Asia’s RTA: Two Alternative Models Jang-Hee Yoo Professor Emeritus, Graduate School of International Studies Ewha 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

Introduction 1) Conventional Wisdom - RTAs tend to stimulate multilateralism 2) Mixed relations between internal trade (IT) and external 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) 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 , , , , , ,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 ,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 Economic Indicators for 3+5 Countries (2005) Member Country Area (1000 Km 2 )PopulationGDP ($ bil.) China Indonesia Japan Korea Malaysia Philippines Singapore Thailand (Statistical Error) 9,561 1, , , , , Total14,088.61, (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 )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) Economic Indicators for APEC Member Economies (2005) Member Country Area (1000 Km 2 ) 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, , , , , , , , , , , , , ,629 15,764 33,648 6,807 1,416 25,006 1,237 36,841 16,897 4,989 6,920 26, ,798 1,088 5,015 27,180 14,857 2,736 41, ,551 4, ,858 32, , ,763 71, , , , ,095 20,334 4,321 12,111 39, , , ,350 97, ,775 26, ,863 1, ,869 24, , ,361 46, , , , ,714 21,716 1,463 8,872 40,297 86, , ,715 95,197 1,469,704 32,734 Source; Economic Fact Sheets, The APEC Region Trade and Investment 2005

APEC Model (cont’d) APEC Shares in World GDP and Trade (2005) GDP ($ bil.) Export ($ bil.)Import (bil.) APEC ,0374, %44.37%42.03% Asian 3+5 model 8,3322,1821, %23.98%18.43% EU 13,4461,3181, %14.49%13.61% World 44,4339,09910, % 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) Share of Intra/Extra Export and Import of APEC Member Economies Value Share in total exports/imports Total exports Intra-exports Extra-exports Total imports Intra-imports Extra-imports Source; IMF, Direction of Trade Statistics, 2006

APEC Model (cont’d) Main Export Shares of APEC Member Economies (2003, %) Source; UN, International Trade Statistics, 2003 USAJapan America APEC Asia APECEU 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

APEC Model (cont’d) Effects of Tariff Removals in Two Scenarios (CGE model) 3+5-country FTAAPEC 21 Economies’ FTA %mil. $% China Indonesia Japan Korea Malaysia Philippines Singapore Thailand Australia Canada USA Other APEC ROW –1.03 – ,598 3,118 31,635 15,125 5,107 2,443 2,691 8, ,799 -3, , ,428 4, ,286 4,858 2,453 9,319 7,454 4,966 34,283 20, ,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