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GTAP Resource #2022

"Preferential Trade Agreements in Asia: Alternative Scenarios of Hub and Spoke"
by Zhai, Fan

The proliferation of preferential trade agreements in Asia may result in a number of hub and spoke configures with Japan, China and ASEAN competing as regional hub of bilateral FTAs. Using a newly developed global CGE model with imperfect competition, increasing return to scale and heterogeneous firm, we explore the potential economic effects of alternative hub and spoke configurations in Asia.

Four scenarios of hub and spoke configurations in Asia are simulated. Under the first and second scenarios, China and Japan are hubs respectively. The third and forth scenarios deal with the role of ASEAN. The third scenario assumes ASEAN countries have bilateral FTAs with non-ASEAN Asian countries individually, but not among themselves. This is contrasted with the forth scenario, under which ASEAN establishes its own free trade area and have bilateral FTAs with other Asian countries as a whole. In each of the scenarios, we eliminate all bilateral distortions, including tariff and export tax, to merchandise trade between hub and spokes, but retain the trade barriers between spokes. The simulations results suggest that the regionalism approach to integration in the Asian context can hardly act as building block of global trade liberalization, if it is confined to shallow integration only.

To evaluate the possible impacts of deep integration in regional trade arrangements in Asia, we repeat the four scenarios on the assumption that services liberalization and trade facilitation are included in Asias bilateral free trade agreements, in addition to the removal of merchandise trade distortions. The new simulation results indicate that the regional trade agreements involving deep integration measures provide promising path towards global free trade.

Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Date: 2006
Version: 2
Created: Zhai, F. (4/29/2006)
Updated: Zhai, F. (4/29/2006)
Visits: 2,946
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