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EU-Asia Free Trade Areas? Economic and Policy Considerations

Author

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  • Michael G. Plummer

    (Asian Development Bank Institute (ADBI))

Abstract

In this paper, we analyzed key aspects of the changing economic relationship between the European Union (EU) and Asia, and explored the potential economic ramifications of deeper EU-Asian economic cooperation. We also investigated the possible costs to the EU of remaining “disengaged†from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. Our empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. We also presented two CGE models that estimated the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial-equilibrium) approach, we argued that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. We therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.

Suggested Citation

  • Michael G. Plummer, 2010. "EU-Asia Free Trade Areas? Economic and Policy Considerations," Governance Working Papers 23282, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:govern:23282
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    File URL: http://www.eaber.org/node/23282
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    References listed on IDEAS

    as
    1. Michael G Plummer & Ganeshan Wignaraja, 2007. "Integration Strategies for ASEAN: Alone, Together, or Together with Neighbors," Economics Study Area Working Papers 92, East-West Center, Economics Study Area.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic relationship; the European Union (EU) and Asia; Asian integration; EU-Asian trade agreements; CGE model; (partial-equilibrium approach; FTA;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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