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Does Regionalism Lead to More Global Trade Integration in East Asia?

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  • Lee, Jong-Wha
  • Shin, Kwanho

Abstract

Since early 1999, global trade liberalization has moved to the wayside as regional preferentialtrade agreements have become the preferred choice in East Asia. Does this shift toward regional trade agreements (RTA) suggest that global trade and welfare levels will be raised? Regional preferential trade arrangements, in contrast to unilateral trade liberalization, may well cause both 'trade creation’ and ‘trade diversion’. If an RTA raises trade and welfare among its members but hurts the welfare of non-members, its net effect on global trade and welfare becomes ambiguous. The hypothesis of ‘natural trading partners’ suggests that RTAs comprising natural trading partners are more likely to create trade between member countries, and less likely to divert trade from non-member countries, and thus leading to large improvements of economic welfare. Based on the existing RTAs in the world, we find that if an RTA forms between geographically proximate countries (measured either by distance or border), trade significantly increases between member countries. At the same time, we find that geographical proximity also contributes to increasing trade between a member and the rest of the world. We apply our findings to East Asia and examine how the existing or proposed East Asian trading blocs affect intra-bloc and extra-bloc trade, and thereby global trade. We find the East Asian RTAs are likely to create more trade among members without diverting trade from non-members.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 706.

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Date of creation: Oct 2005
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Handle: RePEc:pra:mprapa:706

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Keywords: Regionalism; Global trade integration; Trade creation; Trade diversion;

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References

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  1. Jong-Wha Lee & Innwon Park & Kwanho Shin, 2005. "Proliferating Regional Trade Arrangements: Why and Whither?," International Trade 0501010, EconWPA.
  2. 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.
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Citations

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Cited by:
  1. Marco Fugazza & Alessandro Nicita, 2011. "On The Importance Of Market Access For Trade," UNCTAD Blue Series Papers 50, United Nations Conference on Trade and Development.
  2. 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, 06.
  3. Alberto Behar, 2010. "The impact of North-South and South-South trade agreements on bilateral trade," Economics Series Working Papers CSAE WPS/2010-30, University of Oxford, Department of Economics.
  4. Hector Calvo-Pardo & Caroline Freund & Emanuel Ornelas, 2009. "The ASEAN Free Trade Agreement: impact on trade flows and external trade barriers," LSE Research Online Documents on Economics 28602, London School of Economics and Political Science, LSE Library.
  5. Sithanonxay SUVANNAPHAKDY & Toshihisa TOYODA & Chris CZERKAWSKI, 2011. "Enhancing Trade Flows in ASEAN Plus Six," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
  6. Fugazza, Marco & Nicita, Alessandro, 2011. "Measuring preferential market access," MPRA Paper 38565, University Library of Munich, Germany.
  7. McDonald, Scott & Robinson, Sherman & Thierfelder, Karen, 2008. "Asian Growth and Trade Poles: India, China, and East and Southeast Asia," World Development, Elsevier, vol. 36(2), pages 210-234, February.
  8. A Salim, Ruhu & Mahfuz Kabir, Mohammad, 2011. "Does More Trade Potential Remain in Arab States of the Gulf ?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 217-243.
  9. Fugazza, Marco & Nicita, Alessandro, 2013. "The direct and relative effects of preferential market access," Journal of International Economics, Elsevier, vol. 89(2), pages 357-368.
  10. Mun Heng Toh, 2006. "Singapore's Perspectives on the Proliferation of RTAs in East Asia and Beyond," Global Economic Review, Taylor & Francis Journals, vol. 35(3), pages 259-284.
  11. Postolachi, Andrei-Teofil, 2012. "Regionalizarea comertului international
    [Regionalization of international trade]
    ," MPRA Paper 36936, University Library of Munich, Germany.

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