EAFTA or CEPEA: Which Way Forward?

Abstract

The spread of free trade agreements (FTAs) in East Asia amidst slow progress in the WTO Doha negotiations has stimulated a debate over the way forward. This paper examines the region's evolving trade architecture, characteristics of FTAs and welfare implications of alternative FTA scenarios. It suggests that consolidation of multiple and overlapping FTAs into a single East Asian FTA can help mitigate the harmful noodle bowl effects of different tariffs, rules of origin and standards. The paper also suggests that WTO-plus elements need to be further expanded and that consolidation into a Comprehensive Economic Partnership in East Asia at the ASEAN 6 level would yield the largest gains to East Asia among plausible regional trade agreements. As the next priority, the paper points to the formation of FTAs between East Asia, the United States and the EU as well as making FTAs more multilateral-friendly.

Keywords: free trade agreements, EAFTA, CEPEA, East Asia, "WTO-plus" provisions

JEL Classification: F10, F13, F40