New Global Economic Architecture

New Global Economic Architecture

The Asian Perspective

ADBI series on Asian Economic Integration and Cooperation

Edited by Masahiro Kawai, Peter J. Morgan and Pradumna B. Rana

The global financial crisis of 2007-2009 exposed flaws and shortcomings in the global economic architecture, and has sparked an international debate about possible remedies for them. The postwar global architecture was essentially guided by the major developed economies, and was centered around the IMF, the GATT – the predecessor of the WTO – and the World Bank. Today, however, the balance of economic and financial power is shifting toward the emerging economies, especially those in Asia, and both global governance and economic policy thinking are beginning to reflect this shift. This book addresses the important question of how a regional architecture, particularly one in Asia, can induce a supply of regional public goods that can complement and strengthen the global public goods supplied through the global architecture. These public goods include institutions to help maintain financial stability, support more open trading regimes and promote sustainable economic development.

Chapter 7: Evolving trade policy architecture and FTAs in Asia

Masahiro Kawai and Ganeshan Wignaraja

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation


Asia’s trade policy architecture is witnessing a proliferation of free trade agreements (FTAs) with significant implications for economies and firms alike. This marks a break with past trade policy in the region. Asia’s famous economic rise as the “global factory” over several decades was facilitated by outward-oriented development strategies and a multilateral approach based initially on the General Agreement on Tariffs and Trade (GATT) and then its successor, the World Trade Organization (WTO). Free trade agreements (FTAs), as trade-policy instruments in Asia, were largely absent in the region’s trade policy architecture during Asia’s economic rise. Today, the region is a leader in global FTA activity with about 76 concluded FTAs in 2013 (up from only 3 in 2000). Its largest economies (People’s Republic of China [PRC], India and Japan) as well as a few advanced ASEAN economies (e.g. Singapore and Thailand) have become key players in FTA activity (see Appendix Table 7A.1). Reflecting the growth of FTAs, the importance of FTAs to Asia’s trade has also increased. Several reasons seem to underlie the spread in Asian FTAs, including market access for goods trade, the need to remove impediments to deepening regional production networks and supply chains, the intensification of FTA activity in Europe and the Americas, and slow progress in WTO Doha Round trade talks.

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