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p. 56 of 81 BACK | NEXT I. Developing Asia and the World II. Economic Trends and Prospects in Developing Asia III. Preferential Trade Agreements in Asia and the Pacific Overview Introduction Debate Over Merits of PTAs Chapter Overview Trends in Trade and the Expansion of PTAs: Trends in World and Asian Trade Flows Diversity in of PTAs The Economic and Broader Effects of PTAS: Theoretical Arguments Effects of PTAs on Trade in Asia and the Pacific: Some Evidence Conclusions References

Asian Development Outlook 2002 : III. Preferential Trade Agreements in Asia and the Pacific : Overview

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Introduction

Trade openness is widely recognized as a cornerstone of economic development and growth, and, ultimately, poverty reduction. Open borders have been linked with the stimulation of economic growth, with microeconomic improvements in the efficiency of resource allocation, and with increases in the level of competition among industries. Trade increases the variety of intermediate products and capital goods that are available and opens up communication channels for exchange of production methods and business practices. Economic integration has also been shown to have an important impact on reducing corruption, increasing government responsiveness, and improving the quality of economic policies.

Although there is substantial debate over the extent of the short-term adjustment costs of reducing barriers to trade, there is near unanimity that increased trade openness has had a significant long-term positive impact on economic development. In this context, developments in preferential trade agreements (PTAs) and multilateral trading arrangements carry important implications for future economic growth and prospects for reducing poverty in the developing world.

There are many reasons to be optimistic about increasing global trade and the trend among economies in the Asia and Pacific region toward greater integration, including the expansion of PTAs in the region. The volume of trade globally has risen steadily in recent decades, and the increase was particularly sharp in the 1990s. This growth has enabled Asian economies to increase the per capita income of their populations and to achieve significant reductions in the incidence and severity of poverty. Although in the late 1990s, the Asian financial crisis had a restraining effect on aggregate growth rates, on the negotiation of new PTAs, and on the expansion of existing PTAs in the region, export growth during the decade as a whole was strong. Export growth was strongest among manufactures while exports of agricultural products—the sector least liberalized in the existing multilateral and regional trading arrangements—actually fell as a share of total world trade. Trade in services also increased rapidly in the 1990s, while the share of services trade across sectors moved away from transport and travel toward other commercial services.

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