Chapter 1: Regionalism, Trade and Economic Development: Theories and Evidence from the Asia-Pacific Region
1. Regionalism, trade and economic development: theories and evidence from the Asia-Paciﬁc region M.A.B. Siddique INTRODUCTION Regional trade agreements (RTAs) are formed with the aim of minimizing trade barriers in order to increase the ﬂow of total trade between the participating countries. RTAs bring the signatory countries one step closer to establishing a global village with fewer trade barriers. The main arguments put forward in favour of establishing RTAs are based on the theory of comparative advantage (initially developed by Adam Smith in 1776) to bring about an increased standard of living, increased employment, increased global understanding and so on. There are two main geographical facets of RTAs: regional, for example the North American Free Trade Area (NAFTA); and bilateral, such as the Singapore–Australia Free Trade Agreement (SAFTA). By November 2005 there were also three types of RTAs in force. These were free trade agreements (FTAs), which make up 84 per cent, customs unions (CUs); and partial scope agreements, which both account for 8 per cent (Crawford and Fiorentino 2005, p. 3). FTAs have zero tariﬀs between member countries and each country retains the ability for independent trade policy with the rest of the world. CUs are FTAs with members imposing common tariﬀs on non-members. This loss of independent trade policy is the likely reason for the prevalence of FTAs over CUs. Partial scope agreements have limited liberalization which dampens their appeal. RTAs inspire much debate between trade economists, business communities and politicians. Unfortunately, there is...
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