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Regional Trade Agreements in East Asia: Will They Be Sustainable?

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  • Park, Innwon

Abstract

Searching for sustainable regional trade agreements (RTAs) for East Asia, we quantitatively evaluated the likely impact of proposed East Asian RTA strategies─(i) the AFTA (a being-left-alone strategy), (ii) an ASEAN Hub RTA (a hub-and-spoke type of overlapping RTA strategy), (iii) the AFTA vs a China-Japan-Korea RTA (a duplicating or competing RTA strategy), (iv) an ASEAN+3 RTA (an expansionary RTA strategy)─on the East Asian economies and the world economy with respect to consumption, production, volume of trade, and terms of trade effect by applying a multi-country and multi-sector CGE model. We found that there was no perfectly Pareto improving RTA strategy among the four different scenarios proposed for East Asia relative to the existing AFTA. However, the expansionary ASEAN+3 RTA can be a sustainable Pareto efficient policy option because the members’ gains were significantly positive enough with more evenly distributed gains between members. The effects on world welfare were also positive enough and the negative effect on nonmembers was not very significant. More interestingly, if the East Asian countries are willing to cooperate with their Pacific Basin partners to form an APEC level of RTA, the evolution toward a global trade bloc can be counted as a Pareto improvement for East Asian economies in every aspect we measure.

Suggested Citation

  • Park, Innwon, 2008. "Regional Trade Agreements in East Asia: Will They Be Sustainable?," MPRA Paper 5068, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:5068
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    References listed on IDEAS

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    1. Lee, Jong-Wha & Shin, Kwanho, 2006. "Does regionalism lead to more global trade integration in East Asia?," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 283-301, December.
    2. Jong-Wha Lee & Innwon Park, 2005. "Free Trade Areas in East Asia: Discriminatory or Non-discriminatory?," The World Economy, Wiley Blackwell, vol. 28(1), pages 21-48, January.
    3. repec:kap:iaecre:v:9:y:2003:i:3:p:249-249 is not listed on IDEAS
    4. Peter Lloyd, 2002. "New Bilateralism in the Asia-Pacific," The World Economy, Wiley Blackwell, vol. 25(9), pages 1279-1296, September.
    5. Robert Scollay & John P. Gilbert, 2001. "New Regional Trading Arrangements in the Asia Pacific?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa63, October.
    6. Tubagus Feridhanusetyawan, 2005. "Preferential Trade Agreements in the Asia-Pacific Region," IMF Working Papers 05/149, International Monetary Fund.
    7. Jong-Wha Lee & Innwon Park & Kwanho Shin, 2008. "Proliferating Regional Trade Arrangements: Why and Whither?," The World Economy, Wiley Blackwell, vol. 31(12), pages 1525-1557, December.
    8. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
    9. McKibbin, W.J., 1997. "Regional and Multiregional Trade Liberalization: The Effects on Trade, Investment and Welfare," Papers 134, Brookings Institution - Working Papers.
    10. Sulamaa, Pekka & Widgrén, Mika, 2005. "Asian Regionalism versus Global Free Trade: A Simulation Study on Economic Effects," Discussion Papers 985, The Research Institute of the Finnish Economy.
    11. Shujiro Urata & Kozo Kiyota, 2003. "The Impacts of an East Asia FTA on Foreign Trade in East Asia," NBER Working Papers 10173, National Bureau of Economic Research, Inc.
    12. Masaru Umemoto, 2003. "Hub and spoke integration and income convergence," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(3), pages 249-249, August.
    13. Bhagwati, Jagdish & Greenaway, David & Panagariya, Arvind, 1998. "Trading Preferentially: Theory and Policy," Economic Journal, Royal Economic Society, vol. 108(449), pages 1128-1148, July.
    14. Warwick McKibbin & Jong-Wha Lee & Inkyo Cheong, 2004. "A dynamic analysis of the Korea-Japan free trade area: simulations with the G-cubed Asia-Pacific model," International Economic Journal, Taylor & Francis Journals, vol. 18(1), pages 3-32.
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    Cited by:

    1. Chirathivat, Suthiphand & Srisangnam, Piti, 2013. "The 2030 Architecture of Association of Southeast Asian Nations Free Trade Agreements," ADBI Working Papers 419, Asian Development Bank Institute.
    2. Innwon Park & Soonchan Park, 2009. "Free Trade Agreements versus Customs Unions: An Examination of East Asia," Asian Economic Papers, MIT Press, vol. 8(2), pages 119-139, Spring.
    3. Jeong-Soo OH & Phouphet Kyophilavong, 2015. "Trade Liberalization and Poverty in Developing Countries: Literature Survey," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(2), pages 86-94, Fabruary.
    4. Park, Innwon & Park, Soonchan & Kim, Sangkyom, 2010. "A Free Trade Area of the Asia Pacific (FTAAP): Is It Desirable?," MPRA Paper 26680, University Library of Munich, Germany.
    5. repec:arp:bmerar:2017:p:57-61 is not listed on IDEAS

    More about this item

    Keywords

    regional trade agreements; sustainability; Pareto efficiency; CGE model; East Asia;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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