IDEAS home Printed from https://ideas.repec.org/p/jku/econwp/2008_13.html
   My bibliography  Save this paper

Economic Implications of Deeper Asian Integration

Author

Abstract

The Asian countries are once again focused on options for large, comprehensive regional integration schemes. In this paper we explore the implications of such broad-based regional trade initiatives in Asia, highlighting the bridging of the East and South Asian economies. We place emphasis on the alternative prospects for insider and outsider countries. We work with a global general equilibrium model of the world economy, benchmarked to a projected 2017 sets of trade and production patterns. We also work with gravity-model based estimates of trade costs linked to infrastructure, and of barriers to trade in services. Taking these estimates, along with tariffs, into our CGE model, we examine regionally narrow and broad agreements, all centered on extending the reach of ASEAN to include free trade agreements with combinations of the northeast Asian economies (PRC, Japan, Korea) and also the South Asian economies. We focus on a stylized FTA that includes goods, services, and some aspects of trade cost reduction through trade facilitation and related infrastructure improvements. What matters most for East Asia is that China, Japan, and Korea be brought into any scheme for deeper regional integration. This matter alone drives most of the income and trade effects in the East Asia region across all of our scenarios. The inclusion of the South Asian economies in a broader regional agreement sees gains for the East Asian and South Asian economies. Most of the East Asian gains follow directly from Indian participation. The other South Asian players thus stand to benefit if India looks East and they are a part of the program, and to lose if they are not. Interestingly, we find that with the widest of agreements, the insiders benefit substantively in terms of trade and income while the aggregate impact on outside countries is negligible. Broadly speaking, a pan-Asian regional agreement would appear to cover enough countries, with a great enough diversity in production and incomes, to actually allow for regional gains without substantive third-country losses. However, realizing such potential requires overcoming a proven regional tendency to circumscribe trade concessions with rules of origin, NTBs, and exclusion lists. The more likely outcome, a spider web of bilateral agreements, carries with it the prospect of significant outsider costs (i.e. losses) both within and outside the region.

Suggested Citation

  • Joseph Francis Francois & Ganeshan Wignaraja, 2008. "Economic Implications of Deeper Asian Integration," Economics working papers 2008-13, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2008_13
    as

    Download full text from publisher

    File URL: http://www.econ.jku.at/papers/2008/wp0813.pdf
    Download Restriction: no

    Other versions of this item:

    More about this item

    Keywords

    regionalism; Asia FTAs; ASEAN; preferential trade; gravity model of services trade; trade costs and infrastructure;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jku:econwp:2008_13. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (René Böheim). General contact details of provider: http://edirc.repec.org/data/vlinzat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.