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Is AFTA a Desirable Regional Trade Agreement for ASEAN?

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  • Innwon Park

Abstract

This study evaluates the effectiveness of the Association of Southeast Asian Nation (ASEAN) in liberalizing trade and investment through regional economic cooperation. We test whether the ASEAN Free Trade Area (AFTA) satisfies necessary conditions for a trade bloc to generate a positive and sufficient net trade creation effect by calculating trade-related indices introduced by the theory of economic integration. We find that ASEAN economies might not satisfy most of the conditions for creating positive welfare gains from AFTA. Moreover, in order to search for a desirable regional trade agreement (RTA) in the East Asian region, this study considers alternative strategies beyond AFTA, such as the currently implemented ASEAN hub (three sets of ASEAN+1: ASEAN+China, ASEAN+Japan, and ASEAN+Korea) RTA and a proposed ASEAN+3 (including ASEAN, China, Japan, and Korea) RTA. Although the ASEAN hub RTA appears to be a better policy option for ASEAN, it is not necessarily desirable for the region when we consider the neighboring countries in Northeast Asia as spokes. Therefore, we propose that the ASEAN+3 RTA, covering 10 ASEAN member countries and the three Northeast Asian countries, is a more desirable RTA in East Asia.

Suggested Citation

  • Innwon Park, 2011. "Is AFTA a Desirable Regional Trade Agreement for ASEAN?," International Area Studies Review, Center for International Area Studies, Hankuk University of Foreign Studies, vol. 14(4), pages 49-72, December.
    • Handle: RePEc:sae:intare:v:14:y:2011:i:4:p:49-72
    DOI: 10.1177/223386591101400404
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    References listed on IDEAS

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    1. Innwon Park & Soonchan Park, 2009. "Free Trade Agreements versus Customs Unions: An Examination of East Asia," Asian Economic Papers, MIT Press, vol. 8(2), pages 119-139, Spring.
    2. Hiro Lee & Dominique van der Mensbrugghe, 2007. "Regional Integration, Sectoral Adjustments and Natural Groupings in East Asia," OSIPP Discussion Paper 07E008, Osaka School of International Public Policy, Osaka University.
    3. Chia, Siow Yue, 2010. "Regional Trade Policy Cooperation and Architecture in East Asia," ADBI Working Papers 191, Asian Development Bank Institute.
    4. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa63, October.
    5. Innwon Park, 2009. "Regional Trade Agreements in East Asia: Will They Be Sustainable?," Asian Economic Journal, East Asian Economic Association, vol. 23(2), pages 169-194, June.
    6. Siow Yue Chia, 2010. "Regional Trade Policy Cooperation and Architecture in East Asia," Trade Working Papers 22029, East Asian Bureau of Economic Research.
    7. Calvo-Pardo, Hector & Freund, Caroline & Ornelas, Emanuel, 2009. "The ASEAN free trade agreement : impact on trade flows and external trade barriers," Policy Research Working Paper Series 4960, The World Bank.
    8. Adams, F. Gerard & Park, I., 1995. "Measuring the impact of AFTA: An application of a linked CGE system," Journal of Policy Modeling, Elsevier, vol. 17(4), pages 325-365, August.
    9. 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.
    10. Yunling Zhang & Minghui Shen, 2011. "The Status of East Asian Free Trade Agreements," Trade Working Papers 23254, East Asian Bureau of Economic Research.
    11. Yunling Zhang & Minghui Shen, 2011. "The Status of East Asian Free Trade Agreements," Governance Working Papers 23254, East Asian Bureau of Economic Research.
    12. Innwon Park, 2006. "East Asian Regional Trade Agreements: Do They Promote Global Free Trade?," Pacific Economic Review, Wiley Blackwell, vol. 11(4), pages 547-568, December.
    13. Kawai, Masahiro & Wignaraja, Ganeshan, 2008. "Regionalism as an Engine of Multilateralism: A Case for a Single East Asian FTA," Working Papers on Regional Economic Integration 14, Asian Development Bank.
    14. 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.
    15. 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.
    16. Zhang, Yunling & Shen, Minghui, 2011. "The Status of East Asian Free Trade Agreements," ADBI Working Papers 282, Asian Development Bank Institute.
    17. 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.
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