The Economics of East Asian Integration
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The Economics of East Asian Integration

A Comprehensive Introduction to Regional Issues

Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai

This study is intended to be the most comprehensive textbook on economic integration in East Asia. It introduces the reader to various issues related to the topic such as institutional building of FTAs; production networks and the location choice of MNEs; R & D and innovation; infrastructure development and transport costs; international migration and service trade; monetary integration; regional disparity and poverty. It also deals with critical energy, environmental and agricultural concerns. Each chapter contains ample data and rigorous analyses, complemented by illustrative box articles.
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Chapter 12: Institutions and Policy Coordination for Further Integration

Daisuke Hiratsuka


Daisuke Hiratsuka 12.1 INTRODUCTION With the most-favored nation (MFN) tariff rates remaining at a significant level, the majority of East Asian countries have implemented investment promotion schemes which grant import tax exemptions to intermediate goods intended for export. The import tax exemption scheme, however, is cumbersome for firms because they are compelled to employ persons to prepare documents. Also, the scheme is suspicious because it appears to be in opposition to the General Agreement on Tariffs and Trade (GATT), Article I, General Most-Favoured-Nation Treatment, in which the MFN tariffs are to be accorded unconditionally to the products originating in and destined for all parties to the agreement. East Asia must put into practice the WTO’s consistent, transparent and nondiscriminatory trade-related measures. One such measure is to extend regional trade agreements (RTAs), one of the WTO’s consistent trade liberalization tools. Until the end of the 1990s, however, there were no RTAs in East Asia, except the ASEAN Free Trade Area (AFTA) and the Closer Economic Relations (CER) between Australia and New Zealand. Subsequently, the Singapore–Japan Economic Partnership Agreement opened up the path for RTAs to spearhead trade liberalization in the region. Currently in fact, there are more than thirty RTAs enforced involving East Asia, of which fourteen are intra-regional RTAs, either bilateral agreements or plurilateral agreements. So, a question arises. Will the proliferation of FTAs be good for East Asia? To rephrase this, will East Asia benefit from the proliferation of FTAs? This chapter aims to identify the problems arising...

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