Asia

1
Asias RTA Two Alternative Models

• Jang-Hee Yoo
• Professor Emeritus, Graduate School of
  International Studies
• Ewha Womans University
• Seoul, Korea

2
CONTENTS

• Introduction
• Required Conditions for Regional Economic
  Integration
• Challenges in Asian 35 Model
• Possible Solutions
• APEC (Asia-Pacific Economic Cooperation)
• Conclusion

3
Introduction

• 1) Conventional Wisdom
• - RTAs tend to stimulate multilateralism
• 2) Mixed relations between internal trade (IT)
  and external trade (ET) WTO (2004) Study
• EU ITltET
• NAFTA ITgtET
• ASEAN ITgtET
• 3) Nevertheless, RTA Global Trade
• 4) Therefore, many argue that RTA should be
  formed in the East Asian region, including China,
  Japan, and Korea

4
Required Conditions for Regional Economic
Integration

• Salient Objectives
• - European Union (EU)
  economic integration
• - AFTA and NAFTA
• intra-regional free trade

5
Required Conditions for Regional Economic
Integration (contd)

• 2) Binding Force
• - EU economic similarities
• - ASEAN quest for economic security
• 3) Economic Size
• - GDP, trade volume, and population size, etc.

6
Required Conditions for Regional Economic
Integration (contd)
ltTable 1gt Likeness in EU
Members (2005)
Country Surface area (thousand sq. km) Population (mil.) GNI ( bil.) GNI per capita ()
Belgium France Germany Italy Luxembourg Netherlands Denmark Ireland UK Greece Portugal Spain Austria Finland Sweden 33 552 357 301 1 41 43 70 245 132 92 506 84 338 450 10 60 82 57 0.5 16 5 4 60 11 11 43 8 5 9 373.8 2,177.7 2,852.3 1,724.9 30.0 598.0 256.8 166.6 2,263.7 218.1 170.7 1,100.1 303.6 196.5 370.5 35,700 34,810 34,580 30,010 65,630 36,620 47,390 40,150 37,600 19,670 16,170 25,360 36,980 37,460 41,060
Average 216.3 25.43 853.6 35,946
Source World Bank, World Development Indicators,
2005
7
Required Conditions for Regional Economic
Integration (contd)

• 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)

8
Asian 35 Model

• Salient Objectives
• - expanded version of AFTA
• - economic cooperation and trade
  liberalization, leaving aside other non-economic
  and political objectives

9
Asian 35 Model (contd)

• 2) Binding Force
• - Common historical interest
• - Common Asiatic market economy

10
Asian 35 Model (contd)

• 3) Economic Size

ltTable 2gt Economic Indicators for 35 Countries
(2005)
Member Country Area (1000 Km2) Population GDP ( bil.)
China Indonesia Japan Korea Malaysia Philippines Singapore Thailand (Statistical Error) 9,561 1,904 378 99 333 300 6 1,513 - 1,304.5 220.6 128.0 48.3 25.3 83.1 4.4 64.2 - 2,229 287 4,506 788 130 98 117 177 60
Total 14,088.6 1,878.4 8332 (19.88)
Source World Bank, World Development Indicators,
2005
11
Asian 35 Model (contd)

• 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

12
Possible Solutions

• Build trust among the Asian countries
• - Promote cooperation among the member
  countries
• - Bring more countries into the economic
  integration

13
APEC Model

• Established in 1989
• 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)

