This paper seeks to explore aspects of a possible scenario of parallel 'trade blocs' using a computable general equilibrium (CGE) model to estimate the effects of an East Asian 'trade bloc' and the FTAA on each other, and on the rest of the world.

We use a general equilibrium model of a small developing economy with urban unemployment to illustrate the impact of processing incentives in the presence of foreign owned factors of production. We show that the location of the processing industry plays a crucial role in determining whether or...