Catalog

	Table of Contents
p. 80 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

---

Prospects for Trade in Asia and the Pacific

There is great variation in the efforts undertaken by different PTAs throughout the world. In their broader sense, PTAs address concerns beyond narrow issues of trade liberalization between members and serve as vehicles for fostering regional cooperation in other economic and non-economic issues. This makes it unproductive to discuss PTAs in general terms. Instead, greater nuance in the portrayal of PTAs can aid understanding of the types of PTAs that can serve as useful complements in a multitiered international trading system. At the same time, this analysis makes it possible to identify those aspects of PTAs that are most harmful either in terms of distorting actual trade flows or of making more difficult the eventual achievement of an all-inclusive global open trading system.

This chapter has identified areas in which PTAs have considerable merit in contributing to the improved welfare of members as well as nonmembers. These include improving communication between regional neighbors and reducing the chances of conflict, pursuing reform in areas not addressed or difficult to address in broader multilateral arrangements, providing commitment mechanisms to support or reinforce domestic policy reform, and areas for experimentation and learning in trade liberalization.

On the other hand, there are characteristics in existing PTAs that are not supportive of these goals and should be avoided in future PTAs and reformed in existing ones. These include rules of origin that distort comparative advantage, and overlapping jurisdictions and rules of the various PTAs.

The Asia and Pacific region should continue its historical efforts to further multilateral trading arrangements, while continuing to pursue limited PTAs focusing on broader aspects of regional cooperation. However, exceptions are warranted in particular sectors or on issues where the multilateral arrangements either have not addressed an important area where liberalization would be beneficial, or where the region’s interests need to be better represented in the international arrangements.

Clearly, there is a need to reform the regulations governing the relations between PTAs and WTO, and to improve the institutional architecture guiding the interaction between PTAs and WTO. The future economic growth of the region is clearly linked to the health of the multilateral trading system.

The WTO rules-based multilateral trading system became further strengthened and even more globalized with the accession of the PRC to WTO in late 2001 and Taipei,China in early 2002. The trade growth that will emerge from the PRC over the next few years will present an adjustment challenge in the short term for other DMCs in the region. Nonetheless, the medium- to long-term prospect is for more efficient location of production in industry in general and thus for accelerated trade and economic growth.

Some DMCs are in the midst of negotiations to join WTO, including Bhutan, Cambodia, Lao PDR, and Nepal, several Central Asian countries, and some Pacific DMCs. The recent commitment by WTO members at Doha to accelerate the pace of accession negotiations for developing and, especially, least-developed countries provides an opportunity for these economies to speed up their reform process and thereby begin reaping the various benefits of WTO membership earlier.

The proliferation of PTAs outside of Asia and the Pacific is a source of concern for DMCs that fear that they may lose as a result of trade and investment diversion. In response, the region has seen numerous initiatives that aim to bolster trade growth. It is important that these initiatives are ultimately welfare enhancing both to the region and the world.

The proposed ASEAN-PRC Free Trade Area, and the moves toward economic partnership between ASEAN and Australia and New Zealand have the potential to make similar contributions to boosting trade growth and increasing competition and economic efficiency. The ASEAN-PRC Free Trade Area, proposed by the PRC and endorsed by ASEAN’s 10 leaders in Brunei in October 2001, represents a limited but concrete proposal. It envisages an FTA within 10 years, even though ASEAN’s own FTA has yet to be fully implemented.

Bilateral agreements currently being negotiated or discussed are even more limited. Japan, for example, has signed and is currently implementing a Japan-Singapore Economic Partnership Agreement, and is exploring arrangements with Korea. Singapore has added bilateral trade agreements to its portfolio of trade policy measures. In addition to the agreement with Japan, it signed an FTA with New Zealand in 2001, is negotiating one with Australia, and is exploring arrangements with Chile and the countries of EFTA as well as the US (Rajan and Sen 2000).

In South Asia, bilateral PTAs have been signed (or are planned) between India and several other countries including Bhutan, Nepal, and Sri Lanka. Sri Lanka is currently seeking a bilateral arrangement with Pakistan. In the Pacific, 14 governments met in late February 2002 to consider an FTA. The meeting may contribute to a greater willingness among the governments to open up their economies more in the future.

The growth in bilateral trade deals is, however, likely to have only a small direct impact on goods trade within the region, but it must be remembered that goods trade is not the only focus of such agreements. Agreements that can lower barriers to services trade and to investment flows may well be able to deepen integration through regional forums and WTO.

Back Policies for Asia and the Pacific	Next References