We consider two APEC scenarios for trade liberalization. First, developed members remove tariff and nontariff barriers by 2010, developing member countries remove them by 2020, while all members retain barriers on imports from non-APEC countries. The second scenario is the same as the first except APEC members remove trade barriers on all imports without discriminating against nonmember regions. In both scenarios, developing members realize significantly greater aggregate output gains than developed members. The members as a group will gain $245 billion under the first APEC scenario and almost $300 billion under the second scenario by the year 2020.

Output adjustments vary significantly across sectors, and sectoral output changes in excess of 20-30 percent over baseline projections are not uncommon. Not surprisingly, every developed member would experience a contraction in the apparel production. Agricultural and processed food sectors in some member countries (e.g., Japan and Korea) are also hit hard by the removal of protection. By contrast, the ASEAN countries expand production of simple manufactures (such as processed food and wearing apparel), as well as more sophisticated products such as machinery (including electronics products) under both scenarios. On the balance, the potential benefits of APEC trade liberalization appear to be far greater than the potential costs arising from structural adjustment.