China, India, and Regional Economic Integration in Asia

Abstract

Trade regionalism, through regional cooperation and integration and in the form of regional trade agreements (RTAs), is rising globally, although Asia has jumped on the bandwagon only recently. Asian economic integration is the second-best approach which Asian countries unfortunately have to follow. In the process of integration, China and India, given the size of their population and population, as well as their central strategic position in international and regional relations, will inevitably play fundamentally important, and sometimes even dominating, roles. This paper argues that regional economic integration in Asia should first of all realize sub-regional integration in East Asia and South Asia, while linking up the two sub-regions with bilateral FTAs, among which the most important one should be a China-India FTA. Eventually, all the FTAs will be consolidated into one pan-Asian FTA. China and India must take the lead in promoting Asian economic integration. They are advised to lead the region to practice open regionalism (with however Asian identity) and conduct deeper integration. Lastly, it is suggested that Asian countries should, at this stage, establish an institution to develop (non-binding) common principles and guidelines for the sub-regional and bilateral FTAs.

Keywords: regional trade integration, RTA, FTA, China, India, Asia

JEL Classification: K33, F15, N75