The determinants of FTA use in Southeast Asia: A firm-level analysis

The spread of free trade agreements (FTAs) in Southeast Asia has ignited a debate about their impact on enterprises including the business costs from the Asian ‘noodle bowl’ effect. This paper undertakes a comparative and firm-level analysis of the determinants of FTA use in Indonesia, Malaysia and the Philippines. The likelihood of firms using important ASEAN+1 FTAs (e.g. the ASEAN-China FTA, the ASEAN-Japan FTA and ASEAN-Korea FTA) is positively associated with acquiring knowledge about FTAs, building technological capabilities, and membership in industrial clusters. Non-use of FTAs is explained by a lack of information about FTAs and the absence of FTAs with major trading partners. Key policy implications are the need to improve business support for FTAs, to conclude FTAs with major trading partners, and to create a database on FTA preference use.     

China＇s Free Trade Agreements with ASEAN, Japan and Korea： A Comparative Analysis

The role of China in East Asia's recovery from the recent global financial and economic crisis highlights China's position as an engine of growth for this region. From the viewpoint of China, there are many potential gains from entering into free trade agreements (FTAs) with its neighbors, who collectively form a large and fast‐growing market. In this paper, we qualitatively and quantitatively assess the four main permutations of China's FTAs with East Asian major economies: China–ASEAN, China–Japan, China–Korea and ASEAN+3. We compare the effects of these FTAs on China's output and welfare. Our comparative analysis shows that China will gain from all three bilateral FTAs, while gaining the most from the ASEAN+3. Because forming a region‐wide FTA, such as the ASEAN+3, is expected to be gradual and difficult, China should continue to engage in bilateral FTAs as a medium‐term and alternative strategy. However, in the long term, China should pursue a region‐wide FTA.     

Exporter responses to FTA tariff preferences: evidence from Thailand

This paper focuses on how exporters respond to free trade agreement (FTA) preferential schemes by analysing the administrative records of FTA implementation at the product level in Thailand. The key finding is that while there is growth in the number of FTAs with a potentially larger membership than existing FTAs, firms tend to prioritise existing FTAs. Moreover, only a narrow range of products are involved in applications for FTA preferential schemes. As a result, only one‐third of exports are covered by such arrangements. The key determinants of firms applying for preferential schemes include tariff margins, the ability to comply with rules of origins (ROOs) and the economic fundamentals influencing trade. Hence, it is less likely for FTAs to open up export opportunities for products that are either yet to be traded or of low prospective trade volume. Estimates of the costs of complying with ROOs average 8.6 per cent of tariff equivalence. The cost approaches zero for developed countries but is substantially higher for developing nations. The key policy inference is that the export‐enhancing effects of FTAs are passive at best, working only after economic fundamentals are established. For us to harness the trade‐inducing effects of FTAs, reducing costs incurred from the presence of ROOs from both exporting and importing countries should be the prime focus.     

Assessing the economic impacts of the EU-Singapore FTA with a dynamic general equilibrium model

Negotiations for the EU-Singapore FTA were concluded on December 6, 2012. Given that this is the EU’s first FTA with an ASEAN member country and the second one with a major Asian trading partner after the conclusion of the EU-Korea FTA, this agreement paves the way for future FTAs with countries in the region. The goal of this paper is to quantify the economic impacts of the EU-Singapore FTA using a dynamic computable general equilibrium model. The resutls estimated in this paper suggest that the bilateral reduction of tariff and non-tariff barriers brings benefits for both sides: Singapore GDP is expected to increase by € 2.7 billion whereas the EU gains are assessed at € 550 million. In addition, EU exports to Singapore would rise by some € 1.4 billion and Singapore’s exports to the EU by some € 3.5 billion. In a complementary scenario, the current paper also assesses the value of this FTA as an insurance policy against any hypothetical tariffs hikes in Singapore to WTO bound levels. In such a “worst case” scenario, the EU-Singapore FTA will protect EU GDP from a decrease of € 350 million and prevents a loss of € 3.7 billion EU exports to Singapore.     

