Economic Integration in East Asia

Until recently, East Asia, the world's most dynamic area for several decades now, had few regional institutions. However, the successive crises in the last ten years (financial crisis in 1997-1998, SRAS, tsunami, bird flu) have demonstrated the need for formal cooperation instruments. Trade integration is one of the aspects of regional cooperation that is beginning to take shape. Particularly, since China joined the WTO in 2001, there has been a multiplication of bilateral and multilateral free trade agreement negotiations. What form will the regional integration that emerges from this plethora of initiatives take? Here, we analyse two scenarios. One centres on an integrated and free trade ASEAN with each of four major Asian partners: China, Japan, Korea and India; the other, clearly more ambitious, consists of a complete free trade area amongst these fourteen countries. Simulations with the Mirage model show that Japan and Korea would have greater interest in the creation of a completely integrated area, whereas the ASEAN would derive greater benefits from bilateral agreements. Finally, even though the economic gains of agricultural liberalisation are potentially substantial, political considerations will no doubt exclude it for a long time yet.