Composition of Trade between Australia and Latin America: Gravity Model

This paper aims to analyse the value of merchandise through a broad category of trade between Australia and nine selected Latin American countries by using a gravity model focusing on the period from 1998 to 2004. The traditional crosssectional data is a useful tool to understand this bilateral trade focusing on exports and imports through primary products, manufactured products, and total merchandise trade. The general thrust of the analysis regarding trade composition implies that Australian trade with Latin America has been shaped by political and economic variables. The trade of primary products is explained by economic distance, openness, population, and political influence. Economic mass along with economic distance are significant explanatory variables in the trade of manufactured products. Political influence on bilateral trade has been significant in most Latin American countries – captured by a dummy for presidential changes – exceptions are: Argentina, Chile, and Uruguay.