Impacts of Sequential Free Trade Agreements in East Asia: A CGE and Political Economy Analysis

Abstract

This paper estimates the economic impacts of the various sequential liberalization scenarios in East Asia, emphasizing the significance of the “sequence” of the liberalization process in computable general equilibrium (CGE) analysis. The major findings are as follows: (1) “Sequence” matters in measuring the economic impacts of free trade agreement (FTA) scenarios in the region; (2) Scenario 1 (Korea-China FTA → Korea-Japan FTA → China-Japan FTA) is the sequence maximizing Korea's economic gains, whereas Scenario 3 (Korea-China-Japan FTA) is the one most preferred economically by China and Japan; (3) Korea's FTAs with the United States (US) and European Union (EU) can be evaluated as a preemptive strategic move, causing changes in FTA preferences of Korea and Japan; (4) the prediction of Bond and Baldwin (adjustment cost and juggernaut effect) and that of Evenett et al. (trade diversion effect) are supported by the empirical results that Korea's (China's) expected gains from northeast Asian FTA sequences increase (decrease) after Korea's FTAs with the US and EU are made; (5) predictions about the International Political Economy (IPE) theories (power consideration and domestic politics) upon the sequential FTA formations in East Asia are consistent with the findings above.     

应对“意大利面条碗”效应——兼论东盟在东亚合作中的作用

伴随着东亚地区经济体迅速签署大量的FTA,导致东亚地区出现所谓的意大利面条碗效应。特别是东盟从自身利益出发,推动建立了东盟+1FTA网络,试图充当轮轴国,这一做法更加恶化了意大利面条碗效应。为了应对意大利面条碗效应,有必要在东亚地区推动建立大范围的FTA,目前看来更可行的办法是先加强东盟内部贸易便利化和能力建设,以期2015年东盟自贸区建成后能开始推动东亚地区实施统一原产地规则方面的贸易便利化措施。     

ASEAN FTA,distribution of income,and globalization

This paper examines the impact of Free Trade Agreements on income distribution within the Association of Southeast Asian Nations (ASEAN) and between the members and their trading partners outside ASEAN. The study uses a Computable General Equilibrium model, a modified version of the 57 sector, 87 country, Global Trade Analysis Project (GTAP) integrated model of national input–output tables, version-6.2 (2001 database) with its reserve matrix facility, to simulate income distribution results as an outcome of certain parameter changes that appear in intra and inter regional trade.Within ASEAN, trade liberalization will stimulate the output of each country within the region according to their comparative advantage. Since trade liberalization tends to increase output of capital-intensive goods more than labor-intensive goods, the less-developed countries within the region tend to get smaller benefits compared to other member countries. In addition, the physical means of production tend to gain more relative to the gains of labor from the FTAs. This tends to widen the income gap between high-income and low-income households within ASEAN.Comparing ASEAN and the developed non-ASEAN countries, an FTA within ASEAN tends to reduce the returns to labor of the developed non-member countries and narrow the income gap between ASEAN, as a whole, and those rich countries since capital-intensive products of developing countries are often labor-intensive goods of developed countries.     

Regional integration in Asia and its effects on the EU and North America

Consequences of free-trade agreements (FTAs) among the ASEAN+3 and ASEAN+6 countries are explored using a dynamic computable general equilibrium (CGE) model. Quantitative assessments of intra- and extra-regional effects on welfare, trade and output are offered. When both trade facilitation and endogenously determined productivity are included in the FTA scenarios, Singapore, other ASEAN countries and China would be able to realize relatively large welfare gains, while the welfare effects on the EU and North America are negligible. The trade and output effects on the latter two regions are also relatively small, with the notable exception of crops, other than rice, in North America.     

