Asian FTAs: Trends, Prospects, and Challenges

46 Pages Posted: 8 Dec 2010

See all articles by Masahiro Kawai

Masahiro Kawai

Asian Development Bank Institute

Ganeshan Wignaraja

Asian Development Bank

Date Written: October 1, 2010

Abstract

Although a latecomer, economically important Asia has emerged at the forefront of global free trade agreement (FTA) activity. This has sparked concerns about the negative effects of Asian FTAs, including the “noodle bowl” problem. Amid slow progress in the World Trade Organization’s (WTO) Doha negotiations and the global financial crisis, however, Asian regionalism seems to be here to stay. The focus for policy makers should then be how best to minimize the costs of FTAs while maximizing their benefits. Adopting a pragmatic perspective, this paper examines key trends and challenges in Asian FTAs. It provides new evidence from firm surveys, analysis of specific agreements, and computable general equilibrium estimates. It provides the following set of recommendations: strengthen the support system for using FTAs; rationalize rules of origin and upgrade their administration; ensure better coverage of agricultural trade; forge comprehensive “WTO-plus” agreements; and encourage a regionwide FTA. Political economy considerations suggest that a likely scenario is for FTA consolidation in Asia – by creating a People’s Republic of China-Japan-Republic of Korea FTA, combining it with ASEAN 1 FTAs, and then involving Australia, India, and New Zealand – to be followed by connections with North America and Europe. In conclusion, the analysis suggests that a bottom-up approach to a Doha Round Agreement should be adopted.

Keywords: Asian Free Trade Agreements (FTA), Noodle Bowl, WTO-Plus Provisions, East Asia-Wide Free Trade Agreements (FTA)

JEL Classification: F1, F15, O24

Suggested Citation

Kawai, Masahiro and Wignaraja, Ganeshan, Asian FTAs: Trends, Prospects, and Challenges (October 1, 2010). Asian Development Bank Economics Working Paper Series No. 226, Available at SSRN: https://ssrn.com/abstract=1721911 or http://dx.doi.org/10.2139/ssrn.1721911

Masahiro Kawai (Contact Author)

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F 3-2-5
Kasumigaseki Chiyoda-ku
Tokyo, 100-6008
Japan

Ganeshan Wignaraja

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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