The Asian Perspective
ADBI series on Asian Economic Integration and Cooperation
Edited by Richard Baldwin, Masahiro Kawai and Ganeshan Wignaraja
Chapter 8: Policy challenges posed by Asian free trade agreements: a review of the evidence
Asian economies face important policy challenges regarding the use of free trade agreements – primarily their scope and their impact on regionalization trends. These topics are at the forefront of contemporary negotiations and of great interest to policy makers. This chapter reviews existing literature, provides new data on the use of FTA preferences from certificates of origin and enterprise surveys, uses new analytical tools to examine the contents of existing FTAs, and shows the results of computable general equilibrium (CGE) modeling exercises to highlight economic impacts. There is an emerging literature on policy issues concerning Asian FTAs. Issues and concerns highlighted in the new literature include low FTA preference utilization, a ‘noodle bowl’ problem of criss-crossing agreements that potentially distort trade toward bilateral channels, excessive exclusions and special treatment in FTAs, limited liberalization of agriculture and services, and the possibility that the multilateral trading system may be progressively eroded (Banda and Whalley 2005; Baldwin 2006; Tumbarello 2007; World Bank 2007; Bhagwati 2008; Drysdale and Armstrong 2010; Ravenhill 2010; Hoekman and Mattoo 2011). Free trade agreements are a relatively new phenomenon in Asia, and a dearth of empirical evidence, particularly with respect to patterns of Asian FTAs and business impacts, has made it difficult to verify the validity of these concerns. With the availability of new data, the time is ripe for an evidence-based assessment of Asian FTAs.
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