What Are Regional Trade Agreements

Formal regional trade agreements are only a new phenomenon in East Asia(1) that trade liberalization has largely pursued on an MFN basis. The region`s first integration agreement, ASEAN, established in 1967, was aimed solely at facilitating trade, mainly for regional security purposes. With the shift from an inward-looking growth strategy to an outward-looking growth strategy in the late 1950s (Japan began after World War II and China in the late 1970s), the region has consistently opened its markets to the rest of the world. Since then, trade has grown rapidly. In 1956, the year for which data are available for all countries except China and Malaysia, total East Asian exports accounted for only 4.6 per cent of world exports, of which 2.6 per cent were supplied by Japan. In 2003, the region accounted for more than 23% of world exports. At the same time, the share of East Asian intra-Asian exports in the region`s total exports increased from 23% to 47%. In particular, RAs aimed at supporting local industries through import substitution in Africa are unlikely to expand the continent`s overall trade – even intra-regional – given the low complementarity of natural resources, the region`s small markets and administrative capacity constraints. The IMF should continue to advocate multilateral trade liberalization as a top political priority for its members. The success of the Doha Round of trade negotiations remains crucial to maintaining confidence in the multilateral trading system, which has been the cornerstone of global economic prosperity since the Second World War. Regionalism in its current form does not replace multilateral liberalization. Regionalism also risks marginalizing small, weak countries outside the large trading blocs, even if they are members of the WTO. The paper then analyses the effectiveness of the agreements in achieving the objectives they have set (Section III) and discusses trade policy priorities and trade promotion strategies (Section IV).

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