The Impact of ASEAN+3 Trade Agreements on the South Asian Economy

Abstract

Regional economic integration has been adopted as a strategy for development in different regions of the world in the 1980s following the formation of single market by the European Union and NAFTA by the North American countries. Though Asian countries have been slow to respond to the global trend of regionalism, however, over the past few years these countries have also recognized the potential of regional economic integration and have started taking steps to benefit from it. Several initiatives of broader economic integration are in progress to push the agenda of regional economic integration. Besides deepening the sub regional cooperation between its 10 member states, ASEAN is also negotiating with major East Asian countries, Japan, China and Korea to formulate a regional trade agreement. This would likely to have an impact on the other economies of the world. However, the impact of regional trade agreement is an empirical question. Thus the paper estimates the economic impacts of proposed ASEAN+3 trade agreements on the South Asian economy using Global Trade Analysis Project (GTAP) framework. The findings reveal that South Asia will be affected adversely in terms of GDP growth, export and also welfare-wise.