East Asian Free Trade Area Research Articles

The Effect of Economic Openness, Democracy, and Institutional Quality on Indonesia Exports to ASEAN Plus Three

The ASEAN Charter Agreement and the cooperation of the East Asia Free Trade Area ASEAN+3 provide momentum for ASEAN countries to increase economic openness, strengthen the application of democratic principles, and improve institutional quality to enhance trade cooperation. This study aims to explore the role of economic openness, democracy, and institutional quality in increasing Indonesia's exports to ASEAN countries plus three during the 1996-2017 period using the augmented gravity model. The results showed that the openness of ASEAN+3 to trade (trade% of GDP), democracy, and institutional quality of Indonesia and ASEAN+3 as Indonesia's export destination had positive effects in increasing Indonesia's exports to ASEAN+3. However foreign direct investment in Indonesia and ASEAN+3 does not affect the export.
 Keyword: trade gravity model, economic openness, democracy, governance institution, Indonesia's export, ASEAN+3

Identifying Thailand’s high-potential export opportunities in ASEAN+3 countries

PurposeThis paper aims to identify Thailand’s realistic export opportunities (REOs) in the ASEAN+3 countries (i.e. ASEAN, Greater China, Japan and South Korea), which together constitute an economically dynamic region and a strategic export destination for Thailand. Furthermore, the paper seeks to determine the extent to which Thailand already has a share in ASEAN+3 countries and where new opportunities lie. This allows the formulation of appropriate export promotion strategies for Thailand.Design/methodology/approachThe methodology used is a decision support model (DSM) which uses an extensive data-filtering system to systematically screen and eliminate less-promising product–country combinations to ultimately reveal high-potential REOs. Product–country combinations are screened on the basis of country risk; macro-economic country performance; market potential in terms of import growth and import market size; and market access conditions, including market concentration and the existence of trade barriers. The thus narrowed-down REOs are categorised according to Thailand’s relative market share in, and the characteristics of, the identified import markets.FindingsThe study reveals that the ASEAN+3 countries account for about 40 per cent of the total potential export value of Thailand’s REOs in the world, with China leading the way (12.45 per cent), followed by Japan (8.56 per cent) and South Korea (6.23 per cent). However, Thailand has a relatively small or intermediately small market share in the majority of these REOs, pointing to the need for more offensive and exploratory export promotion strategies.Research limitations/implicationsThe ASEAN+3 countries – given that they are an abundant source of REOs for Thailand and are in Thailand’s “backyard” – should receive more focused attention and resources in government export promotion efforts. The recent launch of the ASEAN Economic Community and the proposed establishment of an East Asia Free Trade Area lend weight to the idea of Thailand adopting a strong regional focus in its export activities.Practical implicationsThe insights derived from the study are valuable for export promotion officials, industry representatives and practising exporters alike, as they constitute an easy-to-digest snapshot of high-potential REOs for Thailand in the ASEAN+3 region. This makes for more efficient planning and prioritising of export development activities, and a more streamlined approach to resource allocation.Originality/valueExport promotion shows diminishing returns and requires sustainable strategies and interventions. The value in this paper lies in its description of an innovative market selection tool, the DSM, which is able to process and filter high volumes of information and arrive at a shortlist of high-potential REOs for Thailand in the ASEAN+3 countries. The paper represents a concise case study of the DSM in practice, which should be of particular interest to export promotion agencies, industry associations and both new and more established exporting countries.

Impact of Regional Trade Agreements in East Asia on Members’ Trade Flows

Using an unbalanced panel dataset of bilateral trade flows, we study the determinants of two-way trade for Australia, China, India, Japan, New Zealand, Korea and the ten ASEAN countries from 1990 to 2009. We find that bilateral trade flow is positively related to the sum of the GDP of trading countries, and similarity in GDP size, but inversely related to relative factor endowment differences, transportation costs and import tariffs. Our empirical results suggest that formulating an East Asian Free Trade Area is important for promoting intraregional trade. Furthermore, there is a need to provide a range of instruments to assist least-developed ASEAN countries in designing and implementing appropriate trade integration policies through the provision of technical and financial assistance as well as analytical support.

