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


  • Innwon Park


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.

Suggested Citation

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

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. 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.
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    6. Tubagus Feridhanusetyawan, 2005. "Preferential Trade Agreements in the Asia-Pacific Region," IMF Working Papers 05/149, International Monetary Fund.
    7. 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, January.
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    9. Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers.
    10. Masaru Umemoto, 2003. "Hub and spoke integration and income convergence," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(3), pages 249-249, August.
    11. Peter Lloyd, 2002. "New Bilateralism in the Asia-Pacific," The World Economy, Wiley Blackwell, vol. 25(9), pages 1279-1296, September.
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    13. 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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    Cited by:

    1. 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.
    2. 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.
    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.
    4. repec:arp:bmerar:2017:p:57-61 is not listed on IDEAS
    5. Jeong-Soo OH & Phouphet Kyophilavong, 2015. "Trade Liberalization and Poverty in Developing Countries: Literature Survey," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(2), pages 86-94, Fabruary.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East


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