Abstract
This paper evaluates whether the proposed FTAAP is a desirable policy option for APEC member economies and the world economy. More specifically, this paper quantitatively investigates whether the FTAAP satisfies conditions for a trade bloc to generate positive and sufficient net trade creation effect. In addition, this paper estimates the likely impact of the FTAAP by using a CGE model analysis. Based on statistical data analysis, this paper strongly argues that the FTAAP can be a desirable regional trade bloc able to generate positive gains from freer trade. From the ex-ante scenario analysis using both static and capital accumulation CGE Models, this paper concludes that the FTAAP has great potential for improving welfare of participating APEC economies and will boost economic growth in the region. In particular, the FTAAP would be even better if it can be linked with liberalization of trade in services and enhanced trade facilitation.
Highlights
Since its inception in 1989, the Asia-Pacific Economic Cooperation (APEC) has long strived to nurture the initially fledgling vision of building the Asia-Pacific economic community to maturity under the principle of ‘open regionalism.’ with its 20th anniversary, APEC appears to be adrift in the midst of formidable challenges that demand major changes and reforms
Considering (i) the sluggish pace of negotiation for multilateral trade and investment liberalization under the WTO’s DDA (Doha Development Agenda) round, (ii) the failure of the APEC’s EVSL (Early Voluntary Sectoral Liberalization), (iii) the slow progress of the Bogor Goals, (iv) the loss of vitality of APEC economic activities after the East Asian financial crisis of 1997, (v) the spaghetti bowl phenomenon2 expected from a complicated web of overlapping Regional trade agreements (RTAs) in the Asia-Pacific region, (vi) deepening interdependence among APEC member economies, and (vii) strong positive welfare effects expected from RTAs;3 the revival and the promotion of the regional economic dynamism became top priority of APEC
Will the proposed Free Trade Area of the Asia Pacific (FTAAP) be a desirable RTA for APEC economies and the world economy as a whole? In order to be a ‘good’ RTA, the RTA should create a significant and sufficient positive welfare effect on all participating member countries and on the world as a whole, which will provide an incentive for RTAs to aim for a nondiscriminatory global free trade area
Summary
Since its inception in 1989, the Asia-Pacific Economic Cooperation (APEC) has long strived to nurture the initially fledgling vision of building the Asia-Pacific economic community to maturity under the principle of ‘open regionalism.’ with its 20th anniversary, APEC appears to be adrift in the midst of formidable challenges that demand major changes and reforms. Level RTAs in order to supplement Bogor Goals through a harmonized integration of smallscale regional free trade agreements in the region For this purpose, the establishment of a Free Trade Area of the Asia Pacific (FTAAP) is being discussed with a long term perspective among APEC member economies as one of possible options to deepen regional economic integration. The establishment of a Free Trade Area of the Asia Pacific (FTAAP) is being discussed with a long term perspective among APEC member economies as one of possible options to deepen regional economic integration Under these circumstances, this paper attempts to provide an economic implication of an FTAAP as a catalyst to promote APEC’s vision of creating a single, unified economic community.
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