Regional economic integration in East Asia

Abstract

There has been a proliferation of proposals for bilateral free trade areas (FTAs) in East Asia in recent times. These initiatives fly in the face of the long-standing support of key players in the region such as Japan for the MFN-based non-discriminatory trading system and the commitment to non-discriminatory trade liberalisation and reform within APEC. As China establishes its role in the WTO, its interests are very much in an open global trading system. The paper argues that the core interests of East Asian economies remain in non-discriminatory global trading arrangements and prosecuting those interests within the Doha Round of trade negotiations. It suggests that a way forward in sorting out the trade-distorting and protectionist effects of FTAs would be for East Asian economies to take a lead in negotiations on strengthening the WTO rules on preferential trade arrangements. In terms of global economic welfare, the only good preferential arrangement is one that disappears in time. The paper makes specific recommendations for re-vamping the rules on preferential trade arrangements with that objective in mind.