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Beyond the Uruguay Round : the implications of an Asian free trade area

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  • Lewis, Jeffrey D.
  • Robinson, Sherman
  • Zhi Wang

Abstract

The Pacific Rim members of the Asia Pacific Economic Cooperation (APEC) group have different views about the role each should play in fostering further trade liberalization. But at the November 1994 APEC meetings in Bogor they committed themselves to forming an APEC free trade area. The authors explore: 1) the impact of such a free trade area on trade, welfare, and economic structure of the Pacific Rim economies and the European Union; 2) the implications of forming a partial free trade area, excluding such potential partners as China, the Association of Southeast Asian Nations (ASEAN) economies, or the United States; 3) whether an APEC free trade area provides more benefits than full trade liberalization that includes the European Union. They analyze these issues using a multicountry, computable general equilibrium model to simulate alternative liberalized trade scenarios. Their findings are as follows. Under the base-case scenario (in which all tariff and most nontariff barriers are removed among the APEC countries, China, Japan, ASEAN, the Asian newly industrializing economies (NIEs), and the United States): all APEC countries gain in GDP and the excluded European Union loses sligthly. Gains are greatest for the poorer countries, for whom trade externalities are more significant. Trade expands greatly, and although there is some trade diversion away from the European Union and the rest of the world, that is swamped by the creation of trade within the free trade area. The U.S.-Japan trade balance improves only slightly (by $1.4 billion), and the U.S.-China balance are much larger, suggesting that changes in sectoral protection make movements in particular bilateral trade balances nearly impossible to predict. When one economy is excluded: there are gains from making the free trade area as broad as possible. Omitting any one region (China, the United States, or the ASEAN 4) makes that region significantly worse off and lowers the gains for all other members as well. The Asian NIEs have the most to gain from broad membership. Excluding China reduces Asian NIE gains by about half, and excluding the United States yields even greater declines. Excluding the United States has the worst impact on all other potential members, greater than the effect of omitting China or the ASEAN 4. The European Union is largely unaffected by different versions of the APEC free trade area. Global (versus regional) liberalization: global liberalization that includes the European Union is the best outcome in terms of world GDP and welfare. And all countries gain more from global liberalization than they do from joining an APEC free trade area alone. Forming a regional free trade area may be politically easier than continued global liberalization, but there are economic incentives for all parties to expand on the completed GATT round.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1467.

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Date of creation: 30 Jun 1995
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Handle: RePEc:wbk:wbrwps:1467

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Keywords: Payment Systems&Infrastructure; Economic Theory&Research; Environmental Economics&Policies; Trade Policy; Transport and Trade Logistics; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Economic Theory&Research; Environmental Economics&Policies; Trade Policy; Trade and Regional Integration;

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  1. repec:fth:michin:311 is not listed on IDEAS
  2. Brown, D.K., 1992. "The Impact of a North American Free Trade Area: Applied General Equilibrium Models," Working Papers 311, Research Seminar in International Economics, University of Michigan.
  3. Kilkenny, Maureen & Robinson, Sherman, 1990. "Computable General Equilibrium Analysis of Agricultural Liberalization: Factor Mobility and Macro Closure," Staff General Research Papers 11124, Iowa State University, Department of Economics.
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  13. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-87, May.
  14. Yoko Sazanami & Shujiro Urata & Hiroki Kawai, 1995. "Measuring the Costs of Protection in Japan," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 32.
  15. Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
  16. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
  17. David Cox & Richard Harris, 1983. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Working Papers 523, Queen's University, Department of Economics.
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  20. de Melo, Jaime & Robinson, Sherman, 1989. "Product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies," Journal of International Economics, Elsevier, vol. 27(1-2), pages 47-67, August.
  21. Braga, Carlos A. Primo & Safadi, Raed & Yeats, Alexander, 1994. "NAFTA's Implications for EastAsian exports," Policy Research Working Paper Series 1351, The World Bank.
  22. de Melo, Jaime & Robinson, Sherman, 1990. "Productivity and externalities : models of export led growth," Policy Research Working Paper Series 387, The World Bank.
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Citations

