 1 digi commodiy GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 0 Food and live animals Y Y N N N Y Y N Y Y 1 Beverages and obacco Y N N Y Y N 2 Crude maerials, inedible, excep fuels Y Y N N N Y Y Y Y 3 Mineral fuels, lubricans and relaed Y Y Y N N Y Y Y Y maerials 4 Animal and vegeable oils, fas Y Y N N N Y Y N N Y and waxes 5 Chemicals and relaed producs, Y Y N N N Y Y N Y N n.e.s. 6 Manufacured goods classified chiefly by Y Y N N N N Y Y N Y maerial 7 Machinery and ranspor equipmen Y Y N N Y Y N N N 8 Miscellaneous manufacured aricles Y N N Y Y Y N N Y 9 Commodiies and ransacions no Y N N Y N Y Y N Y elsewhere classified Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 14

15 Table 4 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 0 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 00 Live animals chiefly for food 01 Mea and mea preparaions 02 Dairy producs and birds' eggs 03 Fish, crusaceans, mollucs, preparaions hereof 04 Cereals and cereal preparaions Y N Y N N N Y Y N N Y Y Y Y N N Y Y Y N Y Y Y N N Y Y Y N N Y Y N Y Y N Y Y N N Y Y 05 Vegeables and frui Y N N Y N N Y Y Y Y 06 Sugar, sugar preparaions and honey Y N N Y Y N N Y Y 07 Coffee, ea, cocoa, spices, manufacures Y Y N N N Y Y N Y Y hereof 08 Feeding suff for animals, no including N N Y Y N N Y Y N unmilled cereals 09 Miscellaneous edible producs and Y N N Y Y Y N N Y preparaions Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 15

16 Table 5 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaions 1 & 2 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 11 Beverages Y Y N N N Y Y N Y 12 Tobacco and obacco manufacures 21 Hides, skins and furskins, raw 22 Oil seeds and oleaginous frui 23 Crude rubber (including synheic and reclaimed) N Y N Y N Y N N Y Y Y N N Y N Y Y N Y N N Y Y Y Y N Y Y 24 Cork and wood Y Y N N N N Y N 25 Pulp and wase paper N Y Y N Y Y N N Y 26 Texile fibres (excep wool ops) and heir wases 27 Crude ferilizers and crude maerials (excluding coal) 28 Mealliferous ores and meal scrap 29 Crude animal and vegeable maerials, n.e.s. Y Y N Y N Y N Y N Y Y N N N Y Y N Y Y N N N N Y Y N Y Y Y N N Y Y Y Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 16

17 Table 6 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaions 3 & 4 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 32 Coal, coke and briquees 33 Peroleum, peroleum producs and relaed maerials 34 Gas, naural and manufacured N Y Y N N N Y Y N Y N N Y Y N N Y Y Y Y N Y N Y Y 35 Elecric curren 41 Animal oils and fas Y Y N N N Y Y N N Y 42 Fixed vegeable oils and fas Y N N N Y Y N Y 43 Animal-vegeable oils-fas, processed, Y N N Y N Y Y N N and waxes Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 17

18 Table 7 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 5 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 51 Organic chemicals Y N N N Y Y Y N 52 Inorganic chemicals Y Y N Y N N Y Y Y N 53 Dyeing, anning and colouring maerials 54 Medicinal and pharmaceuical producs 55 Essenial oils & perfume maerials; oile polishing and cleansing preparaions N N Y Y Y Y N N N N N Y Y Y Y N N Y Y Y Y Y N N Y Y N 56 Ferilizers, manufacured Y Y N N Y N N Y N Y 57 Explosives and pyroechnic producs 58 Arificial resins, plasic maerials, cellulose esers and ehers 59 Chemical maerials and producs, n.e.s. Y Y N N N Y N Y Y Y N N Y Y N N Y N Y Y N N N N Y Y Y N Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 18

19 Table 8 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 6 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 61 Leaher, leaher manufacures, n.e.s. and dressed furskisg 62 Rubber manufacures, n.e.s. 63 Cork and wood manufacures (excluding furniure) 64 Paper, paperboard, aricles of paper, paperpulp/board 65 Texile yarn, fabrics, made-up aricles, relaed producs 66 Non-meallic mineral manufacures, n.e.s. Y Y N N Y Y N N N Y Y Y N N Y N N Y Y N N Y N Y N Y Y Y N Y Y Y Y N N Y Y Y N N Y N N Y Y N Y Y Y N N N Y N N Y 67 Iron and seel Y Y N Y N Y Y N N Y 68 Non-ferrous meals Y Y N N N N Y Y N N 69 Manufacures of meal, n.e.s. Y Y N N N N Y Y Y Y Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 19

20 Table 9 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 7 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 71 Power generaing machinery and equipmen 72 Machinery specialized for paricular indusries Y Y N N Y N N Y N N Y Y N N Y Y N N Y Y 73 Mealworking machinery Y N Y Y N N Y N 74 General indusrial machinery & equipmen, and pars 75 Office machines & auomaic daa processing equipemen 76 Telecommunicaions & sound recording apparaus 77 Elecrical machinery, apparaus & appliances n.e.s. 78 Road vehicles (including air-cushion vehicles) Y Y N N Y Y N N N Y Y Y N N N N Y Y Y N Y Y N N Y Y N N N N Y Y N N Y Y N N N N Y Y N N Y Y N N Y N 79 Oher ranspor equipmen Y Y N N N Y Y N N Y Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 20

21 Table 10 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 8 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 81 Saniary, plumbing, heaing and lighing fixures Y N Y Y N N Y Y Y 82 Furniure and pars hereof Y N N Y Y Y N N 83 Travel goods, handbags and similair conainers 84 Aricles of apparel and clohing accessories Y N N Y Y Y N N Y Y Y N N Y Y Y N N N Y 85 Foowear Y N N Y Y N Y N 87 Professional, scienific & conroling insrumens 88 Phoographic apparaus, opical goods, waches Y Y N Y Y N N Y N N N Y Y Y N N Y Y 89 Miscellaneous manufacured aricles, n.e.s. Y Y N N Y Y N N Y Y Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 21

22 Table 11 China's expors o and impors from Ausralia -- 2 digi commodiy for classificaion 9 GDP Populaion Exchange rae NAFTA APEC Expors Impors Expors Impors Expors Impors Expors Impors Expors Impors 91 Posal packages no classified according o kind 93 Special ransacions no classified according o kind 94 Animals, live, zoo animals, dogs, cas ec. 95 Arms, of war and ammuniion herefor 96 Coin (oher han gold), no being legal ender N N Y N Y Y N Y N N Y Y N Y Y N N Y N Y N Y Y 97 Gold, non-moneary Noe: Y means increasing changes of explainable variables improves China s expors o or impors from Ausralia N means increasing changes of explainable variables decreases China s expors o or impors from Ausralia -- means no resul or no saisically significan a all 22