Introduction and overview

The Pacific Rim contains many dynamic, export-oriented economies that have grown rapidly in recent years, shifting the world's economic center of gravity toward the east. The Asia Pacific Economic Cooperation (APEC) group was established in 1989, with 12 founding members. Its goal is to promote multilateral trade reform and to facilitate regional trade. Since its inception, APEC has expanded to its present membership of 18, including: the Association of South East Asian Nations (ASEAN) of Malaysia, Thailand, Indonesia, the Philippines, Singapore, and Brunei; the “three Chinas” – China, Hong Kong, and Taiwan; South Korea; Australia; New Zealand: Papua New Guinea; the US; Canada; Mexico; and Japan. Papua New Guinea and Mexico were admitted during the APEC summit in November of 1993 and Chile was admitted in 1994. Its member economies now account for almost 50% of the world's production and 40% of world trade (Far Eastern Economic Review 1993). In November 1994 the APEC members signed the Bogor Accord, which states that they will “adopt the long-term goal of free and open trade and investment” in the region. This will be accomplished by 2010 for industrialized countries and by 2020 for developing countries (Wall Street Journal 1994). The purpose of this chapter is to analyze the implications of such an agreement for trade and welfare in the region.

An initial reason given for the creation of a free trade zone in the Pacific is disillusionment over the effectiveness of the General Agreement on Tariffs and Trade (GATT) to sustain multilateral trade liberalization.