A World Trade Organization for the 21st Century

A World Trade Organization for the 21st Century

The Asian Perspective

ADBI series on Asian Economic Integration and Cooperation

Edited by Richard Baldwin, Masahiro Kawai and Ganeshan Wignaraja

The global financial crisis exposed great shortcomings in the global economic architecture, generating extensive international debate about possible remedies for these deficiencies. The postwar global architecture was guided by major developed economies, centered around the IMF, the GATT, and the World Bank. Today, the balance of economic power is shifting toward emerging economies. Global governance and economic policy must reflect this shift. With contributions from prominent Asian and international trade experts, this book critically examines key changes occurring in the world trading system and explores policy implications for Asia.

Chapter 8: Policy challenges posed by Asian free trade agreements: a review of the evidence

Masahiro Kawai and Ganeshan Wignaraja

Subjects: asian studies, asian development, asian economics, economics and finance, asian economics, international economics


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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