Propects for trade growth among Pacific basin countries

Abstract

The market economies in the Pacific basin enjoy intense intra-regional trade. That is, they each trade much more with other Pacific basin countries than do countries outside the region. Contrary to what might be expected, this intensity is not due to strong trade complementarity between them. While the marked differences in factor-endowment ratios and hence comparative advantages within the region suggest trade complementarity should be high, actual trade complementarity is not. The reason is simply that many countries protect their least competitive industries and sectors. Scope therefore exists for substantial gains from trade liberalization in the region. And since most of the benefits from a regional trade liberalization would be reaped within the region (because of both strong intra-regional trade bias and potentially strong trade complementarity within the region), efforts should be made to encourage such a move, particularly with global trade liberalization prospects at an apparent standstill. Show more