Regionalism vs. Multilateralism: Assessing the Impact of Free Trade Agreements between EU and Asian Countries

Abstract

In 2006 the EU decided to abandon its moratorium on negotiating new free trade agreements. Since then, numerous negotiations have been started. In particular, the EU joined in the scramble for preferential market access in Asia, starting bilateral negotiations both with individual countries, as in the case of India and South Korea, and with regional subgroupings, such as the Association of Southeast Asian Nations (ASEAN).

In this paper, we use a computable general equilibrium (CGE) model to assess the effects of the possible agreements between the EU and the Asian countries. We want to evaluate the impact of the free trade agreements by themselves, their mutual compatibility as well as their relations with the larger agenda of multilateral trade liberalization. As a matter of fact, regional trade agreements are controversial in economics, not simply because of the classic (so-alled 'Vinerian') view that they can sometimes reduce trade by diverting it, rather than creating it, but also because of the unresolved disagreements over when a regional trade agreement is likely to precede, rather than preclude, more global agreements.

Keywords: Protection, Commercial policy, GTAP model, International trade

JEL Classification: F13, Q17, F17