ABSTRACT
This chapter employs a numerical general equilibrium model of the Pacific Basin to study the effects of various trade liberalisation strategies on ASEAN and Australia. The development of effective protective rates in empirical trade analysis has been an attempt to design a tool to forecast effects of protectionist policies on resource allocation in a more complex setting than in the simple world without intermediate goods where nominal tariff rates perform this task adequately. The demand pattern in each trading region is represented by a single private unit or 'household' and a single public unit. The reliability of welfare gains from trade liberalisation in neoclassical models depends primarily on the terms of trade (TOT) effects that result. If a region is treated as a 'small country' from the perspective of the trade theory this implies that there are no TOT effects.
