A Study Of China-Australia FTA Influence On Chinese Wool And Textile Industry Based On CGE Modeling

China-Australia Free Trade Area negotiation is the most important bilateral trade negotiation that carries on of China. This paper analyses what will happen to China's textile and wool industries if Australia cuts the tariff of textile import from China or China eliminate the import tariff rate quotas (TRQs) of wool import, through a single country static Computable General Equilibrium Model(CGE) which distinguishes export destination and modifies long-run closure based on China's foreign exchange system. The simulation result shows that: 1. China's textile export and output will increase by 0.6% and 0.3%, if Australia eliminates the tariff of textile import from China. The effects are not so large, because of small textile market potential and low import tariff rate of Australia, and single structure of China's textile export which focuses on clothes. But it will be important to make the best of tariff cut if we consider the China's textile export reality. 2. The wool import TRQs which China uses caused "rent-seeking" phenomenon which disturbed Chinese wool import market, increased textile production cost in the past. Eliminating the wool import TRQs will harm Chinese wool industry but will benefit textile industry in the future. The simulation we assume shows that the benefit that textile industry receives is much more than the hurt that wool industry suffers. The author advises China release wool import TRQs, and notes the monopoly which will be caused by low price export strategy of Australia.