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Regional Trade Agreements in East Asia: Will They Be Sustainable?

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  • Innwon Park

Abstract

By assessing the sustainability of regional trade agreements (RTAs) for East Asia, we quantitatively evaluate the likely impact of proposed East Asian RTA strategies on the East Asian economies and the world economy with respect to consumption, production, volume of trade and terms of trade effects by applying a multi-country and multi-sector computable general equilibrium model. These strategies include: (i) the ASEAN Free Trade Area (AFTA: a being-left-alone strategy); (ii) an ASEAN Hub RTA (a hub-and-spoke type of overlapping RTA strategy); (iii) the AFTA versus a China-Japan-Korea RTA (a duplicating or competing RTA strategy); and (iv) an ASEAN+3 RTA (an expansionary RTA strategy). We find that an expansionary ASEAN+3 RTA could be a sustainable policy option because the members' gains would be significantly positive, with more equitably distributed gains between members than when using other strategies. The effect on world welfare would also be positive and the negative effect on nonmembers would not be very strong. More interestingly, if the East Asian countries cooperate with Pacific Basin countries to form an APEC-level RTA, such as a free trade area of the Asia-Pacific, the extension of the regional trade bloc might be considered a more desirable policy option than the proposed East Asian RTAs for East Asian economies, even though countries excluded from the free trade area of the Asia Pacific are worse off. Copyright 2009 The Author. Journal compilation 2009 East Asian Economic Association and Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by East Asian Economic Association in its journal Asian Economic Journal.

Volume (Year): 23 (2009)
Issue (Month): 2 (06)
Pages: 169-194

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Handle: RePEc:bla:asiaec:v:23:y:2009:i:2:p:169-194

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References

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  1. Shujiro Urata & Kozo Kiyota, 2003. "The Impacts of an East Asia FTA on Foreign Trade in East Asia," NBER Working Papers 10173, National Bureau of Economic Research, Inc.
  2. Tubagus Feridhanusetyawan, 2005. "Preferential Trade Agreements in the Asia-Pacific Region," IMF Working Papers 05/149, International Monetary Fund.
  3. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa63, November.
  4. Jong-Wha Lee & Innwon Park & Kwanho Shin, 2008. "Proliferating Regional Trade Arrangements: Why and Whither?," The World Economy, Wiley Blackwell, vol. 31(12), pages 1525-1557, December.
  5. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-48, July.
  6. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
  7. Peter Lloyd, 2002. "New Bilateralism in the Asia-Pacific," The World Economy, Wiley Blackwell, vol. 25(9), pages 1279-1296, 09.
  8. Lee, Jong-Wha & Shin, Kwanho, 2006. "Does regionalism lead to more global trade integration in East Asia?," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 283-301, December.
  9. Jong-Wha Lee & Innwon Park, 2005. "Free Trade Areas in East Asia: Discriminatory or Non-discriminatory?," The World Economy, Wiley Blackwell, vol. 28(1), pages 21-48, 01.
  10. Sulamaa, Pekka & Widgrén, Mika, 2005. "Asian Regionalism versus Global Free Trade: A Simulation Study on Economic Effects," Discussion Papers 985, The Research Institute of the Finnish Economy.
  11. Warwick McKibbin & Jong-Wha Lee & Inkyo Cheong, 2004. "A dynamic analysis of the Korea-Japan free trade area: simulations with the G-cubed Asia-Pacific model," International Economic Journal, Taylor & Francis Journals, vol. 18(1), pages 3-32.
  12. McKibbin, W.J., 1997. "Regional and Multiregional Trade Liberalization: The Effects on Trade, Investment and Welfare," Papers 134, Brookings Institution - Working Papers.
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Cited by:
  1. Park, Innwon & Park, Soonchan, 2008. "Free Trade Agreements versus Customs Unions: An Examination of East Asia," MPRA Paper 11301, University Library of Munich, Germany.
  2. Chirathivat, Suthiphand & Srisangnam, Piti, 2013. "The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements," ADBI Working Papers 419, Asian Development Bank Institute.
  3. Park, Innwon & Park, Soonchan & Kim, Sangkyom, 2010. "A Free Trade Area of the Asia Pacific (FTAAP): Is It Desirable?," MPRA Paper 26680, University Library of Munich, Germany.

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