How is Business Responding?
ADBI series on Asian Economic Integration and Cooperation
Edited by Masahiro Kawai and Ganeshan Wignaraja
Masahiro Kawai and Ganeshan Wignaraja 2.1 INTRODUCTION This chapter presents the main findings from the surveys of 841 firms in six East Asian countries and explores policy implications from the research. It addresses four key questions on free trade agreements (FTAs) and the Asian noodle bowl effect: Are FTA preferences being used? What are the benefits and costs of FTAs for firms? Are multiple rules of origin (ROOs) a burden on firms, particularly on small and medium-sized enterprises (SMEs)? Is there enough support for domestic firms to utilize trade preferences under FTAs? Sections 2.2 to 2.5 deal with these questions. Section 2.6 discusses policy implications from the firm surveys while section 2.7 concludes the chapter. The individual country chapters in this book contain the more detailed information and analysis that will interest trade and industry specialists. Appendix 2A.1 contains the survey methodology and sample profile, while Appendix 2A.2 highlights recommendations from the country chapters. Appendix 2A.3 explores policy considerations for a single East Asian FTA. 2.2 USE OF FTA PREFERENCES The question of whether FTA preferences are being used in the East Asian countries surveyed is critical to the debate on the effectiveness of East Asian FTAs. An overarching indicator of the effectiveness of East Asian FTAs is the use made of preferences by business. Previous country- and industry-level studies have suggested that FTA preference utilization rates (based on shares of export value enjoying preferences) are low in East Asian countries and that FTAs are not actually used.1 Accordingly, FTAs...
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