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Partners or predators? : the impact of regional trade liberalization on Indonesia

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  • Lewis, Jeffrey D.*Robinson, Sherman

Abstract

The authors empirically assess regional integration and liberalization scenarios impact on Indonesia and other Pacific Rim economies, including the complete Uruguay Round, further global liberalization and the creation of the Association of Southeast Asian Nations (ASEAN) or Asia-Pacific Economic Cooperation (APEC) free trade areas. They consider how major international exchange rate realignments affect the world trade pattern, and Indonesia in particular. The analysis uses a multi-country, computable general equilibrium (CGE) model to quantify the trade liberalization impact on countries, sectors, and factors. The extended APEC-CGE model consists of nine linked country models: Indonesia, Malaysia, and Singapore (together), the Philippines, Thailand, China (including Hong Kong), Korea and Taiwan, Japan, the United States and the European Union. Each country model is linked through explicit bilateral trade flows modeling for each traded sector. The empirical results lead to several conclusions: a) eliminating tariff and non tariff barriers in industrial countries (especially the Multifibre Agreement) gives Asian developing countries the opportunity to expand exports and achieve productivity gains; b) creation of an APEC free trade area gives participants significant benefits, with little effect on nonmembers while creation of an ASEAN free trade area gives its members little benefit, thus ASEAN countries should work toward more liberalization under GATT or hasten the APEC free trade area creation; c) all economies gain the most from further multilateral liberalization; and d) major exchange rate realignments significantly affect bilateral trade balances and world trade volume and direction. However, they have less effect than trade liberalization on the internal production and trade structure. Sectoral protection and subsidy rates vary greatly and their elimination yields significant efficiency gains. Changes in exchange rates have less effect.

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  • Lewis, Jeffrey D.*Robinson, Sherman, 1996. "Partners or predators? : the impact of regional trade liberalization on Indonesia," Policy Research Working Paper Series 1626, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1626
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    References listed on IDEAS

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    1. Lewis, Jeffrey D. & Robinson, Sherman & Wang, Zhi, 1995. "Beyond the Uruguay Round: The implications of an Asian free trade area," China Economic Review, Elsevier, vol. 6(1), pages 35-90.
    2. Braga, Carlos A. Primo*Safadi, Raed*Yeats, Alexa, 1994. "NAFTA's Implications for East Asian exports," Policy Research Working Paper Series 1351, The World Bank.
    3. 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 115-145, February.
    4. Julian M. Alston & Colin A. Carter & Richard Green & Daniel Pick, 1990. "Whither Armington Trade Models?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 455-467.
    5. 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, January.
    6. 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.
    7. 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.
    8. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
    9. Hinojosa-Ojeda, Raul & Robinson, Sherman, 1992. "Labor Issues in a North American Free Trade Area," CUDARE Working Papers 198601, University of California, Berkeley, Department of Agricultural and Resource Economics.
    10. Hinojosa-Ojeda, Raul A. & Robinson, Sherman & Lewis, Jeffrey D., 1995. "Regional integration options for Central America and the Caribbean after NAFTA," The North American Journal of Economics and Finance, Elsevier, vol. 6(2), pages 121-148.
    11. Devarajan, Shantayanan & Lewis, Jeffrey & Robinson, Sherman, 1990. "Policy Lessons from Two-Sector Models," CUDARE Working Papers 198566, University of California, Berkeley, Department of Agricultural and Resource Economics.
    12. Hanson, Kenneth & Robinson, Sherman & Tokarick, Stephen, 1989. "United States Adjustment in the 1990s: A CGE Anaylsis of Alternative Trade Strategies," CUDARE Working Papers 198496, University of California, Berkeley, Department of Agricultural and Resource Economics.
    13. Jaime de Melo & Sherman Robinson, 2015. "Productivity and externalities: models of export-led growth," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 3, pages 43-70, World Scientific Publishing Co. Pte. Ltd..
    14. Robinson, Sherman & Yunez-Naude, Antonio & Hinojosa-Ojeda, Raul & Lewis, Jeffrey D. & Devarajan, Shantayanan, 1999. "From stylized to applied models:: Building multisector CGE models for policy analysis," The North American Journal of Economics and Finance, Elsevier, vol. 10(1), pages 5-38.
    15. Brown, Drusilla K., 1987. "Tariffs, the terms of trade, and national product differentiation," Journal of Policy Modeling, Elsevier, vol. 9(3), pages 503-526.
    16. Hallett Andrew Hughes & Braga C. A. Primo, 1994. "The New Regionalism and the Threat of Protectionism," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 388-421, December.
    17. 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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    1. Robinson, Sherman & Thierfelder, Karen, 2002. "Trade liberalisation and regional integration: the search for large numbers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-20.
    2. Nlemfu Mukoko, Jean Blaise & Wabenga Yango, James, 2011. "Zone de libre échange de la sadc et économie de la RDCongo :Création de commerce et Bien-être? [Implications of joining the SADC Free Trade Agreement on the D.R.Congo economy]," MPRA Paper 65050, University Library of Munich, Germany, revised Jun 2015.
    3. Permani Risti, 2011. "The Impacts of Trade Liberalisation and Technological Change on GDP Growth in Indonesia: A Meta Regression Analysis," Global Economy Journal, De Gruyter, vol. 11(4), pages 1-30, December.
    4. 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.
    5. Decaluwé, B. & Dumont, J.-C. & Mesplé-Somps, S. & Robichaud, V., 2000. "Union économique et mobilité des facteurs; le cas de l'Union Économique et Monétaire Ouest Africain (UEMOA)," Cahiers de recherche 0009, Université Laval - Département d'économique.
    6. Lewis, Jeffrey D. & Robinson, Sherman & Thierfelder, Karen, 1999. "After the negotiations: assessing the impact of free trade agreements in Southern Africa," TMD discussion papers 46, International Food Policy Research Institute (IFPRI).

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