Cross-Regional Trade

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Abstract Latin American and Asia-Pacific countries are fervently forging economic cooperative relationships, which began with the Asia-Pacific Economic Cooperation in 1989. The two regions have shifted away from looking intra-regionally for economic stability against the forces of globalization. Rather, they have moved towards emphasizing cross-regional trade pacts. Cross-regional trade pacts present a number of advantages for member countries. The Mexico-Japan FTA, as a case study, shows us that trade and FDI between member countries increase with cross-regional free trade agreements (FTA). However, FTAs between the Latin American and Asia-Pacific regions do not have a direct impact on trade and FDI. As trade relations between Mexico and Japan show, there have periods of expanded trade activity prior to the implementation of a cross-regional trade pact. Instead, a number of other variables play a key role in promoting trade and FDI such as the regulatory environment, fiscal policy, and physical infrastructure. Furthermore, cross-regional trade agreements present other new opportunities for the countries involved. Latin American and Asia-Pacific countries that sign onto inter-regional trade deals have access to other regional markets that may consist of larger economies, low-cost producers, and more efficient production mechanisms.

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