The Regional Comprehensive Economic Partnership (RCEP) concluded between Asian Pacific States in 2020 is expected to change regional and global trade patterns. Based on a Computable General Equilibrium model (including 41 countries and 39 sectors), the underlying paper evaluates the impact of firstly, RCEP on trade between Latin American and Caribbean (LAC) and Asian Pacific member countries, and secondly, a hypothetical free trade area in LAC and thirdly, a free trade agreement within and between the two regions. Results are analyzed on the country —and sector— level by type of agent (small and medium-sized, MSMEs, and large companies). 

The model outputs imply a boost in trade in the Asian Pacific region caused by the RCEP agreement coming into force, while trade volumes of LAC countries would contract. This likely targets primarily exports of natural resources and low —and medium— technology manufacturers based in LAC. When a hypothetical bi-regional trade agreement is simulated, results indicate a positive impact on output, trade and welfare: It is expected to yield a change in GDP between 0.35% and 0.6% for LAC, and a change between 0.46% and 1% for Asia Pacific. The agreement is also assumed to lead to welfare gains in all countries considered. Regarding employment, LAC and RCEP countries are expected to face an average increase in employment of unskilled workers of 1.7% and 3.0%, respectively, and rise in total employment of 0.9% and 1.8% on average, respectively. The results further reveal that especially Latin American MSMEs would be more positively impacted by such agreement than large companies. In this respect, agro-industrial MSMEs are expected to increase exports. Simulations of productivity improvements associated with the reduction of non-tariff measures generate large positive increases in output, trade and employment, underlining the importance of trade facilitation as a complementary tool to tariff reduction.