Impact of East Asia's growth interruption and policy responses: the case of Indonesia

Abstract

Assessments to date of the consequences of implementing the Uruguay Round of multilateral trade negotiations have assumed medium-term rates of economic growth in East Asia that now seem unsustainable. This paper compares an earlier assessment with a new set of estimates involving an interruption to East Asian economic growth in the late 1990s, using the global, economy-wide GTAP model. Attention focuses on results for Indonesia, the worst-affected country in the region. An important consequence of the crisis is that Indonesia is likely to become more agrarian for a time than it otherwise would have been. The estimated benefits to Indonesia from embracing further unilateral reform, as a way of catching up, are contrasted with the alternative strategy of reneging on Uruguay Round commitments to liberalize trade.