DP1760 | Commercial Links Between Western Europe and East Asia: Retrospect and Prospects

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East Asia has rapidly become the third centre of gravity for global economic activity. North America is relatively well integrated with East Asia, but Europe is not. This paper explores the extent to which economic growth and trade policy developments over the next decade or so will strengthen European-East Asian economic integration, and what scope there is to facilitate that set of bilateral relationships. Use is made of a modified version of the global CGE model known as GTAP to project the world economy to 2010 under various scenarios including Uruguay Round implementation, a transatlantic free trade agreement, APEC liberalization, and a new WTO multilateral round. The bilateral trade consequences of economic growth and Uruguay Round implementation highlight the fact that as East Asia?s relative importance in the world economy keeps growing, so too does its importance to Europe. The relative importance of Europe to East Asia is projected to grow very little, however, although in absolute terms the volume of that trade still grows enormously.