Asia’s RTA: Two Alternative Models

Jang-Hee YooProfessor Emeritus, Graduate School of International Studie

sEwha Womans University

Seoul, Korea

CONTENTS• Introduction

• Required Conditions for Regional Economic Integration

• Challenges in Asian 3+5 Model

• Possible Solutions

• APEC (Asia-Pacific Economic Cooperation)

• Conclusion

Introduction1) Conventional Wisdom - RTAs tend to stimulate multilateralism2) Mixed relations between internal trade (IT) and exter

nal trade (ET) – WTO (2004) Study

EU: IT<ET NAFTA: IT>ET ASEAN: IT>ET

3) Nevertheless, RTA Global Trade 4) Therefore, many argue that RTA should be formed in

the East Asian region, including China, Japan, and Korea

Required Conditions for Regional Economic Integration

1) Salient Objectives

- European Union (EU): economic integration

- AFTA and NAFTA:

intra-regional free trade

Required Conditions for Regional Economic Integration (cont’d)

2) Binding Force

- EU: economic similarities

- ASEAN: quest for economic security

3) Economic Size

- GDP, trade volume, and population size, etc.

Required Conditions for Regional Economic Integration (cont’d)

<Table 1> Likeness in EU Members (2005)

CountrySurface area

(thousand sq. km)Population

(mil.)GNI

($ bil.)GNI per capita

($)

BelgiumFranceGermanyItalyLuxembourgNetherlandsDenmarkIrelandUKGreecePortugalSpainAustriaFinlandSweden

33552357301

1414370

245132

92506

84338450

106082570.516

54

60111143

859

373.82,177.72,852.31,724.9

30.0598.0256.8166.6

2,263.7218.1170.7

1,100.1303.6196.5370.5

35,70034,81034,58030,01065,63036,62047,39040,15037,60019,67016,17025,36036,98037,46041,060

Average 216.3 25.43 853.6 35,946

Source: World Bank, World Development Indicators, 2005

Required Conditions for Regional Economic Integration (cont’d)

4) Stabilizing Mechanism

- Establish a stable intra-regional cooperation for the successful development of regional economic integration

- Internal stabilizing mechanism

:EU (Germany), NAFTA (USA), China-ASEAN FTA (China)

Asian 3+5 Model

1) Salient Objectives

- expanded version of AFTA

- economic cooperation and trade liberalization, leaving aside other non-economic and political objectives

Asian 3+5 Model (cont’d)

2) Binding Force

- Common historical interest

- Common “Asiatic” market economy

Asian 3+5 Model (cont’d)

3) Economic Size <Table 2> Economic Indicators for 3+5 Countries (2005)

Member CountryArea (1000 Km2) Population GDP ($ bil.)

ChinaIndonesiaJapanKoreaMalaysiaPhilippinesSingaporeThailand(Statistical Error)

9,5611,904

37899

3333001.6

1,513-

1,304.5220.6128.0

48.325.383.1

4.464.2

-

2,229287

4,506 788130

98117177

60

Total 14,088.6 1,878.4 8332 (19.88%)

Source; World Bank, World Development Indicators, 2005

Asian 3+5 Model (cont’d)4) Stabilizing Mechanism - Japan? - China?5) Non-economic Factors - Diverse religions, different languages, and

different races - Historical background of the Asian region - Differences in political ideology

Possible Solutions

Build trust among the Asian countries

- Promote cooperation among the member countries

- Bring more countries into the economic integration

1) Established in 1989

2) Goal:

- To advance economic dynamism and sense of community within the Asia-Pacific region

- To promote open trade and practical economic and technical cooperation

- Free Trade by 2020 (2010 for developed economies)

APEC Model

APEC Model (cont’d)

< Table 3> Economic Indicators for APEC Member Economies (2005)

MemberCountry

Area(1000 Km2)

Population(mil.)

GDP($ bil.)

GDP per capita ($ mil.)

Exports($ mil.)

Imports($ mil.)

