Impact of FTA on Trade in ASEAN and Australia Using Customs Level Data

Abstract

This study examines the impact of the Association of Southeast Asian Nations (ASEAN)-Australia-New Zealand Free Trade Agreement (AANZFTA) on Australian trade with a particular focus on imports from ASEAN member countries to Australia. We examine the AANZFTA’s utilization by ten ASEAN countries at the six-digit trade classification level from 2012 to 2016 using Australian customs data. We implement Ando and Urata’s (2018) and Hayakawa et al.’s (2014) framework of free trade agreement (FTA) utilization based on preferential tariff margins. We also account for overlapping FTAs that are likely to impact the AANZFTA’s utilization. The results indicate that preferential tariff margins positively impact FTA utilization. However, the results also indicate that the AANZFTA’s utilization rate across ASEAN countries is low relative to Australia’s bilateral FTAs with Malaysia, Thailand, and Singapore. We also find evidence that co-sharing rules of origin positively impact FTA utilization.