Regional and Multilateral Trade Liberalization: The Effects on Trade, Investment and Welfare

This paper explores the impact on economies of trade liberalization under alternative regional and multilateral arrangements: unilateral liberalization; liberalization as part of the ASEAN regional grouping; liberalization as part of the APEC regional grouping; or liberalization as part of a multilateral trade liberalization regime. The paper is based on a Dynamic Intertemporal General Equilibrium model (DIGEM) called the Asia-Pacific G-Cubed Model. It is shown that the long run gains from a country's own liberalization tend to be large relative to the gains from other countries liberalizing although this varies across countries. It is also shown that there is a significant difference between the effects on GDP (production location) and the effects on consumption per capita of the alternative liberalization approaches across countries. The timing of liberalization is also shown to matter. With open capital markets the gains from credibly announced trade liberalization are realized befo...