Assessing Regional Trading Arrangements in the Asia-Pacific

Using both a gravity model to consider the natural trading bloc hypothesis, and simulation using a CGE model to make welfare estimates, we examine the potential effect of a subset of the new RTA proposal in the APEC region. In broad terms the two approaches appear consistent in their ability to identify RTAs that are beneficial in terms of the welfare of the proposed members. However, comparison of the two alternative approaches does not lead to support for the hypothesis that natural blocs are less likely to be damaging to those economies that remain on the outside of the new proposals.