Apec's Regional Economic Integration Agenda and the Evolution of Economic Integration in the Asia-Pacific Region

In the early years of the twenty-first century proposals reflecting two distinct “visions” of Asia-Pacific integration were being advanced for consolidating the regional trade architecture through the establishment of region-wide trade agreements. The rise of East Asian regionalism was reflected in proposals for an East Asian Free Trade Area (EAFTA) and Comprehensive Economic Partnership for East Asia (CEPEA), envisaged as major elements in an agenda for building an economically integrated East Asian region. APEC’s “trans-Pacific vision”, of integrating economies on both sides of the Pacific through achievement of APEC’s Bogor goals of free trade and investment in the Asia-Pacific region, was refreshed in modified form with the proposal for a Free Trade Area of the Asia-Pacific (FTAAP), conceived in principle as a free trade agreement embracing all APEC members.In 2006 APEC leaders sought to emphasise complementarity between the two “visions” by formally adopting a Regional Economic Integration agenda in which the FTAAP was recognized as a “long-term prospect”. At Yokohama in 2010 the leaders set out the way forward in more concrete terms, when they unambiguously endorsed the FTAAP as the end-point to be reached in the evolution of the Asia-Pacific regional trade architecture, while at the same time endorsing a “two-track” approach to its eventual achievement. The leaders stated that achievement of the FTAAP is to be based on progress made within both a “trans-Pacific track”, represented by the Trans Pacific Partnership (TPP), involving economies from both sides of the Pacific, and an “East Asian track”, now represented by the Regional Comprehensive Economic Partnership (RCEP), a successor initiative to the EAFTA and CEPEA, with participation at this stage limited to the sixteen “ASEAN Plus Six” economies on the western side of the Pacific. Six of the 21 APEC economies are currently participating in both “tracks”, while four are participating in neither track. Four of the RCEP participants are not members of APEC.The leaders left open the question of how the two “tracks” might evolve and eventually converge into the FTAAP. In the meantime, attention is focused on the substance of the TPP and RCEP agreements being negotiated within each “track”, and their implications both for the size and distribution of the prospective economic benefits of each agreement, and for the prospects of each agreement for gaining acceptance from other economies in the Asia-Pacific region as the “model” for the eventual FTAAP.Of the two agreements, the TPP at this stage appears to have the more ambitious and comprehensive agenda. After three years negotiations have advanced to the point where failure, while still possible, would be a major surprise, but there are many sensitive issues remaining to be resolved. In addition to the expected market access issues of particular sensitivity to individual participating economies, other highly sensitive issues involve rules of origin, intellectual property, pharmaceutical evaluation pricing and subsidy programmes, management of electronic data flows, labour and environment. These and other issues are discussed in detail in the paper. How these issues are eventually resolved will be important in determining both the extent to which the TPP lives up to its stated ambition of being a “high quality” agreement and also its prospects of being accepted as a “model” for an eventual FTAAP.The RCEP negotiations are only just beginning. It is correspondingly more difficult to evaluate its likely content and its potential as a basis for the eventual FTAAP. It appears likely that the most substantive provisions will be those on trade in goods, trade in services, and investment, prospects for which are analysed in detail in the paper. In these areas the RCEP faces formidable challenges in consolidating existing arrangements among the participating economies to a level that would mark an impressive step towards the eventual FTAAP. On the other hand the RCEP may be better placed than the TPP to develop rules of origin that foster deep integration among the production systems of participating economies. Provisions on intellectual property and competition policy are included in the proposed content of the RCEP, but it would be a surprise if these provisions approach the depth of commitment being sought in the TPP. Like the TPP before it, RCEP faces all the issues involved in establishing agenda priorities and modalities for negotiating an agreement among countries that in many cases are already linked by existing agreements, or in some cases by ongoing negotiations. The complexities and difficulties will be compounded by the likelihood that the participating economies will come to the negotiations with widely divergent levels of ambition. Especially under these conditions ASEAN’s determination that the RCEP should be an ASEAN-led process also means that RCEP negotiations could turn out to a defining test of ASEAN’s ability to maintain its leadership role in regional economic integration.

