Trade liberalization can pose a threat to developing countries or economies because of their obligation to compete in the same market as stronger economies or nations. This challenge can stifle established local industries or lead to the failure of the industries that are developed there. In a first move to the important question, we did our own gravity modeling analysis using the APC approach. Due to data constraints, we were unable to accurately replicate the APC econometric method; So we used our own data set and used econometric techniques that actually include the APC method. However, our methodology lacks an important element of the APC approach: an index that distinguishes preferential trade agreements according to their comprehensiveness. On the other hand, our coverage of merchandise flows and preferential trade agreements is broader than the APC dataset. The DeRosa (2007) dataset covers 30 years (1970-1999), 156 countries and 46 preferential trade agreements compared to the APC dataset that covered 28 years (1970-1997), 116 countries and 16 preferential trade agreements. Recent work by Hufbauer and Schott (2007), based on additional econometric work by DeRosa, analyzes nine PTA groups covering some 560 individual preferential trade agreements. The Hufbauer and Schott study extended the panel data to a more recent period (1976-2005) and covered 179 countries. Table 3 is the equivalent of Table 2, but for outsiders; it contains estimates of the impact of existing and envisaged free trade agreements on people outside the Asia-Pacific region. Table 3 is structured like Table 2, with a significant difference. For each country or region, the deviation effects resulting from all agreements under a column title (for example. B “in force”) in which the country or region does not participate are indicated.
The reduction in global tariffs over the past decade has been marked by preferential trade agreements. These agreements promote trade among members, but by creating customs discrimination, they also divert trade from non-members. Recent studies suggest that the majority of the world`s preference agreements have generated more trade than they have diverted from them, thus being a constructive force in the global economy. However, progress in integration has been heterogeneous in recent decades. Progress has been very impressive for a number of developing countries in Asia and, to a lesser extent, in Latin America. These countries have succeeded because they have chosen to participate in world trade and have helped them attract the majority of foreign direct investment to developing countries. This is the case for China and India, because they welcomed trade liberalization and other market-based reforms, as well as higher-income countries in Asia – such as Korea and Singapore – which were themselves poor until the 1970s. Hufbauer and Schott (2007) rely on Rieder techniques, which are applied to an updated and extensive data set. A calculation system has been developed to reflect the results of the gravity model in terms of percentage and dollar impacts on potential, as well as current preferential trade agreements in the Asia-Pacific region. Critics believe that trade liberalization costs jobs and lowers wages.