APTIAD

‘‘Regionalism and Regionalism and multilateralismmultilateralism’’ clash clash ‐‐ Asian Asian 

stylestyle

Mia MikicMia MikicTID, ESCAPTID, ESCAP

APTIAD

Outline

• Setting the scene• Using APTIAD to learn more on Asian regionalism in trade

•Stylized facts•Level of trade liberalization and sectoral coverage•Performance

• Looking into the future

APTIAD

Source: Fink 2006

APTIAD

APTA

SAFTAAFTA

Bhutan

Sri Lanka

Maldives Bangladesh

IndiaPakistan China

Rep. of Korea

New ZealandBrunei

Darussalam CambodiaIndonesia

Lao PDR

MalaysiaMyanmar Philippines

Thailand

Viet Nam

Nepal

SPARTECA

Marshall Is. Micronesia

Palau Tuvalu

Cook Is. Fiji Kiribati Nauru Niue Samoa

Tonga VanuatuSolomon Is.

MSG

Australia

Singapore

Papua New Guinea

USA

Chile

Japan

Hong Kong, China

Macao, China

Jordan

Bahrain

BIMSTEC

PICTA

EFTAEU

Turkey

Russian Fed.

Georgia

Kyrgyzstan

Armenia

Kazakhstan

Ukraine

Azerbaijan

Turkmenistan

Afghanistan

APTIAD, Sep 2006, some PTA s not shown

Moldova

Niger

CISFTA

GULF

APTIAD

APTA

SAFTAAFTA

Bhutan

Sri Lanka

Maldives Bangladesh

IndiaPakistan China

Rep. of Korea

New ZealandBrunei

Darussalam CambodiaIndonesia

Lao PDR

MalaysiaMyanmar Philippines

Thailand

Viet Nam

Nepal

SPARTECA

Marshall Is. Micronesia

Palau Tuvalu

Cook Is. Fiji Kiribati Nauru Niue Samoa

Tonga VanuatuSolomon Is.

MSG

Australia

Singapore

Papua New Guinea

USA

Chile

Japan

Hong Kong, China

Macao, China

Jordan

Bahrain

BIMSTEC

PICTA

EFTAEU

Turkey

Russian Fed.

Georgia

Kyrgyzstan

Armenia

Kazakhstan

Ukraine

Azerbaijan

Turkmenistan

Afghanistan

APTIAD, Sep 2006, some PTA s not shown

Moldova

Niger

CISFTA

GULF

Mexico

PanamaPeru

Qatar

Canada

SACU MERCOSUR

APTIAD

Definitional matters

• Regionalism and multilateralism: – policies– processes

• Trade plus

APTIAD

APTIAD as a data source• Qualitative and historical trade flow data 

– identify stylized facts– underlying architecture of the regional integration in Asia and the Pacific 

– identify degree of overlapping membership– content / substance of liberalization

• Trade performance indicators – assess the implicit (ex‐ante)– or actual (ex‐post) effect of a proposed or implemented track of liberalization

APTIAD

Qualitative data and historical trade flows

APTIAD

Stylized facts1. Process of regional integration started in earnest in the 

1990s.2. Strong preference for BTAs.3. Strong preference for FTAs (in name) rather than customs 

union.4. Multiple memberships are a norm. Average number of 

agreements per country is 3.9.5. BTAs in force focus on industrial goods, while RTAs might 

have slightly broader but equally shallow approach to trade liberalization. Extent of tariff liberalization is variable and rules of origin are protectionist.

6. BTAs tend to be core of much wider economic partnerships.7. IP especially in FTAs with the US gets most coverage and 

mobility of labour the least.

0 0 0 0 0 3 0 4 06 1

130

172

23

0

2712

60

17

102

64

197

0

50

100

150

200

47-50 51-55 56-60 61-65 66-70 71-75 76-80 81-85 86-90 91-95 95-00 01-present

Asia-Pacific Worldwide

Many agreements, but ….

APTIAD

Architecture

APTIAD

How much trade covered?

B TAR TA

To t al ESC A Pt rade

In ESCAP trade

In world trade

4 .73 .9

2 9 .2

16.2

13.2

0

5

10

15

2 0

2 5

3 0

In ESCAP tr ade In wor ld tr ade

APTIAD

Overlapping membership

ESCAP economies and multiple PTAs membership in 2004

0

2

4

6

8

10

0 1 2 3 4 5 6 7 8 9 10 11 12 13

Number of agreements per economy

Num

ber o

f eco

nom

ies

APTIAD

From a few layers:

and apparently trade not adversely affected

APTIAD

……to to more more layerslayers……

APTIAD

and the frontrunner is:

APTIAD

Features of the ‘model’ FTAGOODS SERVICES OTHERS

trade in goods, including trade remedies (safeguards, anti-dumping measures and countervailing duties)customs proceduresrules of origintechnical barriers to tradesanitary and phytosanitary measures

trade in services, and in particular:

o trade in financial services

o trade in telecommunications servicescommercial presencemovement of natural persons

intellectual propertycompetition policygovernment procurementtrade facilitation investment

electronic commerce

transparent administration of laws and regulationsconsultations and dispute settlement and legal and institutional issues

APTIAD

Tariff reductionPTAs Positive list Negative list Full elimination

Total 24 24 26

BTA 19 17 22BTA (CB) 2 2 2RTA 3 5 2

FTA 18 20 22Other 6 3 3CU 0 1 1

APTIAD

Rules of origin

APTIAD

“Beyond the goods” sectoral coverage

8

3

12

1

18

3

18

2

20

3

21

2

22

3

0

5

10

15

2 0

2 5

M o b ili t y o flab o ur

Services C o mp et it io n Pub licp ro curement

T rad ef acil i t at ion

Invest ment Int el lect ualp ro p ert y

BTAs RTAs

APTIAD

Example of ‘beyond the goods’ ‐ IP

Type of Agreement Coverage

FTA CU Other Broad Very broad

BTA 19* (7) 12 (7) - 7 10 (5) 7 (1)

