Asia’s Free Trade Agreements

Asia’s Free Trade Agreements

How is Business Responding?

ADBI series on Asian Economic Integration and Cooperation

Edited by Masahiro Kawai and Ganeshan Wignaraja

The spread of Asia’s free trade agreements (FTAs) has sparked an important debate on the impact of such agreements on business activity. This pioneering study uses new evidence from surveys of East Asian exporters – including Japan, the People’s Republic of China, the Republic of Korea and three ASEAN economies of the Philippines, Singapore and Thailand – to shed light on the FTA debate.

Chapter 9: Conclusion

Masahiro Kawai and Ganeshan Wignaraja

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, international economics

Extract

Masahiro Kawai and Ganeshan Wignaraja SUMMARY AND FUTURE AGENDA Since the beginning of this millennium, East Asia has emphasized the importance of free trade agreement (FTA)-led regionalism alongside a long history of strong multilateralism and outward orientation. Dubbed the global factory, this region has seen a rapid increase in FTAs since 2000. Major East Asian economies like Japan, the People’s Republic of China (PRC), the Republic of Korea (hereinafter Korea), Thailand and Singapore have become the leading players in the spread of FTAs while others have become increasingly active through the Association of Southeast Asian Nations (ASEAN). Slow progress in the World Trade Organization (WTO) Doha Development Round of trade negotiations and a plethora of agreements under negotiation suggest that FTAs will remain a central plank in the region’s commercial policies. The region’s new multitrack trade policy necessitates adjustments in business strategies and national economic policies. These developments have sparked a lively debate on the business impact of FTAs in East Asia. Positions in the debate seem to have become polarized. One influential camp associates these agreements with harmful, systemic noodle bowl effects that raise transaction costs for small and medium-sized enterprises (SMEs). Furthermore, the potential for distortion of trade toward bilateral channels is linked to the possible erosion of the multilateral trading system. Another camp sees net benefits from FTAs and suggests that well-designed, comprehensive agreements can be a building block to multilateral liberalization. The resolution of the debate has been hampered by the absence of comprehensive information...

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