Regional Trade Agreements Versus Global Trade Liberalisation: Implications for a Small Island Developing State

21 Pages Posted: 27 Apr 2009

See all articles by John Asafu-Adjaye

John Asafu-Adjaye

University of Queensland - School of Economics

Renuka Mahadevan

University of Queensland - School of Economics

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Abstract

This study undertakes an empirical investigation of the macroeconomic and sectoral impacts of two forms of regional trade agreements vis-à-vis global trade liberalisation on a small island country, using Fiji as a case study. In order to capture the feedback effects of such a complex set of policies, we employ a dynamic computable general equilibrium model of the Fijian economy to investigate (i) the impact of the Pacific Island Countries Trade Agreement (PICTA), (ii) the impact of PICTA, the Pacific Agreement for Closer Economic Relations (PACER), and the Economic Partnership Agreements (EPAs), (iii) the impact of full tariff liberalisation (i.e. tariff removal only), and (iv) the impact of full trade liberalisation, with removal of both tariff and non-tariff barriers. While PICTA consistently provides the least benefits across a range of macroeconomic indicators including real output, welfare, trade volumes and employment, full trade liberalisation involving the removal of tariff and non-tariff barriers provides the greatest benefits compared to the other scenarios in terms of real output. However, the latter scenario is outperformed by PICTA, PACER, the EPAs and full tariff liberalisation in terms of welfare effects, trade volumes and employment. The policy implications hold important lessons for developing countries considering trade liberalisation.

Suggested Citation

Asafu-Adjaye, John and Mahadevan, Renuka, Regional Trade Agreements Versus Global Trade Liberalisation: Implications for a Small Island Developing State. World Economy, Vol. 32, Issue 3, pp. 509-529, March 2009. Available at SSRN: https://ssrn.com/abstract=1395489 or http://dx.doi.org/10.1111/j.1467-9701.2008.01117.x

John Asafu-Adjaye (Contact Author)

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

Renuka Mahadevan

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

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