Impact of the China-Australia FTA on global coal production and trade

Using a computable partial equilibrium model, this study provides a comprehensive and prospective empirical analysis of the economic impacts of the China-Australian Free Trade Agreement (ChAFTA) on global coal output, trade, consumption and welfare. Based on data from 2014, the simulated results indicate that ChAFTA has a significant trade creation effect. ChAFTA will increase Australia's coal exports to China by 35.7% and China's exports to Australia by 19.9%. However, the impacts of ChAFTA on global coal production and price are relatively limited. Results also demonstrate that ChAFTA will cause an annual net welfare loss of US$ 200 million for China and a net welfare gain of US$ 569.3 million for Australia. Moreover, Chinese consumers and Australian coal producers are the biggest beneficiaries of ChAFTA. Based on the research conclusions, we put forward some policy recommendations.