The Barriers and Solutions to Integration of the EAFTA and TPP

The EAFTA (East Asia Free Trade Area) and TPP (Trans Pacific Partnership) will likely be unified in the future to form the FTAAP (Free Trade Area of the Asia Pacific). I have analyzed these two types of FTAs and studied the barriers and solutions to their integration. Furthermore, the process by which the FTAAP will convert into the Asia Pacific Community (APC), equipped with larger terms and conditions, is also considered. The largest barrier to the integration of EAFTA and the TPP is the agreement over sensitive problems, such as import tariffs. The difference in posture about such sensitive problems in these two economic organizations is analyzed beneath, and it is claimed that a viable solution exists. As far as sensitive problems are concerned, it is clear that EAFTA takes a cooperative stance and that TPP is more severe. In the case that these two economic organizations are eventually unified, such differences will become major obstacles to integration. However, these differences will also serve as the terms of promotion and conditions to integration. Just as there are differences, we can also recognize the necessity for mutual complements. The case of the EU can be applied to this. The unification of 28 states to form the EU was not achieved because of the comparability argument; it was achieved thanks to the differences which exist between member states. Although the EU is in a state of historical crisis, the cause of this lies in the failure of the public-finance policy of certain member states. While learning from the EU experience, EAFTA and the TPP should merge to form the FTAAP, with the ultimate goal of APC establishment in the future.

The Emerging Regional Economic Integration Architecture in East Asia

This paper examines regional market integration through production networks and free trade agreements in East Asia and their attendant challenges and issues. It examines progress in the ASEAN Economic Community and in various ASEAN+1 free trade and economic integration agreements. It argues that there is a strong case for a region-wide agreement to maximize economic synergy and resolve emerging problems, including market fragmentation and the “noodle bowl” effect. It explores three possible paths to region-wide integration, namely, the East Asia Free Trade Area (encompassing ASEAN+3 [the People's Republic of China, Japan, and Korea]), the Comprehensive Economic Partnership for East Asia (encompassing ASEAN+3 countries and Australia—New Zealand and India) and the Trans-Pacific Partnership, currently involving nine negotiating countries in the Asia-Pacific Economic Cooperation. The paper explores the economic and political benefits and challenges of forming these three regionwide agreements.

Asian Economic Integration and Cooperation: Challenges and Ways Forward for Pan-Asian Regionalism

As the Asian economies have grown larger and become more complex, they have also be-come more integrated at both the regional and the subregional level. Yet although economic integration has increased, regionalism in the sense of economic cooperation at both the pan-Asian and subregional levels has lagged behind. Regionalism or economic cooperation in terms of bilateral or multilateral FTAs is a relatively new phenomenon, but one that has in-creased rapidly in recent years. However, the progress of Asian regionalism faces several challenges. Also, the increasing number of FTAs could lead to a “spaghetti-bowl effect” and reduce trade volume instead of increasing it. In addition to resolving the existing challenges, actors in the region need to convert some of the existing FTAs into a broader one that can serve as a hub for further integration. Given the potential economic gains and future eco-nomic dynamism of the region, this paper suggests the pursuit of the Comprehensive Eco-nomic Partnership in East Asia (CEPEA) rather than the East Asia Free Trade Area (EAFTA). In dem Mase, in dem die asiatischen Okonomien gewachsen sind und an Komplexitat ge-wonnen haben, hat auch ihre regionale und subregionale Integration zugenommen. Dennoch hinkt Regionalismus im Sinne okonomischer Kooperation auf panasiatischer oder subregio-naler Ebene hinterher. Bilaterale oder multilaterale Freihandelszonen sind ein relativ neues Phanomen, erleben in jungster Zeit allerdings ein rapides Wachstum. Gleichwohl steht der Fortschritt des asiatischen Regionalismus vor einer Reihe von Herausforderungen. Die zu-nehmende Zahl von Freihandelsarrangements konnte zu einem „Spaghetti-Schussel-Effekt“ fuhren und das Handelsvolumen eher verringern als steigern. Die Akteure der Region mus-sen einige der bestehenden Freihandelszonen in eine weiter gefasste uberfuhren, die als Drehscheibe weiterer Integrationsprozesse fungieren kann. Angesichts der potenziellen wirt-schaftlichen Zuwachse und des kunftigen Dynamismus der Region pladiert der Beitrag da-fur, eher die Comprehensive Economic Partnership in East Asia (CEPEA) als die East Asia Free Trade Area (EAFTA) voranzutreiben.

