Richard Pomfret assesses Asian regionalism:

Since the turn of the century, attention has turned east as over 70 RTAs have been signed by East Asian countries. This is striking because during earlier post-1947 waves of RTAs the only serious Asian agreement was ASEAN and this had little impact on trade. China, Japan, Korea, Mongolia and Taiwan stood out as practically the only countries showing complete respect for the MFN principle…

Asian regionalism is posing challenges to international relations, but what is its economic basis and likely economic impact?…

In sum, the pattern for China, as for East Asia in general, in the first half of the 2000s was one of talking regionally but acting bilaterally…

Although regionalism may be viewed as an alternative to multilateralism, in the East Asian context there may be little conflict between the two, at least in their economic consequences. Duty payments on intra-Asian trade tend to be low as a result of trade liberalisation and of the prevalence of duty-drawback systems in response to the production fragmentation and networks which emerged over the last two decades. To the extent that the new RTAs include discriminatory tariffs, as in the China-ASEAN FTA, they tend to be narrow in scope and coverage, with trivial economic impact. To the extent that bilateral or regional agreements include trade facilitating measures, progress in reducing trade costs by improved customs operation and so forth tends to benefit all trades and in practice is non-discriminatory. To the extent that they simplify foreign investment procedures and intra-firm trade, they may start as bilateral but are likely to proliferate until multilateral…

A negative economic consequence of using RTAs for political ends is the lack of transparency about which rules actually apply; even when RTAs are implemented many traders continue to trade on an MFN basis rather than invoking bilateral agreements, e.g. less than 15% of Singapore’s trade with preferred partners is conducted under the terms of bilateral agreements…

In sum, the recent East Asian regional agreements are less threatening to the world trade system than they may appear. They do not threaten the MFN tariff structure in a meaningful way, and if they can promote trade facilitation this will likely benefit Asia-traders from all countries. The major threat is political rather than economic…

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