BTA(country-

bloc)

5** (2) 3 (1) 1 (1) 1 4 (2) 1

RTA 3 - - 3 2 1

Total 27 15 1 11 16 9 TotalExcludingTurkey

18 7 - 11 9 8

Total number

APTIAD

In summary, Asian BTAs compared to RTAs deliver

• ‘Deeper’ cuts in trade barriers, but selective– and thus more protectionism through exemptions 

• More trade restrictive rules of origin, thus potentially neutralizing liberalization efforts

• Cooperation in more policy areas covering  many directions spanning economic, social, political, security policy making

APTIAD

Trade performance indicators 

APTIAD

•Has intra‐regional trade intensified after  the formation of a preferential agreement?

• Index: Trade Intensity

• Definition:

• Interpretation: Trade share relative to world average trade share (if greater than 1, then the regional trade is ʹintenseʹ).

• Usefulness: Ex‐ante potential for trade diversion/preference dilution (if intense trade with non‐members), success in promoting regional trade, ex‐post occurrence of trade diversion.

INDICATORS used to answer various questionsINDICATORS used to answer various questions

APTIAD

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Intra Extra

APTIAD

• Are the trade profiles of current or prospective members of a preferential trade agreement compatible?

• Index: Complementarity

• Definition:

• Interpretation: The degree to which the export profile of country A matches the import profile of Country B (%).

• Usefulness: Indicator of potential for trade creation, degree of adjustment costs, changes in economic integration.

APTIAD

2002Indonesia Malaysia Philippines Singapore Thailand Vietnam

Indonesia - 43.6 54.3 48.5 46.6 46.0Malaysia 38.7 - 61.1 71.7 54.9 34.4Philippines 33.9 69.0 - 65.1 50.3 32.2Singapore 51.8 81.1 71.2 - 67.1 49.4Thailand 55.0 72.7 76.2 70.6 - 53.7Vietnam 34.2 23.7 33.2 28.5 27.0 -

1992Indonesia Malaysia Philippines Singapore Thailand Vietnam

Indonesia - 30.0 44.4 42.8 36.1 33.9Malaysia 37.5 - 54.2 68.0 49.0 36.9Philippines 35.7 57.5 - 59.2 45.3 36.9Singapore 44.7 66.5 56.1 - 54.4 55.4Thailand 36.5 50.4 50.2 54.4 - 40.6Vietnam 18.8 15.4 26.9 26.3 21.2 -

APTIAD

• Can we identify those sectors in which members have comparative advantage?

• Index: Revealed Comparative Advantage (RCA)

• Definition:

• Interpretation: Greater than unity if the country exports more of the commodity than the world on average.

• Usefulness: Can highly protected sectors be matched to strong comparative advantage in at least one member economy ex‐ante? If so, there is potential for trade creation. 

APTIAD

• Can we identify those sectors that might be significant sources of trade diversion?

• Index: Regional Orientation (with RCA) 

• Definition:

• Interpretation: The relative degree to which exports of a commodity intra‐region compare to those extra‐region.

• Usefulness: Indicator for trade diversion (when used in combination with RCA). 

APTIAD

0

50

100

150

200

250

Indonesia Malaysia Philippines Singapore Thailand Vietnam

APTIAD

And more…• To what extent are individual economies dependent on regional markets and how has this changed post PTA?

• To what extent are individual economies or regions dependent on particular products? 

• Are some economies regionally dominant, and what might this mean for negotiations?

• What is the structure of competitiveness?• Has intra‐industry trade expanded or contracted? What are the implications for adjustment costs?

APTIAD

Bottom line?

APTIAD

• Non‐discrimination, promotes economic efficiency

• Minimizes complexity for traders and investors (and trade negotiators)

• Can negotiate reduction of agricultural subsidies

• For small countries:– Benefit from MFN liberalization of big players

– Can negotiate in alliances (G‐20, G‐33, G‐90)

• Access to DSU

• Can yield welfare gains relative to the status quo (trade creation versus trade diversion)

• Under certain circumstances, can be more beneficial than multilateral integration– Obtaining preferential 

access to a highly protected market

– Terms of trade gains vis‐à‐vis the rest of the world

– Learning‐by‐doing effects• Greater bargaining 

effectiveness (less scope for free‐riding on MFN)

• Greater scope for regulatory cooperation

Multilateralism:Multilateralism: Regionalism:Regionalism:

APTIAD

Building blocks?• RTAs reduce trade protection, which can 

eventually be multilateralized• Spur competitive liberalization• RTAs can innovate: offer models for rule‐

making at the multilateral level• RTAs force governments to do their 

preparatory ‘homework’ which benefits WTO negotiations as well

APTIAD

Stumbling blocks?• Diversion of

– Negotiating resources– Private sector engagement– Political capital

• Trade preferences can create constituents that may lose out from and therefore resist further multilateral liberalization

• Undermine bargaining at the WTO (e.g., diminished quid‐pro‐quos for the reduction of agricultural subsidies)

APTIAD

Looking into the future –centrality of regionalism in emerging global trade architecture?

APTIAD

I. Laissez‐faire: wait and see at what configuration proliferation of PTAs will come to rest?

APTIAD

II. Policy‐induced consolidation and rationalization

‐ geographic consolidation‐functional consolidation‐ integration through supranational institutitons

APTIAD

Your feedback would be welcome and much appreciated ‐ thank you!

mikic@un.org