IGI Working Paper Nov.14th, 2013
How Far is Asia Already Surrogate Trade Bloc?
LI Chunding John Whalley
Abstract: This paper is the first exploration to numerically calculate the Debreu (1951) coefficient, and to introduce Debreu distance indicator in free trade agreement (FTA) effect measures. In the meanwhile, FTA negotiations in Asia developed very fast in the past decade which made it important to evaluate how far Asia has already surrogate trade bloc. This paper uses a fifteen-country global general equilibrium model with trade cost to numerically calculate Debreu distance between present situation and potential Asia trade blocs, so as to evaluate these Asia FTA effects. Our calculation results reveal that all Asia involved countries will gain from Asia trade bloc arrangements unless these FTAs can only eliminate tariffs. These countries’ gain will increase as non-tariff elimination deeps. Larger countries will gain more than small countries. Asia FTA, Asia Union and RCEP will benefit member countries more than ASEAN+3. Global free trade will gain all countries the most.
Keywords: Asia Trade Bloc; Debreu Distance Coefficient; Trade Cost; RCEP
1. Introduction
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2. Asia FTAs and Their Developments
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3. Debreu’s Coefficient and Distance Measure
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4. Model Structure and Trade Cost Calculation
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5. Data and Parameters Calibration
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6. Simulation Results
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7. Conclusions
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