Exploring the Impacts of Trade Liberalization in Asia and the Pacific

While it is commonly accepted that multilateral liberalization will bring the greatest global gains from liberalization, regional agreements may be much more feasible in the short term. The dictum from the traditional trade theory on the superiority of unilaterally applied free trade for a small economy under perfect competition is universally accepted but rarely applied to policymaking. Reasons for this are many, ranging from using trade policy for non-economic objectives (e.g., employment), to circumstances in an actual economy and markets being different from those of the economic model (e.g. existence of economies of scale, imperfect competition or imperfect information). Nevertheless many countries have embraced the advantages of open trade regimes and have pursued liberal trade unilaterally or more often through membership in the multilateral trading system, the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). On the other hand, both trade theory and the international trading rules allow for the discriminatory trade policies in the forms of preferential or regional trade agreements.