Catalog

	Table of Contents
p. 61 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 Trends in Trade and the Expansion of PTAs: Trends in World and Asian Trade Flows Diversity in of PTAs Origins of PTAs Institutional Characteristics of PTAs PTAs as Mechanisms for Regional Cooperation Asia and Pacific PTAs and the World Trade Organization Income Characteristics of PTAs Overlapping Memberships in PTAs and Multilateral Trading Arrangements 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 : Diversity in of PTAs

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Origins of PTAs

It is beyond the scope of the present chapter to fully compare and contrast all the international trading arrangements in the Asia and Pacific region. Instead, this chapter restricts itself to briefly reviewing the contrasts between Asian PTAs and the major PTAs in other regions. WTO has received notification of 30 multilateral PTAs and 58 bilateral arrangements in the past three decades. Most of these are between neighboring countries. Most are currently PTAs aspiring to evolve into free trade agreements (FTAs), rather than customs unions. Possibly this is because the formation of a customs union and agreement on a common external tariff structure are more demanding than the formation of an FTA. The degree of internal free trade varies highly, as does the breadth of the agreements beyond tariff reductions for goods trade. Agriculture is commonly excluded from the list of sectors where trade is liberalized. Most PTAs explicitly recognize the need for facilitating trade, harmonizing quality and other regulatory issues, building infrastructure, and streamlining customs procedures, but activity in these areas tends to be limited in all but a few PTAs. Liberalization of trade in services is comparatively rare, although investment policies are more common.

PTAs vary widely in the degree of institutionalization. The majority are based on reciprocal trade concessions and thus require some sort of forum for negotiations, but the frequency of negotiations varies from several times per year to once every few years. Dispute settlement mechanisms frequently specify some sort of bilateral negotiation; only a few agreements have set up a multinational court to arbitrate on disagreements between members and have established the administrative agents to oversee implementation of agreements. Many of the PTAs are more ambitious in aspiration than implementation.

The group of PTAs involving DMCs varies widely.⁴ AFTA, MSG, and SAPTA—as agreements between several neighboring countries to extend reciprocal preferential treatment to the others’ exports for many sectors—are three typical PTAs in the region. AFTA and SAPTA were outgrowths of regional cooperation bodies (ASEAN and SAARC, respectively, which were formed for largely political reasons). They encompass a wide range of cross-national interactions in cultural, health, environmental, and other areas, in addition to trade. AFTA, in particular, has been active in drawing up a timetable whereby tariffs are to be reduced in progressive steps, leading eventually to an FTA.

MSG and SPARTECA involve groups of Pacific island countries (the latter in association with Australia). Trade volume among member countries remains low and these economies remain oriented toward the larger Australian and New Zealand markets. Another recently approved PTA in the Pacific is the Pacific Island Countries Trade Agreement (PICTA), which involves 14 countries, including several DMCs. The agreement is expected to come into force in 2002, once it is ratified by at least six countries. Its implementation is planned in stages leading to full trade liberalization within 8 to 10 years. PICTA aims to generate employment and other economic benefits through increased trade and investment opportunities in the larger market that it creates.

ECO involves much weaker arrangements than most PTAs,⁵ and appears to have a greater focus on broad background institutions and arrangements for bilateral agreements (and even an attempted customs union) than on PTAs as such. In general, formal diplomatic arrangements for trade agreements have been offset by unilateral policy barriers and unpredictable changes, such as exchange controls. Two examples are Uzbekistan’s imposition of exchange controls in October 1996 after a decline in cotton prices triggered a balance-of-payments crisis, and the Russian Federation’s imposition of special tariffs after its economic crisis in 1998 (Pomfret 2001).

CER, an industrial-country PTA, has the institutional format of a generic PTA but is one of the most advanced free trade areas in terms of implementation: it has removed nearly all policy barriers to trade in both goods and services. CER not only eliminates tariffs but also contains provisions for customs harmonization and common product standards.

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