THE SECTORAL APPROACH TO TRADE LIBERALIZATION: Should We Try To Do Better?

Abstract

This paper discusses partial approaches to trade liberalization, such as the Asia Pacific Economic Cooperation (APEC) group's Early Voluntary Sector Liberalization (EVSL) proposal and the "zero-for-zero" approach. Distortions to resource allocation and global markets that might result from partial liberalizations are discussed, and parallels drawn to the possible trade diversion impacts and welfare losses of regional liberalization and tariff escalation. A global Computable General Equilibrium (CGE) model is used to provide some numerical illustrations of the issues with respect to international trade in grains, oilseeds, and related processed products.