A North American Free Trade Agreement and East Asian Developing Countries

Abstract

This article analyses the implications of a North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada for China, Hong Kong, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand. Those provisions most likely to discriminate against East Asian producers and investors, notably changes in tariffs, rules of origin, safeguards, dispute settlement, non-tariff barriers, and new rules for NAFTA inves tors are reviewed. Particular attention is given to textiles and clothing, autos and auto parts, steel, energy, services and the maquila industries. A quantitative assessment suggests that trade diversion will be small ? less than 0.5 per cent of exports to the United States. While both East Asian exposure in the North American market and the structural overlap with Mexican exports have been growing, neither suggests that any East Asian country will be seriously threatened by a NAFTA. The article concludes with a discussion of trade policy responses for East Asia.