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Impact of Free Trade Agreements on Trade in East Asia

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  • Misa OKABE

    (Faculty of Economics, Wakayama University)

Abstract

The number of bilateral and plurilateral free trade agreements (FTAs) in East Asia has increased rapidly after the 2000s behind the world trend of RTAs. Many studies tackled the challenge of figuring out the impact of FTAs in this region by applying various methodologies. The first half of this paper reviews empirical studies of ex-post evaluation of FTAs in East Asia. A look at earlier studies on the impact of the ASEAN Free Trade Area (hereafter AFTA), the first regional FTA in this region revealed that few studies found robust trade creation effects of AFTA in the 1990s. However, since the 2000s, several studies using detailed trade and tariff data on products or sectors indicate that tariff elimination under AFTA promoted regional trade among ASEAN countries. Recent studies also show tariff elimination is not necessarily the most important measure to promote trade in goods in the case of AFTA. Liberalisation measures--such as reduction of non-tariff measures, trade facilitation and coordination of rules of origin, and improvement of FTA usability--are more important measures to facilitate trade between members other than tariff elimination. Likewise, with regard to bilateral FTAs in East Asia, some ex-post evaluation studies show that these FTAs positively impact trade at some extent. These studies show that the positive impacts are brought not only by tariff elimination under the FTAs but also by other liberalisation measures. The latter half of this paper discusses a basic empirical analysis on the impact of five ASEAN+1 FTAs which have not yet been sufficiently investigated because of shortage of data. We found that trade creation effects of ASEAN-China FTA (ACFTA) and ASEAN-Korea FTA (AKFTA) appear in industrial supplies and capital goods between members. Also, trade in consumption goods is facilitated under ACFTA. On the other hand, the impact of ASEAN-Japan FTA (AJCEP) is not revealed in many cases. These results suggest that these regional FTAs potentiate the positive impact on trade when production and sales networks among members have already been developed. At the same time, the newer FTAs whose members are the same as precedent FTAs should set tariff elimination and other liberalisation measures at more liberalised level than precedent FTAs. From the perspective of effectiveness, the newer regional FTA in this region, such as the Regional Comprehensive Economic Partnership, needs to have a higher level of liberalisation and more inexpensive procedures for members to utilize said FTA than the existing ASEAN+1 FTAs in this region.

Suggested Citation

  • Misa OKABE, 2015. "Impact of Free Trade Agreements on Trade in East Asia," Working Papers DP-2015-01, Economic Research Institute for ASEAN and East Asia (ERIA).
  • Handle: RePEc:era:wpaper:dp-2015-01
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    2. Taguchi, Hiroyuki, 2018. "Trade impacts of South Asian Free Trade Agreements: The case of Sri Lanka," MPRA Paper 85238, University Library of Munich, Germany.
    3. Setyastuti, Rini & Adiningsih, Sri & Widodo, Tri, 2018. "ASEAN Economic Community: Theoretical versus Practical Economic Integration," MPRA Paper 86919, University Library of Munich, Germany.
    4. Mari Pangestu & Lili Yan Ing, 2016. "ASEAN: Regional Integration and Reforms," Asian Economic Papers, MIT Press, vol. 15(2), pages 44-60, Summer.
    5. Kazunobu HAYAKAWA & Nuttawut LAKSANAPANYAKUL & Shujiro URATA, 2015. "Firm-level Impact of Free Trade Agreements on Import Prices," Working Papers DP-2015-33, Economic Research Institute for ASEAN and East Asia (ERIA).
    6. Cassey LEE, 2015. "The Objectives of Competition Law," Working Papers DP-2015-54, Economic Research Institute for ASEAN and East Asia (ERIA).
    7. Venkatachalam ANBUMOZHI & Phoumin HAN, 2015. "Policy Effects on Total System Energy Efficiency: Comparisons of Advanced and Developing Economies in the EAS region," Working Papers DP-2015-67, Economic Research Institute for ASEAN and East Asia (ERIA).
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    9. Burton ONG, 2015. "Competition Law and Policy in Singapore," Working Papers DP-2015-53, Economic Research Institute for ASEAN and East Asia (ERIA).
    10. Hiroyuki Taguchi & Don Chalani Imasha Rubasinghe, 2019. "Trade Impacts of South Asian Free Trade Agreements in Sri Lanka," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 1-18, March.
    11. Taguchi, Hiroyuki & Nishi, Emiko Darcy, 2017. "Trade effects of ASEAN-plus-China and -Japan free trade agreements by production stage and industry," MPRA Paper 81628, University Library of Munich, Germany.
    12. Manaek SM PASARIBU, 2016. "Challenges of Indonesian Competition Law and Some Suggestions for Improvement," Working Papers DP-2016-04, Economic Research Institute for ASEAN and East Asia (ERIA).
    13. Tereso S. TULLAO, Jr. & Miguel Roberto BORROMEO & Christopher James CABUAY, 2015. "Framing the ASEAN Socio-Cultural Community (ASCC) Post 2015: Quality and Equity Issues in Investing in Basic Education in ASEAN," Working Papers DP-2015-65, Economic Research Institute for ASEAN and East Asia (ERIA).
    14. Setyastuti, Rini & Adiningsih, Sri & Widodo, Tri, 2018. "The Dynamics of Comparative Advantage in the ASEAN Region," MPRA Paper 86541, University Library of Munich, Germany.
    15. repec:era:wpaper:dp-2015-73 is not listed on IDEAS
    16. Venkatachalam ANBUMOZHI, 2016. "Convergence of Opportunities: Resilience and the ASEAN Community," Working Papers DP-2016-02, Economic Research Institute for ASEAN and East Asia (ERIA).
    17. Setyastuti, Rini & Adiningsih, Sri & Widodo, Tri, 2018. "The Role of Governance Quality in Increasing Intra-ASEAN Trade," MPRA Paper 85258, University Library of Munich, Germany.
    18. Toshitaka GOKAN & Ikuo KUROIWA & Nuttawut LAKSANAPANYAKUL & Yasushi UEKI, 2015. "Spatial Patterns of Manufacturing Agglomeration in Cambodia, Lao People’s Democratic Republic, and Thailand," Working Papers DP-2015-68, Economic Research Institute for ASEAN and East Asia (ERIA).
    19. Alassane D. Yeo & Aimin Deng, 2019. "The trade policy effect in international trade: case of Pakistan," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-17, December.

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    More about this item

    Keywords

    ASEAN Free Trade Area; ASEAN+1FTAs; RCEP;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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