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

The surge in free trade agreements (FTAs) in East Asia since the Asian financial crisis (see Figure) has prompted a lively debate on the characteristics, impact, and future path of FTAs in the region. This paper, by Masahiro Kawai (ADBI Dean) and Ganeshan Wignaraja (ADB HQ), 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:

1. ASEAN act as the regional “hub” by further deepening ASEAN economic integration,
2. the plus-three countries (People’s Republic of China, Japan, and Korea) collaborate more closely, and
3. India pursue further structural reforms.

The paper also observes the need for international support, such as WTO-led Aid for Trade (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.

Read Discussion Paper 77.