The Economic Consequences of Exclusion from Preferential Trading Agreements and Free Trade Agreements in East Asia

The Economic Consequences of Exclusion from Preferential Trading Agreements and Free Trade Agreements in East Asia

This paper tries to identify the causes and forms of PTAs in general and subsequently describe features of regionalism in East Asia since the last decade in particular. We explore the possible influencing channels for the excluded economies, including mainly quantity (reduced exports) and price effects (worsened terms of trade) of PTAs/FTAs. Larger PTAs are likely to have greater effects on tradable goods’prices in general. However, smaller PTAs can still affect prices and terms of trade if markets are segmented.
This paper utilizes a simulation approach based on the GTAP (Global Trade Analysis Project, version 5.4) along a range of scenarios. The main concerns are the results and impacts of the ongoing ASEAN+China-centered PTAs/FTAs on Taiwan. We conclude that ASEAN+China-centered PTAs/FTAs definitely do harm to Taiwan’s GDP and economic welfare but are ambiguous for terms of trade. Among these PTAs/FTAs, as an outsider Taiwan will lose most due to the inclusion of Japan and Korea.