Chapter 9: Trade Integration in Asia
(F) Day of the week: Friday Class: IS308 Created Time: April 23, 2021 2:46 PM Database: Class Notes Database Date: April 23, 2021 2:46 PM Days Till Date: Passed Last Edited Time: June 9, 2021 10:38 AM
Intro
Trade integration has key areas of concerns
- Trade
- Finnance
- Investment
Trade integration in multilateral trade in Asia between
- Market-led integration:
- State-led integration: fta, custom unions
Market-led Integration
- Trade integration in Asia pushed mainly by market, not government
- Assumes that state doesn’t contribute much to increase trade integration in the region
China became main partner in Asia
Increase in trade integration in Asia
|2006: Asian accounted for 1/3 of world trade
|1990-2009: integration between Asia 9x
|2009: Share of intra-East and SEA export account for 41% of overall trade. Imports at 49%
Why has the support for multilateral regulation of trade disappeared?
WTO wasn’t participated by Asia much in the 1960s?
Bretton Wood System
- in case of financial crisis in a country: they could borrow from IMF and World Bank
- Failed: because dollar kept increasing in value and gold kept shrinking
GATT
- To promote international trade by reducing or eliminating trade barriers (tarriffs or quotas)
- Led to Establishment of WTO
GATT became important
- US: saw GATT as beneficial before WW2
- EU:
- Asia:
The US national interest
Bush admin:
Clinton Admin: gentle trade involvement?
Obama Admin: support free trade
First 2 decades: US was #1 supporter, Europe #2 supporter of GATT
The World Trade Organization
Created in 1995 with set of principles of
- Market liberalization: open world to internationalized trade system
- Non-discrimination: each member has the same opportunities, rejecting ‘most-favored-nation’ treatment
Acted s dispute settlement mechanism to ensure compliance in trade agreements
The Mushrooming of trade agreement in Asia
FTA spread to Asia
- China became most active in bilateral trade
- China and ASEAN created world largest Free Trade Zone
Asia changing to economic focus
The Asian financial crisis shifted Asia’s focus from regional security → economic integration and stability
Why?
- traditional security is no longer important
- economic instability is a greater concern than traditional risks
- economies in Asia is growing closer together: share intra-regional trade
- Political rivalry between China and Japan stimulated Asian regionalism and PTAs
The limited utility of preferential trade agreement
Limited utility of preferential trade agreement is burdened by “rules of Origin”
Rules of Origin: where goods have been produced or manufactured
- Intermediate goods from country A to put together in country B would create a product with the Origins from country B
Used to
- Developing countries: enhance economic development
- Developed countries: protect aging domestic industries
4 Methods of Establish the ntionality of the product
Natural Origin: raw materials and non-processed agricultural products
Substantial Transformation
Tariff Heading: recevies a tariff heading after the production is processed to qualify the origin
Minimum Value-added rule: a % of the value of the product must be produced in the FTA
Production Process: production processes that is identified and agreed to be established in the origin
Should Asian economies consider custom unions?
Open Trading Regime: reginal economic integration without discrimination against economies outside the region
- Problem: Open regionalism is unclear
Discriminating Preferential Trade Agreement: PTA not to discriminate against members but to do so for non-members
- Problem: there are more convincing alternatives?
Customs Union: eliminate trade barriers