Win, Lose or Draw: Estimating the Impact of Trade Disengagement on APEC Trade

Over the past three decades, globalisation and multilateralism have significantly benefited the APEC region. However, there are loud calls for economic and trade disengagement, advocating a return to fragmented economic blocs last seen in the 1980s.

This policy brief endeavours to elucidate what would happen – who wins, and who loses? – if fragmentation were to occur. By analyzing data spanning three decades to estimate the impacts of trade disengagement policies on APEC trade flows and categorising APEC economies into three blocs, the study finds that cross-bloc trade restrictions negatively impact APEC trade for all blocs and almost all sectors, even affecting neutral economies. Conversely, intra-bloc facilitative policies benefit trade across all blocs, emphasizing the importance of maintaining commitments to economic integration and multilateralism.

The findings underscore the need to strengthen institutions like APEC to foster cross-border cooperation and rebuild trust in the multilateral trading system, suggesting that geoeconomic fragmentation is not inevitable and can be reversed with concerted efforts.