Effects on China and ASEAN of the ASEAN-China FTA: The FDI perspective

The ASEAN-China FTA (ACFTA) is a significant step in regional economic integration for both China and the ASEAN countries. While analysis of the effects of Free Trade Agreements (FTAs) most commonly focuses on the trade effects, the closeness of the link between trade and investment implies that the effect of an FTA on foreign direct investment (FDI) is also potentially significant. FTAs may stimulate FDI through the effects of market expansion and vertical fragmentation, while they may also reduce FDI through a plant rationalization effect. The overall effect of an FTA on FDI flows is an empirical question. This paper examines the impact of ACFTA on FDI flows through an econometric model that captures the influence of East Asian production networks on FDI, which we expect to be an important explanatory factor. The model finds that ACFTA has a significant and positive effect on FDI flows. A brief survey of the theoretical literature on the welfare and other related effects of FDI serves to emphasize that the extent to which individual member countries of the ACFTA will benefit from this increase in FDI will depend in important ways on the policies pursued in each country.     

APEC成员间建立FTA的影响因素研究

本文使用Probit模型对APEC成员间建立FTA的影响因素进行了经验分析。一个国家在决定是否与其他国家结成FTA时,从长期来看主要考虑其是否会带来本国经济福利的改善。纯经济因素准确预测了APEC成员间59个已经形成的FTA中的51个和151个尚未结成的FTA中的146个。与以往的研究不同,本文额外考察了生产者服务在长期内对于FTA形成的影响,以及社会和政治因素在短期内对于FTA形成的影响。     

VALUE CONTENT AND PRODUCTION NETWORKS IN SOUTHEAST ASIA: APPLICATION OF AFTA AND ASEAN‐PLUS‐ONE FTA FORMULAS

Rules of origin are an integral part of all trade rules. To be eligible for Common Effective Preferential Tariffs under the ASEAN Free Trade Area (AFTA) agreement, a product must satisfy the conditions relative to value content. The present paper seeks to calculate value content of industries in Southeast Asia, using the formula specified by the rules of origin in AFTA, the ASEAN–China FTA, the ASEAN–Korea FTA, and the ASEAN–Japan FTA. Moreover, the paper attempts to calculate true value content of industries by applying a simple technique of input–output analysis, and to estimate error margins (i.e., overestimates) in calculating value content. The paper also examines the relationship between value content and production networks. The paper finds that many industries exhibited declines in local content during the period 1990–2000, but that the geographical spread of production networks raised the proportion of inputs supplied by the neighboring ASEAN countries, so that the contribution of the cumulative rule of origin increased.     

A note on detecting biases in assessing the use of FTAs

There has been much confusion, rather than debate, on the use of free trade agreements (FTAs). Unfortunately, a large part of the confusion is caused by the absence of consensus on the meaning of key terms such as the “utilization rate” and “usage rate” of FTAs, and the lack of knowledge on upward or downward biases from various data sources regarding the use of FTAs. Rather than making an original empirical contribution, this article reviews existing studies and attempts to identify the relevant methodologies for assessing the use of FTAs.     

Do trade agreements increase Vietnam's exports to RCEP markets?

The paper reviews recent developments in trade relations between Vietnam and members of the Regional Comprehensive Economic Partnership (RCEP) agreement, and analyses the impacts on Vietnam's exports of tariff reductions in RCEP trading partners. The margin of tariff preferences is adopted as a proxy for the degree of trade liberalisation and a gravity model is used to assess the impacts of the tariff preferences under the AFTA and ASEAN+1 FTAs on Vietnam's major exports. The results show that the effects of tariff preferences differ between the types of preferences and products. The FTA tariff preferences do not exert a stimulating effect on the export of agricultural products but they have positive effects on several manufacturing exports such as garments and footwear.     

Do Free Trade Agreements Increase the New Goods Margin? Evidence from Korea

We analyze the changes in the composition of bilateral trade—and more specifically, in the new goods margin—following the free trade agreements (FTAs) signed by Korea between 2004 and 2008. We find that new goods trade increased disproportionately after the FTAs came into effect, and that least-traded goods (LTG)—those accounting for the lowest 10% of trade prior to the FTAs—ended up accounting for 37% of post-FTA trade with FTA partners. In contrast, the corresponding share for a comparable group of countries that did not sign FTAs with Korea was only half as large, averaging close to 20%. We also find that only less than 2% of all least-traded products accounted for most of the growth in LTG trade, and that those goods tended to be clustered in the same industries as the intensively-traded goods. Furthermore, a larger fraction of LTG became heavily traded for the case of FTA partners than for non-FTA countries. Finally, we find evidence that least-traded imports were subject to higher pre-FTA tariff protection than other products.     

