Catalog

	Table of Contents
p. 58 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

---

Chapter Overview

This chapter extends the discussion from the special chapter in Asian Development Outlook 2001, which examined international integration of markets and economic activities, and considered the impact of changes in technology and institutions that have underpinned globalization. It also builds on the Asian Development Outlook 1997 and 1998 special chapter, which considered regional cooperation and highlighted the economic benefits of trade liberalization when accompanied by the development of efficient domestic factor markets. While this current chapter updates the Asian Development Outlook 1997 and 1998 special chapter, it differs from it by adopting a more narrow focus on PTAs as institutional mechanisms for fostering freer trade and improved economic conditions in the region. It also devotes greater attention to the implications of recent theoretical and empirical work in economics for crucial policy questions on PTAs.

The 5 years since that chapter was written have been economically turbulent, with the experiences of the financial crisis and the subsequent global recession bringing to the fore concerns about increasing international economic integration and its impact on developing countries and the world’s poor. These and other developments—such as the People’s Republic of China (PRC) joining WTO and the expiration of the MFA—over these 5 years have prompted renewed consideration of multilateral trading arrangements, including PTAs.

This chapter focuses on identifying the characteristics of PTAs that are likely to maximize short-term economic and political benefits for member countries and minimize the potential risks that PTAs present to the longer-term goal of global free trade. Although the multilateral trading system remains the backbone of progress toward the realization of this goal, it is clear that the current impetus for PTAs has gained momentum. Consequently, this chapter has had to identify the specific features of PTAs that are worrisome and those that are more likely to contribute to improved economic performance. In particular, this chapter highlights ways to minimize conflict between PTAs and the WTO multilateral trading arrangements and identifies ways in which PTAs can be a neutral—if not complementary—means of trade liberalization.

The chapter has five main sections. The first reviews trends in regional and world trade and in the expansion of the number of PTAs worldwide. The next section discusses the diverse characteristics of existing PTAs, highlighting the distinct path that PTAs have followed in Asia and the Pacific relative to other regions. It stresses that it is difficult to argue about PTAs in general, and, specifically, that characteristics that may hinder free trade are found in some agreements but not all.

The third section reviews the main theoretical arguments for and against PTAs as institutional mechanisms for fostering trade and broader economic cooperation between nations. The fourth section provides a short quantitative evaluation of the effects of PTAs on Asian and world trading patterns using results drawn from econometric techniques. The results also provide some insight into the effects that major PTAs outside of the region have on trade flows to and from Asian economies. The conclusions summarize some major policy questions and developments.

Back Debate Over Merits of PTAs	Next Trends in Trade and the Expansion of PTAs: Trends in World and Asian Trade Flows