| Computable general equilibrium (CGE) models have been utilized to analyze a variety of international trade issues, such as policies of trade liberalization. I use a CGE model to examine the impact of a proposed trade bloc consisting of the US, Canada, Mexico, and Japan. The liberalization of trade consists of the complete elimination of tariffs between the four countries.; I find welfare increases for all members of the proposed trade bloc when tariffs are eliminated. These gains appear to accrue more to Canada, whose welfare experiences the largest percentage gain of the four countries. I also find, on average, Japan's bilateral exports to member nations increase more than any other union member. The bilateral results further indicate the greatest change in industry production occurs in the manufacturing sector. Although the impact is concentrated in the manufacturing sector in each country, the industries affected differ across member nations. All countries experience an increase in total production except the US.; While I find the members of the trade bloc experience changes in welfare, volume of trade, and production, the overall impact of the removal of tariffs on each economy is minimal. These results do not change considerably under different assumptions about the demand for leisure or the elasticity of substitution between factors of production. |
