Oecd Development Centre

At the 1994 APEC summit in Bogor, Indonesia, it was recommended that trade and investment barriers among the member countries be removed by 2020. Despite general consensus that trade liberalization would accelerate development in this most dynamic trading area, there is very little empirical evidence about the adjustment process which would ensue. In this chapter, a ten-country CGE model is used to estimate the impact of trade liberalization among economies of Pacific Asia and the United States, giving particular attention to the adjustment which would occur in domestic labor markets. Our results elucidate the employment linkages between trading partners and show that the potential for new import demand by developed countries would accelerate employment growth in developing countries. In particular, Pacific trade liberalization could facilitate the emergence of a new reciprocal basis for multilateral gains from trade. Under an expanding system of liberal trade, capital-intensive and labor-intensive countries can cooperate to consolidate the basis for regional growth and prosperity. † We are grateful to J. Edward Taylor and David Turnham for helpful comments and the University of California's Pacific Rim Research Program for financial support. The opinions expressed here are those of the authors and should not be attributed to their affiliated institutions.