Regionalism's multiple negotiations: ASEAN in East Asia

This article explains East Asian regionalism as the product of two sets of negotiations. The first negotiation is between East Asia on the one hand and global forces and structures on the other. The second negotiation is intra-regional and includes a critical negotiation between the Association of Southeast Asian Nations (ASEAN)-Southeast Asia and East/Northeast Asia, which also provides the primary focus of this article. This article details ASEAN's extensions into East Asian regionalism as part of interdependent efforts to adapt transitioning global and regional systems. Conceiving these regional negotiations to be not just economic and utilitarian but first and foremost normative, this article details the opportunities and dilemmas represented by ‘East Asia’ for ASEAN, ASEAN-Southeast Asia and Southeast Asia as a meaningful organizing principle. Dilemmas associated with the ASEAN Plus Three process, an East Asia free-trade area and the ASEAN Charter provide illustrations of East Asia's understood challenges for Southeast Asia in addition to the ways that Southeast Asian agencies have been shaping the form and content of recent East Asian efforts and also how regional-global and intra-ASEAN negotiations continue to provide key constraints.

Quantitative impacts of alternative East Asia Free Trade Areas: A Computable General Equilibrium (CGE) assessment

This paper analysis the relative economic effects of four East Asian Free Trade Area (FTA) options. A particular feature of the model, which is an extension from a standard CGE model, is the introduction of unemployment with the intention of assessing the changes in the real wage and unemployment in each region under each of those options. The simulation results suggest that a preferred strategy for member regions is the “East Asia FTA” multilateral agreement, 1 1 ASEAN, China, Japan and Korea. which would yield higher gains in welfare and greater economic impacts than any of the other possible bilateral agreements – ASEAN–China, ASEAN–Japan and ASEAN–Korea. However, such an ‘ideal’ multilateral economic integration might be deterred by the uneasy relationship between Japan and other East Asian nations, reflecting their economic and political differences.

The United States and the East Asia Summit: Finding the Proper Home

For the first two decades of its existence, the Association of Southeast Asian Nations (ASEAN) had the field of inter-governmental regional bodies in East Asia and the wider Asia Pacific to itself. This suited ASEAN and its objective of engaging all extra-regional powers to help ensure none gains hegemony in Southeast Asia. (1) The last two decades have been very different, as East Asia and the wider Asia-Pacific regions have seen proliferation of Track-II, ministerial level and leaders-level regional organizations. The leaders-led organizations, ASEAN, Asia-Pacific Economic Cooperation (APEC), the ASEAN+3 process (APT) and the East Asia Summit (EAS), gain the greatest support from their leading members and attention globally. This proliferation seems to be accelerating as Australian Prime Minister Kevin Rudd recently called for new leaders-led Asia-Pacific Community. (2) US Secretary of State Condoleeza Rice has added her support to turning the ad hoc Six-Party Talks on North Korea into permanent Northeast Asian security institution. Japan has offered to host trilateral leaders' summit between Japan, China and South Korea in 2008, and this may turn into an annual, rotating event. (3) At the same time, influential non-official voices are suggesting the idea of setting up new leaders-led Asia-Pacific security forum to complement the confidence building work of the ministerial-level ASEAN Regional Forum (ARF). (4) Not only is there continuing proliferation of regional organizations, two overlapping regional architectures are also developing at the same time in Asia. One of them is an Asia-Pacific architecture that includes the United States, with APEC as its premier regional body, and narrower East Asian one which excludes the only global superpower with the decade-old APT process as its primary regional body. APEC is the only major body in either architecture not convened by ASEAN. Complicating things further, the three Great Powers in the Asia Pacific are each putting their region-building efforts behind three different regional bodies. China is the major behind the APT process and is funding its Track-II arm and the study for an East Asian Free Trade Area. Japan is the major behind the East Asia Summit and is funding its Track-II arm and the study for an EAS-wide trade deal. The United States has re-engaged with APEC and is pushing the idea of an APEC-wide Free Trade Area of the Asia Pacific. There are thus three different Great Powers, three different regional organizations and three different regional free trade area proposals. Regional organizations work best when they bring all the key regional powers together with common purpose; and not when they divide them. Reforming the EAS, as the newest leaders-led body, is good way to find way out of what could become competing regionalisms, while at the same time ensuring the Summit's future. At the moment, the EAS is not even formal institution but rather an informal forum of participating countries convened by ASEAN for strategic discussion. It lies uncomfortably between the broader idea of an Asia-Pacific region and the narrower East Asia one that it is named after and has institutionally evolved within. Australia, New Zealand and India are clearly more Asia-Pacific countries than East Asian ones. Yet the EAS omits the United States, the trans-Pacific superpower, at the core of the idea of the Asia Pacific as region. (5) Moreover, the EAS, as it stands now, only has tertiary in East Asian community building. ASEAN is recognized as the driving force and the APT process as the main vehicle for East Asian community building. (6) The EAS is relegated to only playing a significant role in this process. (7) This article argues that the expansion of the EAS to include the United States would be beneficial to America's in Asia, China, Japan, India, ASEAN and the process of consolidating the increasingly crowded regional architectures of East Asia and the Asia Pacific while securing the EAS distinct and sustainable future. …

