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Impacts of Sequential Free Trade Agreements in East Asia: A CGE and Political Economy Analysis

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  • Chang-Soo Lee
  • Don Moon

Abstract

This paper estimates the economic impacts of the various sequential liberalization scenarios in East Asia, emphasizing the significance of the “sequence” of the liberalization process in computable general equilibrium (CGE) analysis. The major findings are as follows: (1) “Sequence” matters in measuring the economic impacts of free trade agreement (FTA) scenarios in the region; (2) Scenario 1 (Korea-China FTA → Korea-Japan FTA → China-Japan FTA) is the sequence maximizing Korea's economic gains, whereas Scenario 3 (Korea-China-Japan FTA) is the one most preferred economically by China and Japan; (3) Korea's FTAs with the United States (US) and European Union (EU) can be evaluated as a preemptive strategic move, causing changes in FTA preferences of Korea and Japan; (4) the prediction of Bond and Baldwin (adjustment cost and juggernaut effect) and that of Evenett et al. (trade diversion effect) are supported by the empirical results that Korea's (China's) expected gains from northeast Asian FTA sequences increase (decrease) after Korea's FTAs with the US and EU are made; (5) predictions about the International Political Economy (IPE) theories (power consideration and domestic politics) upon the sequential FTA formations in East Asia are consistent with the findings above.

Suggested Citation

  • Chang-Soo Lee & Don Moon, 2010. "Impacts of Sequential Free Trade Agreements in East Asia: A CGE and Political Economy Analysis," Global Economic Review, Taylor & Francis Journals, vol. 39(4), pages 365-381.
  • Handle: RePEc:taf:glecrv:v:39:y:2010:i:4:p:365-381
    DOI: 10.1080/1226508X.2010.533846
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    Cited by:

    1. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.

    More about this item

    Keywords

    FTA sequence; East Asia; CGE; political economy;

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