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EU, NAFTA, and Asian Responses: A Perspective from the Calculus of Participation

  • Junichi Goto
  • Koichi Hamada
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    This paper assesses the economic conditions for Asian countries to cope with the formation of EU and NAFTA. Is it desirable for them to form their own trading area? And, if desirable, is it better to have a closed one like the EAEC or a more open one like the APEC? Relying on public economics and the calculus of participation combined with the Dixit-Stiglitz-Krugman framework, we find the following: (i) the development of the EAEC by the leadership of Malaysia would be a natural response of Asian countries against two big blocs in the world, EU and NAFTA; (ii) it is natural for the United States to discourage this move because the formation of an economic bloc in Asia will have a negative economic impact on the non- Asian countries; (iii) it is natural for the U.S. to propose an opposing coalition like the APEC to nullify the possible economic impact of the EAEC; but (iv) perhaps the APEC will be a good roundabout way towards international free trade.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5325.

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    Date of creation: Oct 1995
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    Publication status: published as Junichi Goto & Koichi Hamada, 1997. "EU, NAFTA, and Asian Responses: A Perspective from the Calculus of Participation," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 91-118 National Bureau of Economic Research, Inc.
    Handle: RePEc:nbr:nberwo:5325
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    1. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
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