ASEAN+3 or ASEAN+6: Which Way Forward?

The surge in free trade agreements (FTAs) in East Asia since the Asian financial crisis has prompted a lively debate on the characteristics, impact, and future path of FTAs in the region. This paper maps the salient characteristics of East Asian FTAs using a new FTA database, identifies several key issues to be addressed, and explores economic effects using computable general equilibrium analysis. The paper argues that WTO-plus elements need to be further expanded and the negative aspects of FTAs be minimized. The paper suggests that consolidation of multiple and overlapping FTAs into a single East Asian FTA could help mitigate the harmful “noodle bowl” effects of different rules of origin and standards and that consolidation at the ASEAN+6 level would yield the largest gains to East Asia—while the losses to non-members would be relatively small.

To make such consolidation possible, the paper recommends that (i) ASEAN act as the regional “hub” by further deepening ASEAN economic integration, (ii) the plus-three countries (People’s Republic of China, Japan, and Korea) collaborate more closely, and (iii) India pursue further structural reforms. The paper also observes the need for international support (including trade-supporting infrastructure) to facilitate the participation of poorer ASEAN countries. Over time an ASEAN+6 FTA should be connected with NAFTA and EU to further promote global economic integration.

Download this Discussion Paper [ PDF 404KB| 52 pages ].

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