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p. 79 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 The Economic and Broader Effects of PTAS: Theoretical Arguments Effects of PTAs on Trade in Asia and the Pacific: Some Evidence Conclusions PTAs, Economic Growth, and Welfare Policies for Asia and the Pacific Prospects for Trade in Asia and the Pacific References

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

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Policies for Asia and the Pacific

The first point is that the PTAs in the Asia and Pacific region appear to be a suboptimal route to free trade, but offer potential benefits. The extent of trade facilitation and nontrade cooperation embedded in the PTAs has been increasing, but remains the first important area for reform. The second is that agreements in the region remain preferential trade agreements with only incremental progress toward becoming free trade areas. Furthermore, the exclusion of sectors from PTAs substantially reduces their potential welfare benefits, as it allows sectors in need of reform to continue inefficient production. Progress toward free trade is needed, particularly in agriculture—the second major area for reform. Third, all PTA agreements in the region have relatively complex rules of origin. This makes it profitable to alter production patterns simply to fulfill the rules for market access rather than to reduce costs and improve efficiency. Processes for certification of origin also create opportunities for rent seeking. Policies to reduce the differences between PTAs members’ external policies and thus decrease the importance of rules of origin are the third major area for reform.

As institutions for international cooperation, PTAs in the region are relatively advanced. Two of the region’s PTAs, AFTA and SAPTA, are embedded in larger regional cooperation organizations. Generally, PTAs’ agendas could, however, be focused further on discussing regional priorities and on preparing for negotiations in larger forums such as WTO. The potential role of PTAs as enhancing commitment to policy reforms in member countries could also be strengthened. Many of the PTAs in the region resolve disputes via bilateral negotiations and have no real provisions for sanctioning members that violate the provisions of the PTA.

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