Endnotes

¹Here, East Asia includes ten ASEAN members (Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam); Hong Kong; Taipei,China; PRC; Japan; and Korea.

²The large volume of Hong Kong FDI flows to the PRC, however, may contain "round tripping" from the PRC, which aims to take tax and other favorable advantages provided to "foreign" direct investment by the PRC authorities.

³If data for the early 1990s and 1980s are included, Japan is seen as a major investor in ASEAN.

⁴See Kawai (1997, 2005b), Kawai and Urata (1998, 2004), Urata (2001), Athukorala (2003), and Fukao, Ishido, and Ito (2003).

⁵The Japanese government promotes EPAs which include, but go beyond, elements of free trade agreements (elimination/reduction of tariffs and liberalization of services trade). Essentially EPAs target (i) ensuring free movements of goods, services, and people (mutual abolition of tariffs; development of logistics systems, infrastructure, and simpler customs clearance; services deregulation; and movement of skilled temporary workers and provision of training programs); (ii) facilitation of intraregional economic activities (standardization of investment rules and dispute settlements; and harmonization of intellectual property systems, certification systems, and competition laws); and (iii) economic cooperation (economic/social infrastructure and cooperation in human resource development, industrial policy, environment, and energy conservation).

⁶Japan is cautious about such an arrangement with the PRC at this point. Its official view is that before negotiating an FTA/EPA the PRC must clearly demonstrate its compliance with all the commitments made in WTO accession negotiations.

⁷Prior to 2000, the concluded FTAs had been the Bangkok Treaty (1976) which is now known as the Asia-Pacific Trade Agreement (APTA), the Laos-Thailand PTA (1991), and the ASEAN FTA (1992).

⁸As of June 2007, there were 198 FTAs at various stages in Asia. Of these, 90 were concluded, 61 under negotiation, and 47 were proposed.

⁹More complete explanations can be found in Kawai (2005a).

¹⁰For products not covered by the CEPT Scheme, the ASEAN Preferential Trading Arrangements could be used. The ASEAN Industrial Cooperation Scheme (AICO), introduced in April 1996, applies the CEPT rate of tariffs (0 to 5%) on approved AICO products to strengthen industrial cooperation among ASEAN-based companies.

¹¹See Hew and Soesastro (2003) for a number of ideas on deepening ASEAN economic integration.

¹²The East Asia Vision Group was established in 1999 under the leadership of Korean President Kim Dae Jung, and the Group recommended: (a) economic cooperation, (b) financial cooperation, (c) political and security cooperation, d) environmental cooperation, (e) social and cultural cooperation, and (f) institutional cooperation.

¹³The ASEAN+1 processes include ASEAN+China, ASEAN+Japan, ASEAN+Korea, ASEAN+India, and ASEAN+CER mainly in the form of free trade agreements (FTAs) or comprehensive economic partnership agreements (EPAs).

¹⁴In response to the proliferation of various FTAs in the Asia-Pacific region, APEC agreed to encourage its members to pursue a best-practice model of an FTA.

¹⁵Some recent studies which have attempted to analyze trends in East Asian FTAs include: Bonapace (2005), Feridhanusetyawan (2005).

¹⁶FTA databases which cover East Asian economies include the WTO RTA Gateway (www.wto.org) and UNESCAP Asia-Pacific Trade and Investment Agreements Database (www.unescap.org/tid/aptiad). Although covering FTA activity in the world, the WTO database only provides information on East Asian FTAs notified to the WTO. Concluded agreements not notified to the WTO and those under negotiation and proposed are excluded. The UNESCAP database provides summaries of FTAs undertaken by UNESCAP members including some in East Asia.

¹⁷Launched in October 2006 by ADB, the ARIC FTA database (www.aric.adb.org) provides three types of information: (i) statistical tables on the status of FTAs in Asia; (ii) available information on each FTA (i.e. legal documents, official summaries, studies, news, opinions, FTA membership and an external link to the UNESCAP database); and (iii) a comparative FTA toolkit which enables comparison of chapters/provisions of concluded Asian FTAs. The information is gathered from official sources, research sites, and online news items.

