EU-Asia Free Trade Areas? Economic and Policy Considerations

27 Pages Posted: 8 Dec 2010

See all articles by Michael Plummer

Michael Plummer

Organization for Economic Co-Operation and Development (OECD)

Date Written: December 7, 2010

Abstract

This paper analyzes key aspects of the changing economic relationship between the European Union (EU) and Asia, and explores the potential economic ramifications of deeper EU-Asian economic cooperation. The author investigates the possible costs to the EU of remaining “disengaged” from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. His empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. He also presents two CGE models that estimate the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial-equilibrium) approach, he argues that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. It is therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.

Keywords: asia-EU economic cooperation, asia eu trade, free trade areas

JEL Classification: F13, F15

Suggested Citation

Plummer, Michael, EU-Asia Free Trade Areas? Economic and Policy Considerations (December 7, 2010). ADBI Working Paper No. 255, Available at SSRN: https://ssrn.com/abstract=1721422 or http://dx.doi.org/10.2139/ssrn.1721422

Michael Plummer (Contact Author)

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

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