Full circle? Ideas and ordeals of creating a Free Trade Area of the Asia-Pacific

In 2004 and 2006, proposals were made at APEC summits to establish a Free Trade Area of the Asia-Pacific (FTAAP). This was an essentially a reworking of an idea first raised in the mid-1960s to create a Pacific Free Trade Area, or PAFTA. Although the PAFTA initiative never advanced, it helped lay the first organizational foundations for regional economic community building in the Asia-Pacific. The recent FTAAP proposal thus brings us full circle to the antecedent origins of APEC itself. If realized, an FTAAP would also create a free trade zone that would encircle the Pacific Rim economy and thereby subsume the region's now large number of bilateral and sub-regional free trade agreements (FTAs) into one unified agreement. Yet there are many inherent problems with establishing an FTAAP. These broadly relate to deconstructing the preferentialism of existing bilateral and sub-regional FTAs, achieving a consensus on the technical policy content and ideational principles on which an FTAAP would be based, and addressing various geopolitical issues such as reconciling the formation of a pan-regional Asia-Pacific FTA with an already fragile multilateral trading system. Growing interest in a ‘rival’ East Asia Free Trade Area project presents another geopolitical challenge. In considering these and other questions, it is concluded that many obstacles will remain in the path to realizing an FTAAP, and that this may not actually be a desirable objective to pursue for some time yet.

Chinese Changing Perspective on the Development of an East Asian Free Trade Area

As a new stage of the policy of opening to the outside world, China's changing perspective and policy regarding an East Asian Free Trade Area (FTA) reflects Beijing's efforts to actively respond to changing internal and external conditions so as to further promote the country's economic development. It also reflects Beijing's growing confidence in overcoming the negative effects of deeper and broader integration into the regional and global economy. On the other hand, Beijing's recent moves in negotiating free trade pacts with neighboring economies will inevitably bring significant impact on the regional and global political economy.

