ree Trade Agreements in East Asia: A ay toward Trade iberalization?
more than tenfold. By May 2010, East Asia had emergedat the forefront of global FTA activity, with 45 FTAs ineffect and another 84 in various stages of preparation.Underlining East Asia’s commitment to open regionalism,most of these agreements are with partners outsideEast Asia.
The region’s largest economies are increasingly the leadingplayers in the spread of FTAs. Japan has implemented11 FTAs; the PRC, 10; and the ROK, 6. And perhaps evenmore significant, these three economies collectively havesome 32 agreements in the pipeline. With the exception of Singapore, the smaller economies of Southeast Asia haveonly recently been aggressive in forging FTAs, mainly by taking collective action through ASEAN. In addition topreviously negotiated FTAs with the PRC, the ROK, and Japan, two ASEAN FTAs (a comprehensive agreementwith Australia and New Zealand, and a goods agreementwith India) took effect in January 2010 for most ASEANmembers and their trading partners.
arieties of ational TA trategies
FTA activity in Asia over the last decade has given rise toclassic hub-and-spoke trade arrangements (Hufbauer andSchott 2009). The development of FTA hubs and spokescan be attributed to a country’s economic size, per capitaincome, level of protection, and economic geography, as wellas the production network strategies of MNCs. As Table 1shows, East Asia’s largest and most open economies initiatedthe proliferation of FTAs and have become key hubs, whilesmaller neighbors have in some cases emerged as spokes. Asia’s cost-effective advanced production networks,initially spearheaded by Japan and now increasingly usedby the PRC, have led to spectacular global export successover the past several decades and they continue to deepenacross the region (Baldwin 2006). Falling regional tradebarriers and logistics costs, along with technologicalprogress, underlie this trend. Intraregional trade in Asia has increased significantly, particularly in partsand components, and it will continue to expand furtherthrough regional liberalization brought about by FTAs.Rising factor costs in core production locations have beena prime driver. Falling regional trade barriers and logisticscosts, as well as technological progress, spurred thedecentralization of production networks to the most cost-effective locations. Accordingly, East Asia’s intraregionaltrade increased significantly from 37% of total trade to52% between 1980 and 2008, led by trade in parts andcomponents (ADB 2008).
Japan has rapidly implemented bilateral economicpartnership agreements (EPAs) with 10 countries,
in addition to an agreement with ASEAN, and it is
Table 1. FTA Activity in East Asia—2010
Simple AverageMFN Tariffs
FTAs in Effect
FTAs underNegotiation/ Proposed
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World Development Indicators