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Cited by:
  1. Sherman Robinson & Zhi Wang & Will Martin, 2002. "Capturing the Implications of Services Trade Liberalization," Economic Systems Research, Taylor & Francis Journals, vol. 14(1), pages 3-33.
  2. Wang, Zhi, 1997. "China and Taiwan access to the World Trade Organization: implications for U.S. agriculture and trade," Agricultural Economics, Blackwell, vol. 17(2-3), pages 239-264, December.
  3. Diao, Xinshen & Diaz-Bonilla, Eugenio & Robinson, Sherman, 2002. "Scenarios for trade integration in the Americas," TMD discussion papers 90, International Food Policy Research Institute (IFPRI).
  4. Jayatilleke S. Bandara & Wusheng Yu, 2007. "Agricultural trade liberalization in the Asia-Pacific region with specific reference to preferential trade agreements - scenario and impact analysis," STUDIES IN TRADE AND INVESTMENT, in: Studies in Trade and Investment - AGRICULTURAL TRADE - PLANTING THE SEEDS OF REGIONAL LIBERALIZATION IN ASIA, volume 60, pages 131-162 United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  5. Warwick J. McKibbin & K. K. Tang, 2000. "Trade and Financial Reform in China: Impacts on the World Economy," The World Economy, Wiley Blackwell, vol. 23(8), pages 979-1003, 08.
  6. Rodriguez, U-Primo E., 2008. "Impacts of the Free Trade Area of the Pacific (FTAAP) on Production, Consumption, and Trade of the Philippines," Discussion Papers DP 2008-20, Philippine Institute for Development Studies.
  7. Karen Thierfelder & Scott McDonald, 2012. "Globe v1: A SAM Based Global CGE Model using GTAP Data," Departmental Working Papers 39, United States Naval Academy Department of Economics.
  8. Plummer, Michael G., 2006. "Toward Win-Win Regionalism in Asia: Issues and Challenges in Forming Efficient Trade Agreements," Working Papers on Regional Economic Integration 5, Asian Development Bank.
  9. Kym Anderson & Mari Pangestu, 1998. "Structural Changes in a Reforming World Economy: Implications for Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 34(3), pages 85-113.
  10. Robinson, Sherman & Lewis, Jeffrey D., 1996. "Partners or predators? : the impact of regional trade liberalization on Indonesia," Policy Research Working Paper Series 1626, The World Bank.
  11. Philip D. Adams & Mark Horridge & Brian Parmenter & Xiao-Guang Zhang, 1998. "Long-run Effects on China of APEC Trade Liberalisation," Centre of Policy Studies/IMPACT Centre Working Papers g-130, Victoria University, Centre of Policy Studies/IMPACT Centre.
  12. Coyle, William T. & Wang, Zhi, 1998. "Open Regionalism In Apec: Impacts On U.S. Agriculture And Trade," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20981, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Ballard, Charles L. & Cheong, Inkyo, 1997. "The effects of economic integration in the Pacific Rim: A computational general equilibrium analysis," Journal of Asian Economics, Elsevier, vol. 8(4), pages 505-524.
  14. McDonald, Scott & Robinson, Sherman & Thierfelder, Karen, 2006. "Impact of switching production to bioenergy crops: The switchgrass example," Energy Economics, Elsevier, vol. 28(2), pages 243-265, March.
  15. McDonald, Scott & Robinson, Sherman & Thierfelder, Karen, 2008. "Asian Growth and Trade Poles: India, China, and East and Southeast Asia," World Development, Elsevier, vol. 36(2), pages 210-234, February.
  16. Scott McDonald & Karen Thierfelder, 2005. "Impact of Switching Production to Bioenergy Crops: The Switchgrass Example January 2005," Working Papers 2005002, The University of Sheffield, Department of Economics, revised Jan 2005.

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