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

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

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

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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 6 (1995)
Issue (Month): 1 ()
Pages: 35-90

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Handle: RePEc:eee:chieco:v:6:y:1995:i:1:p:35-90
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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  1. Hallet, Andrew Hughes & Braga, Carlos A. Primo & DEC, 1994. "The new regionalism and the threat of protectionism," Policy Research Working Paper Series 1349, The World Bank.
  2. 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, May.
  3. 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.
  4. 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.
  5. Kilkenny, Maureen & Robinson, Sherman, 1990. "Computable general equilibrium analysis of agricultural liberalization: Factor mobility and macro closure," Journal of Policy Modeling, Elsevier, vol. 12(3), pages 527-556.
  6. Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
  7. de Melo, Jaime & Robinson, Sherman, 1990. "Productivity and externalities : models of export led growth," Policy Research Working Paper Series 387, The World Bank.
  8. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
  9. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  10. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
  11. John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, June.
  12. 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.
  13. Robinson, Sherman, 1989. "Multisectoral models," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 18, pages 885-947 Elsevier.
  14. repec:cup:cbooks:9780521319867 is not listed on IDEAS
  15. Braga, Carlos A. Primo & Safadi, Raed & Yeats, Alexander, 1994. "NAFTA's Implications for EastAsian exports," Policy Research Working Paper Series 1351, The World Bank.
  16. Cox, David & Harris, Richard, 1985. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 115-45, February.
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  18. Corden, W.M., 1984. "The normative theory of international trade," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 2, pages 63-130 Elsevier.
  19. 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.
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  21. J. MUYSKENS & C. de Neubourg, 1986. "Introduction," Discussion Papers (REL - Recherches Economiques de Louvain) 1986031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  22. Venables, Anthony J., 1985. "Trade and trade policy with imperfect competition: The case of identical products and free entry," Journal of International Economics, Elsevier, vol. 19(1-2), pages 1-19, August.
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