14
APEC Model (contd)
lt Table 3gt Economic Indicators for APEC
Member Economies (2005)
Member Country Area (1000 Km2) Population (mil.) GDP ( bil.) GDP per capita ( mil.) Exports ( mil.) Imports ( mil.)
Australia Brunei Darussalam Canada Chile China Hong Kong Indonesia Japan Korea Malaysia Mexico New Zealand Papua New Guinea Peru Philippines Russia Singapore Chinese Taipei Thailand USA Viet Nam 7,692 6 9,971 757 9,561 1 1,905 378 99 330 1,958 271 463 1,285 300 17,075 1 36 513 9,364 332 20.2 0.4 32.0 15.4 1,299.8 6.9 223.8 127.3 48.2 25.5 105.0 4.1 5.9 27.5 86.2 144.0 4.2 22.5 64.6 293.0 82.6 692.4 5.7 1,084.1 105.8 1,851.2 174.0 280.9 4,6934.3 819.2 129.4 734.9 108.7 3.5 78.2 95.6 719.2 116.3 335.2 178.1 12,365.9 51.0 33,629 15,764 33,648 6,807 1,416 25,006 1,237 36,841 16,897 4,989 6,920 26,373 585 2,798 1,088 5,015 27,180 14,857 2,736 41,815 610 86,551 4,713 315,858 32,548 593,647 265,763 71,585 566,191 253,845 125,857 177,095 20,334 4,321 12,111 39,588 171,431 179,755 174,350 97,098 818,775 26,061 103,863 1,638 271,869 24,769 560,811 273,361 46,525 455,661 224,463 105,297 171,714 21,716 1,463 8,872 40,297 86,593 163,982 168,715 95,197 1,469,704 32,734
Source Economic Fact Sheets, http//www.dfat.gov.
au/geo/fs The APEC Region Trade and
Investment 2005
15
APEC Model (contd)
ltTable 4gt APEC Shares in World GDP and Trade
(2005)
GDP ( bil.) Export ( bil.) Import (bil.)
APEC 19.254 4,037 4,329
APEC 43.33 44.37 42.03
Asian 35 model 8,332 2,182 1,899
Asian 35 model 19.88 23.98 18.43
EU 13,446 1,318 1,402
EU 30.26 14.49 13.61
World 44,433 9,099 10,300
World 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
16
APEC Model (contd)
ltTable 5gt Share of Intra/Extra Export and Import
of APEC Member Economies
Value Share in total exports/imports Share in total exports/imports Share in total exports/imports
2004 1995 2000 2004
Total exports Intra-exports Extra-exports 3858 2643 1215 100.0 73.1 26.9 100.0 72.6 27.4 100.0 68.5 31.5
Total imports Intra-imports Extra-imports 4288 2784 1504 100.0 71.7 28.3 100.0 68.1 31.9 100.0 64.9 35.1
Source IMF, Direction of Trade Statistics, 2006
17
APEC Model (contd)
ltTable 6gt Main Export Shares of APEC Member
Economies (2003, )
USA Japan America APEC Asia APEC EU Rest of the world Total
Western Hemisphere Canada Chile Mexico Peru United States Northeast Asia China Hong Kong Japan Korea Chinese Taipei Southeast Asia Brunei Darussalam Indonesia Malaysia Philippines Singapore Thailand Viet Nam Oceania Australia New Zealand Papua New Guinea Russia Total 85.8 17.8 88.9 26.5 21.1 18.2 24.9 17.7 18.0 7.3 12.1 19.6 20.1 14.3 17.0 14.7 8.8 14.5 2.6 2.3 23.4 2.1 11.2 0.4 4.5 7.2 13.6 5.3 8.9 8.3 38.5 22.3 10.7 15.9 6.7 14.2 14.6 18.2 11.0 4.3 1.7 7.0 0.7 8.6 1.9 7.5 36.9 2.0 1.7 2.3 2.7 0.0 0.1 1.0 1.1 1.2 0.8 1.7 0.8 1.6 3.4 0.0 0.0 9.3 2.6 5.4 0.6 10.3 17.2 28.8 50.9 45.7 40.4 35.5 35.8 37.3 45.0 44.7 48.2 36.5 24.4 33.2 18.1 7.1 6.8 28.3 5.6 24.3 3.4 25.4 20.8 16.5 13.7 15.3 12.9 8.6 0.3 13.1 12.1 16.3 13.4 14.7 18.9 14.2 16.1 11.0 25.9 15.0 3.1 32.7 4.8 25.8 17.9 18.0 10.2 11.7 17.4 29.6 18.1 14.2 11.6 1.8 16.6 15.8 26.6 24.0 36.9 75.0 63.3 16.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source UN, International Trade Statistics, 2003
18
APEC Model (contd)
ltTable 7gt Effects of Tariff Removals in Two
Scenarios (CGE model)
35-country FTA 35-country FTA APEC 21 Economies FTA APEC 21 Economies FTA
mil. mil.
China Indonesia Japan Korea Malaysia Philippines Singapore Thailand Australia Canada USA Other APEC ROW 14.46 5.48 6.45 10.13 5.37 5.96 2.14 11.53 1.03 0.14 -0.68 -1 -0.31 34,598 3,118 31,635 15,125 5,107 2,443 2,691 8,153 -902 -323 -5,799 -3,409 -10,593 22.33 8.31 11.15 11.9 6.61 11.85 1.95 13.18 8.51 2.15 4.02 6.15 -0.54 53,428 4,728 54.687 17.767 6,286 4,858 2,453 9,319 7,454 4,966 34,283 20,964 -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.
19
Conclusion

1. Asian 35 and its limitations
2. APEC as a solution resolving the challenging
   obstacles of Asian 35
3. APEC action plans by 2020