¹⁸The Korea-US FTA negotiations were concluded in April 2007 and the FTA signed in June 2007.

¹⁹See Fiorentino, Verdeja and Toqueboeuf (2007) on this point.

²⁰An issue may arise when a trading bloc with a single authority (like the EU) forms an FTA with a country. Though such an FTA may be considered as bilateral, it is plurilateral in our definition as in the case of the Korea-EU FTA. Other definitions of bilateral and plurilateral FTAs exist in the literature. For instance, Crawford and Fiorentino (2005) define a bilateral agreement as one which may include more than two countries where one of them is a trading bloc itself (e.g. the ASEAN-PRC FTA) while a plurilateral agreement refers to an FTA in which the number of FTA partners exceeds two. If we reclassify our data according to this definition, there would be more bilateral FTAs in East Asia (91 bilateral agreements and 10 plurilateral agreements).

²¹They are: the APTA; AFTA; the Preferential Trade Agreement-Group of Eight Developing Countries; Trans-Pacific Strategic Economic Partnership Agreement; ASEAN-PRC FTA; ASEAN-Korea FTA; Korea-EFTA FTA; Singapore-EFTA FTA; and the Taipei,China-El Salvador-Honduras FTA.

²²The 1979 Enabling Clause provides for the mutual reduction in tariffs on trade in goods among developing countries. It also allows for developed countries to give a reduction in tariffs to developing countries but not necessarily on a reciprocal basis. Meanwhile, Article XXIV of GATT sets rules for FTAs in the area of goods and Article V of the GATS for services.

²³As of June 2007, there were 36 concluded FTAs in East Asia. However, the Taipei,China and Nicaragua FTA and Taipei,China-El Salvador-Honduras FTA could not be included in Table 7 as the texts were not available.

²⁴Our findings on the comprehensive WTO-plus scope of East Asian FTAs thus confirm those of Banda and Whalley 2005) for FTAs involving more developed ASEAN members (e.g. Singapore, Thailand and Malaysia). They conclude that FTAs concluded by these countries go beyond WTO disciplines and deal with competition policy, mutual recognition, movement of persons, investment and cooperation in specific areas.

²⁵For 6 of the 36 concluded FTAs, we cannot get information on ROOs due to the lack of relevant texts.

²⁶See, for instance, Cheong and Cho (2006), James (2006) and Lee, Jeong, Kim and Bang (2006).

²⁷See Hertel (1997). For more details about the current standard GTAP model see www.gtap.agecon.purdue.edu

²⁸The CGE estimates for the ASEAN+3 FTA scenario reported in this paper draw on a modeling exercise for an ADB project "Study on Economic Cooperation between East Asia and South Asia." The ASEAN+6 scenario was specifically computed for this paper. For more details of the CGE model used, see Francois and Wignaraja (2007).

²⁹This attempts to capture important developments such as the phase out of the Agreement of Textiles and Clothing quotas, implementation of remaining WTO commitments under the Doha Round and enlargement of the EU from 15 to 27 members.

³⁰Services trade barriers were estimated using a gravity model which involves the estimation of an equation where import demand is a function of GDP, per capita income and sector and country dummy variables. For trade cost estimates, it is assumed that a 5% improvement in the general quality of trade-related infrastructure in our scenarios would yield a 2.5% trade cost savings on average.

³¹Our findings confirm those of previous CGE studies that under an ASEAN+3 scenario, Northeast Asian economies and ASEAN gain significantly. For instance, Zhang et.al. (2006) report gains of $67 billion for Japan, Korea and PRC and $38 billion for ASEAN economies. Cheong (2005) finds gains of $42 billion for the three Northeast Asian economies and $20 billion for ASEAN.

³²See Francois, McQueen and Wignaraja (2005) and Piermartini and Teh (2005).

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