Introduction

The issue tackled in this paper—the business impact of the Asian "noodle bowl" of regional trade deals—is of profound significance to firms and policymakers alike. It is particularly so in the context of the ongoing global financial crisis and the accompanying economic downturn, which has prompted a search for practical ways of reviving rapid trade-led growth in East Asia. Dealing with the Asian noodle bowl phenomenon is thus an integral element of the policy agenda for stimulating future trade-led growth.

Free trade agreements (FTAs) are a new addition to the region's trade policy landscape, which hitherto emphasized the multilateral General Agreement on Tariffs and Trade (GATT)/ World Trade Organization (WTO) approach and the trans-regional Asia Pacific Economic Community (APEC) forum. It has been only since the turn of this century that East Asian economies have actively created an assortment of bilateral and plurilateral FTAs. The Association of Southeast Asian Nations (ASEAN), the region's oldest FTA, is emerging as the integration hub for FTAs in East Asia. The People's Republic of China (PRC), Japan, and Korea have implemented their respective FTAs with ASEAN. India, Australia, and New Zealand are also joining the bandwagon. The Asian Development Bank (ADB) estimates that, by January 2009, as many as 37 FTAs were in effect in East Asia and another 72 FTAs were in the pipeline.

A lively debate over the impact of FTAs on the region's business is taking place between those who view the agreements as harmful and others who see net beneficial effects.¹ Influenced by Bhagwati's (1995) powerful insight on the "spaghetti bowl" of trade deals, the former group asserts that different tariffs and rules of origin (ROOs) in multiple FTAs have resulted in an Asian noodle bowl phenomenon that increases the burden for business. The latter suggests that, in the absence of a Doha trade deal, comprehensive, well-designed FTAs may be a means to achieve regional liberalization and structural reforms, which can constitute a building block to multilateral liberalization. Advancement of the debate, however, has been hampered by a dearth of firm-level evidence on the use of FTA preferences, the benefits and costs of FTAs, and the burden due to multiple ROOs.

This study is the first comprehensive survey of firms in East Asia, exploring several important questions concerning the proliferation of FTAs and the Asian noodle bowl: Are FTA preferences being used? What are the benefits and costs of FTAs? Are multiple ROOs a burden on SMEs? Is there enough support for domestic firms to use preferences under FTAs? This paper attempts to generate debate through these questions by examining firm survey results concerning the business impact of FTAs—such as market access issues, ROOs, and the severity of the noodle bowl for small- and medium-sized enterprises (SMEs). Five firm surveys—in Japan, Singapore, Republic of Korea (hereafter Korea), Thailand, and Philippines—were conducted in 2007–2008. These five countries represent a mix of development levels and FTA experiences and offer a large, diverse dataset (609 manufacturing export firms). ADB, Japan External Trade Organization (JETRO), and several other partners were involved in the firm surveys. Section 2 of the paper highlights the recent proliferation of FTAs in East Asia, economic perspectives on the Asian noodle bowl phenomenon, and FTA elements of the Asian noodle bowl. Section 3 presents a summary of firm survey findings by focusing on FTA preference use; perceived benefits and costs of FTAs; and potential problems of multiple, overlapping ROOs. It also presents an econometric analysis of the determinants of ROOs perceptions at firm-level. Section 4 offers policy implications for further encouraging trade and investment in the region in multilateral frameworks. Section 5 concludes the paper with suggestions for better tackling the Asian noodle bowl.

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Comment(s)

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1. manuel a cardenas
   (posted 20 April 2009 / 10:52:18 PM)
   
   Chile maybe is a unique country because it has suscribe the greater quantity of agreements of free commerce. The net effect is that it has develop faster in the latin american region.
   The problem with the small business is not with the agreements signed, the problem is the lack of opportune information given with the tools that the information technology can give. The governments have to construct the adequate tools in order that the small business can get the adequate information for their needs and benefit with agreements as the big business does.