广西对外投资分析

总体而言,广西对外投资仍处于起步阶段,规模小,技术含量低,投资地域也主要集中在越南等东南亚国家。随着中国—东盟自由贸易区的正式建成,以及中国—东盟全面经济合作的进一步深入,广西与东盟国家的经济联系必将更加紧密,这也为广西鼓励企业更多"走出去",深化和扩展投资提供了难得的历史机遇。     

Who Uses Free Trade Agreements?

The utilization of ASEAN free trade agreements (FTA) is low by international standards. To clarify the reasons for such low utilization, this paper uses unique affiliate‐level data to investigate what kinds of Japanese affiliates in ASEAN are more likely to use an FTA scheme in their exporting. Our findings are as follows. First, the larger the affiliate is, or the more diversified the origins of its procurements, the more likely it is to utilize an FTA scheme in its exporting. Second, affiliates that export actively to countries with higher general tariffs are more likely to use FTA. Third, there are clear differences in FTA utilization depending on affiliates' locations and sectors.     

Vertical trade and free trade agreements

We investigate the effects of free trade agreements (FTAs) on tariffs and welfare in vertical trade. We consider a three-country model, where an FTA is formed between a country exporting a final good and a country exporting an intermediate good. The FTA unambiguously leads to a reduction in the member country’s tariff, but may cause the non-member country’s tariff level to increase. In the case, where FTA raises the non-member country’s tariff level, the FTA increases that country’s welfare. In contrast, the FTA may render its member countries better off. This result implies that the formation of an FTA may not always be Pareto-improving.     

The EU-Korea FTA: anticipation,trade policy uncertainty and impact

Anticipatory trade effects of free trade agreements (FTAs) have been documented in various papers. One reason put forward trying to explain this phenomenon is reduced trade policy uncertainty. This paper is one of the first to explore the role of anticipation and trade policy uncertainty in the case of a recently concluded deep and comprehensive EU FTA, including significant behind the border measures. We use monthly data at a lower level of aggregation (8-digit level) compared to previous studies and we account for changes in the EU product classification over time. We also distinguish between the impact on products which are actually subject to liberalisation under the FTA as opposed to those which are already duty-free and we examine the effects on both the extensive margin and the intensive margin. We consider the impact of the FTA during three different periods of time (the start of negotiations, initialling of the agreement and entry into force), while comparing with the period before negotiations began. The results indicate that the FTA has had a positive impact on exports on both margins. The impact on the EU is somewhat higher indicating that EU exporters have more to gain in terms of increasing the predictability of the trade policy regime of the destination market and lowering its tariffs than vice versa. The results demonstrate that the impact of FTAs should not be assessed against the time period just prior to entry into force of the agreement, but much earlier to account for anticipation effects.     

我国产业结构创新升级和和平崛起的重要实践基地:中国-东盟自由贸易区

经济全球化和区域经济一体化是当今世界经济发展的两大潮流。而区域经济一体化是经贸双方实现共同繁荣和发展的成功之路。本文分析了自由贸易区对经济发展和对我国国际经济安全保障的重要性,建立中国-东盟自由贸易区的必要性和可能性,并对深化中国-东盟自由贸易区的合作提出了战略构想和相关的举措。     

Understanding the NGO revolution in Korea

Using institution‐building theory from the school of neoliberalism, the paper examines the role of leadership and institutional bargaining in moving the “10+3” regional cooperation framework forward. The core argument developed here is that close cooperation between Japan and China is key to the future of “10+3”, and ASEAN states and South Korea should utilize the “10+3” platform for bringing Japan and China together. Finally, some ASEAN states’ fear that a more integrated East Asia will mean the withdrawal of U.S. presence in the region is very remote.