AustraliaBrunei DarussalamCanadaChileChinaHong KongIndonesiaJapanKoreaMalaysiaMexicoNew ZealandPapua New GuineaPeruPhilippinesRussiaSingaporeChinese TaipeiThailandUSAViet Nam

7,6926

9,971757

9,5611

1,905378

99330

1,958271463

1,285300

17,0751

36513

9,364332

20.20.4

32.015.4

1,299.86.9

223.8127.3

48.225.5

105.04.15.9

27.586.2

144.04.2

22.564.6

293.082.6

692.45.7

1,084.1105.8

1,851.2174.0280.9

4,6934.3819.2129.4734.9108.7

3.578.295.6

719.2116.3335.2178.1

12,365.951.0

33,62915,76433,648

6,8071,416

25,0061,237

36,84116,897

4,9896,920

26,373585

2,7981,0885,015

27,18014,857

2,73641,815

610

86,5514,713

315,85832,548

593,647265,763

71,585566,191253,845125,857177,095

20,3344,321

12,11139,588

171,431179,755174,350

97,098818,775

26,061

103,8631,638

271,86924,769

560,811273,361

46,525455,661224,463105,297171,714

21,7161,4638,872

40,29786,593

163,982168,715

95,1971,469,704

32,734

Source; Economic Fact Sheets, http://www.dfat.gov.au/geo/fs

The APEC Region Trade and Investment 2005

APEC Model (cont’d)

<Table 4> APEC Shares in World GDP and Trade (2005)

GDP ($ bil.)Export ($ bil.) Import (bil.)

APEC19.254 4,037 4,329

43.33% 44.37% 42.03%

Asian 3+5 model8,332 2,182 1,899

19.88% 23.98% 18.43%

EU13,446 1,318 1,402

30.26% 14.49% 13.61%

World44,433 9,099 10,300

100.00% 100.00% 100.00%

Source; Central Intelligence Agency The World East Bank Asian Development Bank; Bank of Thailand; ASEAN; CIA Fact book The APEC Region Trade and Investment 2005

APEC Model (cont’d)

<Table 5> Share of Intra/Extra Export and Import of APEC Member Economies

ValueShare in total exports/imports

2004 1995 2000 2004

Total exportsIntra-exportsExtra-exports

385826431215

100.073.126.9

100.072.627.4

100.068.531.5

Total importsIntra-importsExtra-imports

428827841504

100.071.728.3

100.068.131.9

100.064.935.1

Source; IMF, Direction of Trade Statistics, 2006

APEC Model (cont’d)<Table 6> Main Export Shares of APEC Member Economies (2003, %)

Source; UN, International Trade Statistics, 2003

USA JapanAmericaAPEC

Asia APEC EURest of the

worldTotal

Western HemisphereCanadaChileMexicoPeruUnited StatesNortheast AsiaChinaHong KongJapanKoreaChinese TaipeiSoutheast AsiaBrunei DarussalamIndonesia MalaysiaPhilippinesSingaporeThailandViet NamOceaniaAustraliaNew ZealandPapua New GuineaRussiaTotal

85.817.888.926.5

21.118.224.917.718.0

7.312.119.620.114.317.014.7

8.814.52.62.3

23.4

2.111.20.44.57.2

13.65.3

8.98.3

38.522.310.715.96.7

14.214.6

18.211.04.31.77.0

0.78.61.97.5

36.9

2.01.72.32.70.0

0.11.01.11.20.81.70.8

1.63.40.00.09.3

2.65.40.6

10.317.2

28.850.945.740.435.5

35.837.345.044.748.236.524.4

33.218.17.16.8

28.3

5.624.33.4

25.420.8

16.513.715.312.98.6

0.313.112.116.313.414.718.9

14.216.111.025.915.0

3.132.74.8

25.817.9

18.010.211.717.429.6

18.114.211.61.8

16.615.826.6

24.036.975.063.316.9

100.0100.0100.0100.0100.0

100.0100.0100.0100.0100.0

100.0100.0100.0100.0100.0100.0100.0

100.0100.0100.0100.0100.0

APEC Model (cont’d)<Table 7> Effects of Tariff Removals in Two Scenarios (CGE model)

3+5-country FTA APEC 21 Economies’ FTA

% mil. $ % mil. $

ChinaIndonesiaJapanKoreaMalaysiaPhilippinesSingaporeThailandAustraliaCanadaUSAOther APECROW

14.465.486.45

10.135.375.962.14

11.53–1.03–0.14-0.68

-1-0.31

34,5983,118

31,63515,1255,1072,4432,6918,153-902-323

-5,799-3,409

-10,593

22.338.31

11.1511.96.61

11.851.95

13.188.512.154.026.15-0.54

53,4284,728

54.68717.7676,2864,8582,4539,3197,4544,966

34,28320,964-18,453

Notes; (1) Benchmark year, 2004 (2) Model Used = Global CGE Model based upon the assumptions of perfect competition, full employment. (3) The % figures indicate an increase in trade volume from current level as a free-trade regime is introduced to two different cases.

Conclusion

1) Asian 3+5 and its limitations

2) APEC as a solution resolving the challenging obstacles of Asian 3+5

3) APEC action plans by 2020