The Asian Perspective
ADBI series on Asian Economic Integration and Cooperation
Edited by Richard Baldwin, Masahiro Kawai and Ganeshan Wignaraja
Chapter 9: Constructing and multilateralizing the Regional Comprehensive Economic Partnership: an Asian perspective
Asia began to witness the emergence of free trade agreements (FTAs) in the 21st century. Asia was a latecomer in the FTA race that started in the early 1990s in the rest of the world. The number of bilateral and plurilateral FTAs increased sharply and rapidly, giving rise to a concern over the emergence of a complicated trade system, or the spaghetti or noodle bowl effect, which could reduce trade by raising trade cost. Recognition of such concern by Asian countries has resulted in the discussions of establishing a region-wide FTA. Two major frameworks were proposed, one consisting of the member countries of ASEAN, the PRC, Japan, and the Republic of Korea (ASEAN13), and the other consisting of ASEAN13, plus India, Australia, and New Zealand (ASEAN16). After several years of discussions on the desirability and feasibility of these two frameworks, East Asian countries led by the ASEAN member countries have decided to establish a region-wide FTA with the ASEAN16 countries under the name of the Regional Comprehensive Economic Partnership (RCEP). The ASEAN16 countries began the RCEP negotiations in May 2013. Free trade agreements have been theoretically shown to be second best in terms of global welfare, while the first best is global or multilateral trade liberalization. Recognizing this point, policy makers and researchers are keen to investigate whether the recent expansion of FTAs and the rise of regionalism in terms of trade policy would lead to a free multilateral trade system.
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