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GTAP Resource #898

"APEC Open Regionalism and its Impact on The World Economy -- A Computable General Equilibrium Analysis"
by Wang, Zhi and William Coyle

This paper evaluates the implications of APEC "open regionalism" for the world economy using a 22-region, 18-sector recursive dynamic computable general equilibrium model with import embodied technology transfer. It empirically assesses how "open regionalism" (unconditional MFN) compares with two alternative approaches to APEC trade liberalization -- a preferential free trade area and global free trade -- in its impact on economic growth, national welfare, trade creation and diversion, for APEC countries and their major trade partners. Simulation results indicate that APEC economies and their major trade partners would benefit from further realization of each region's comparative advantage in a freer trade environment and faster economic growth. Real purchasing power in the APEC region as a whole rises in the range of $58 to $105 billion a year for the three options during 2001-2010 (as 0.3 to 0.5 percent of real consumption in baseline), and from $217 to $394 billion during 2011-2020 (as 0.7 to 1.2 percent of real consumption in baseline). APEC unconditional MFN liberalization also yields welfare gains for non-APEC countries. However, the simulation results also show that non-APEC countries are limited in their ability to "free ride" on trade expansion from APEC's "open regionalism". The remaining protection in the non-APEC region taxes its own production and exports, and slows technology transfer, thus reducing its competitiveness in world markets. This would furnish an incentive for non-APEC economies to adopt measures in liberalizing their own markets. Therefore, APEC open regionalism, defined as unconditional MFN here, could be a stepping-stone toward global free trade.

Key Words: Open regionalism, APEC, import embodied technology transfer, and CGE models

JEL Classification Numbers: F1, F02, C68

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: The World Economy
Date: 2002
Created: Wang, Z. (11/20/2001)
Updated: Wang, Z. (3/25/2002)
Visits: 2,747
No keywords have been specified.

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