The Asian 'Noodle Bowl': Is it Serious for Business

Abstract

A lively debate is taking place over the impact of free trade agreements (FTAs) on East Asia's business between those who view the agreements as a harmful Asian "noodle bowl" of trade deals and others who see net beneficial effects in terms of regional liberalization and a building block to multilateral liberalization. A lack of enterprise-level data has made it has made it difficult to resolve the debate. Providing new evidence from surveys of 609 East Asian firms (in Japan, Singapore, Korea, Thailand and the Philippines), this paper seeks to address the critical question of whether the Asian noodle bowl of multiple overlapping FTAs is harmful to business activity particularly small SMEs. The surveys suggest that the Asian "noodle bowl" does not seem to have severely harmed the region's business activity to date. Use of FTA prefences (22% of responding firms) is higher than expected from previous studies. Furthermore, only 27% of responding firms said that multiple rules of origin significantly added to business cost. As more FTAs under negotiation take effect and the complexity of the Asian "noodle bowl" increases, however, the business impact is likely to intensify. Implementation of key policies and closer public-private sector cooperation can help mitigate negative effects and facilitate a more SME-inclusive business response to FTAs. Suggestions include: encouraging MFN liberalization, rationalisation of rules of origin, upgrading origin administration, increased awareness of FTA provisions, improving business participation in FTA consultations and SME support.

Keywords: FTAs, East Asia, Asian Noodle Bowl, Spaghetti Bowl, Rules of Origin

JEL Classification: F1, F15, O24