Southeast Asian Perspectives on the Rise of China: Regional Security after 9/11

Napoleon Bonaparte once described as sleeping dragon and warned not to wake it up. Now that has awakened, it causes many nations to tremble--including United States, sole global power and world's preeminent policeman. The unprecedented rise of People's Republic of (PRC) is global reality. From one of world's least developed countries in 1970s, had developed one of largest economies in world by late 1990s. (1) The World Bank and International Monetary Fund (IMF) reported that from 1979 to 1997, China's gross domestic product (GDP) grew at average rate of 9.8 percent. (2) This phenomenal economic growth has spilled over to China's defense budget, with military spending rising to 17.6 percent of China's outlays, equivalent of $3 billion in March 2002 alone. (3) Because of burgeoning economic and military power of China, there are enormous worries about idea of China The United States has particularly expressed strong apprehensions regarding ascension of China. The US Commission on National Security/2 1st Century warns that the potential for competition between United States and may increase as grows stronger. (4) Even Global Trends 2015 prepared under direction of US National Intelligence Council argues that implications of rise of pose greatest uncertainty in world. (5) The Commission on National Interests describes as America's major potential strategic adversary in East (6) while Council on Foreign Relations has stated that China poses significant economic, military, and political challenges for United States and for nations of Southeast (7) This theme is supported by RAND study describing as potential military threat to United States and Southeast Asia. (8) While United States views as potential threat to its national security, how do Southeast Asian countries view rise of China? What are implications of growth of for regional security, especially in aftermath of 9/11? This article aims to present Southeast Asian perspectives on rise of and its regional security implications since 9/11. Southeast Asian Perspectives Taken individually, Southeast Asian countries have varying perspectives on many ramifications of strategic issues in (9) Unlike some Western countries, however, Southeast Asian nations, taken as whole, consider rise of as great opportunity, with concomitant security challenges, rather than as serious threat. From economic standpoint, Rodolfo Severino, former Secretary General of Association of Southeast Asian Nations (ASEAN), candidly describes and ASEAN as partners in competition. (10) There is also widespread perception in Southeast Asia that China will be new engine of growth for entire region. (11) In report submitted by ASEAN-China Expert Group on Economic Cooperation in October 2001, Southeast Asia optimistically views as economic opportunity. The Expert Group has, in fact, proposed forging of closer ASEAN-China economic relations in 21st century to integrate their economies. (12) Recognizing economic potential that may bring to Southeast Asia, one important recommendation of Expert Group is establishment of ASEAN-China Free Trade Area (ACFTA). The group views ACFTA as an important move forward in terms of economic integration in East as well as a foundation for more ambitious vision of East Asia Free Trade Area, encompassing ASEAN, China, Japan, and Korea. (13) The group suggests that the realization of China-ASEAN free trade zone agreement indicates that historical feuds and political clashes between ASEAN member states and PRC are no longer one of most important factors influencing ASEAN-PRC relations. …

Economic integration in northeast Asia: Preconditions and possible trajectories

When in November 2001, the leaders of the Southeast Asian and Northeast Asian states met for the “ASEAN (Association of South East Asian Nations) plus three (China, Japan and Korea),” President Kim Dae‐Jung of South Korea proposed the exploration for an East Asian Free Trade Area (EAFTA) and thereby opened a new chapter of East Asian integration. The special Northeast Asian perspective on regional co‐operation became clear by the simultaneous decision to hold annual meetings of finance and trade ministers of China, Japan and Korea. At the same time, bilateral agreements, like a free trade area between Japan and Singapore, the tentative large free trade area between ASEAN and China and the work‐in‐progress on a Korean‐Japanese Free Trade Area, show the devotion and sometimes even obsession of current policy‐making with reaching regional trade agreements. Regional integration, it seems, is finally on the Northeast Asian agenda. In this paper, the preconditions and perspectives of economic integration in Northeast Asia will be explored. Since economic integration is in various ways linked to political factors, the second section discusses the geo‐political situation of Northeast Asia today. The third section deals with the economic perspectives of different forms of trade integration, followed by an analysis of various attempts for greater macro‐economic and financial co‐operation and a short conclusion.

The effects of economic integration in the Pacific Rim: A computational general equilibrium analysis

We simulate the effects of economic integration in the Pacific Rim, using a multi-sector, multi-region, computational general equilibrium model. We use both a perfectly-competitive model (in which cross-hauling is explained by the Armington assumption) and a model with firm-level imperfect competition. Both the perfectly-competitive model and the imperfectly-competitive model suggest that a Pacific free-trade area (FTA) and an East-Asia FTA would generate gains for all member countries, even without the participation of Japan and the United States. The developing nations of Asia are expected to gain more when the United States joins the FTA than when Japan joins. The imperfectly-competitive model simulates substantially larger welfare gains than does the perfectly-competitive model. According to the imperfectly-competitive model, the newly-industrialized countries of Asia would reap very large gains from the establishment of a free-trade area.