A Free Trade Area of the Asia Pacific (FTAAP): Is It Desirable?

This paper evaluates whether the proposed FTAAP is a desirable policy option for APEC member economies and the world economy. More specifically, this paper qualitatively 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. From the qualitative analysis based on statistical data, 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.