Stemming from the ongoing globalization, the process of global integration and international trade has accelerated ever since. Where back in the days the trade was more or less bounded to inter-regional trade with customers, partners and countries in close proximity, nowadays goods are shipped throughout the world, costs of transportation have decreased, time to market has increased and thus the needs and desires can be served almost instantly throughout the world particularly because of the continuous support of the WTO, where “a plethora of bilateral and regional trading and economic cooperation agreements have been mushrooming globally, and increasingly in the Asia-Pacific, generating a wave of “new regionalism” in Asia” (Sen; Srivastava 2009: 194). Concerned by the Asian financial crisis in 1997-1998, the ASEAN countries were under the impression of a slowdown in pace of trade liberalization and thus this put pressure on these countries to engage sustainably in mutual beneficial trade and economic integration. By that, “at a theoretical level regional economic integration is being taken to mean deepening of intra-regional trade, expansion of mutual foreign direct investment (FDI) and harmonization of commercial regulations, standards and practices.” (Ekanayake; Veeramacheneni 2009: 2). This proceeding integration in ASEAN has mainly been motivated by the intention to create an attractive production base and to satisfy the rising competitive challenge on the part of China and India for both, domestic and foreign companies. (Hew; Sen 2004: 1-2). The impact especially of the ASEAN countries has raised over time, mainly in comparison to the OECD countries. “At the same time that developing Asia‟s share in ASEAN trade has been rising substantially (from about one-third to nearly one-half of total ASEAN exports and imports over the 1990-2004 period), the share of major OECD countries has fallen commensurately.” (Naya; Plummer 2006: 231). As a reason for that “both trade and financial liberalization are believed to have propelled faster the long-run economic growth of the East Asian economies.” (Masron; Yusop 2008: 292).
Table of Contents
1. Introduction
2. The Fundamental Perceptions of the ASEAN Community and its Improvement Opportunities
3. Economic Incentives to Engage in Bilateral Free Trade Agreements
4. The Transition to Multilateral Free Trade Agreements and their Economic Impacts
5. Challenges and Prospects
Objectives and Topics
This paper aims to analyze the intrinsic economic incentives that drive ASEAN nations to form bilateral free trade agreements and explores the subsequent transition towards a more integrated, multilateral trading network, addressing how these processes impact regional economic performance and business environments.
- Theoretical analysis of bilateral trade incentives using network modeling
- Evaluation of the ASEAN Community's path toward regional economic integration
- Examination of the "multiplier process" in trade agreement formation
- Assessment of current challenges regarding trade policy consistency and non-tariff barriers
- Strategic outlook on moving from individual bilateralism to collaborative multilateralism
Excerpt from the Book
2. The Fundamental Perceptions of the ASEAN Community and its Improvement Opportunities
Since its inception in 1967, the Association of Southeast Asian Nations became an excellent example of a successful confederacy (Sudsawasd; Mongsawad 2007: 340). Started with the five fastest growing Asian countries (Singapore, Malaysia, Thailand, Indonesia and Philippines) in 1967, nowadays the ASEAN community consists of 10 countries, where Brunei, Burma, Cambodia, Laos and Vietnam were added over time (Tang 2005: 244). The main objective of ASEAN is to provide political security rationale as well as economic cooperation among members. This resulted in higher trade among the included countries and could only be facilitated by the countries' industrialization process and their willingness to understand free trade as a welfare enhancement for both, the involved countries and the affected citizen. Supposedly, in 1993 the AFTA (ASEAN Free Trade Agreement) was initiated in order to deepen economic integration and mutual cooperation while eliminating trade barriers in the ASEAN region. Unfortunately, many ASEAN members did not yet achieve satisfying integration in terms of tariffs (Sudsawasd; Mongsawad 2007: 340). The enhanced variety of products and international price convergence allow for comparative advantages and thus drive up the welfare.
The ASEAN countries relied on trade ever since to boost economic growth and hereby induced a multiplier process where more thorough industrialization and political openness would lead to more trade. That being said it is surprising and convincing at the same time that these countries managed to generate impressive growth figures, hereby their pace of growth consistently exceeded that of other countries with similar patterns (Tang 2005: 244).
Summary of Chapters
1. Introduction: This chapter contextualizes the evolution of global trade and the specific pressures faced by ASEAN countries, particularly following the Asian financial crisis of 1997-1998.
2. The Fundamental Perceptions of the ASEAN Community and its Improvement Opportunities: This section details the historical development of ASEAN and the motivations behind the AFTA, highlighting the tension between individual bilateral trade strategies and regional integration goals.
3. Economic Incentives to Engage in Bilateral Free Trade Agreements: This chapter utilizes mathematical network-modeling, based on the work of Goyal/Joshi, to explain the intrinsic economic drivers for countries to move from autarky to bilateral trade agreements.
4. The Transition to Multilateral Free Trade Agreements and their Economic Impacts: This section bridges the theoretical model with real-world observations, discussing the "domino effect" of trade agreements and the benefits of moving toward broader multilateral frameworks.
5. Challenges and Prospects: The final chapter identifies institutional and structural barriers to further integration and suggests that moving toward a more cohesive, multilateral approach is essential for long-term economic prosperity in the region.
Keywords
ASEAN, Free Trade Agreements, FTA, Bilateralism, Multilateralism, Trade Liberalization, Economic Integration, Network Theory, Cournot-Oligopoly, Welfare Gains, AFTA, Globalization, Regional Security, Tariff Reduction, Market Connectivity
Frequently Asked Questions
What is the primary focus of this research paper?
The paper examines the transition of ASEAN countries from individual bilateral trade agreements to more integrated, multilateral frameworks, specifically analyzing the economic incentives behind these trade structures.
What are the central themes discussed in the work?
Key themes include the impact of globalization on ASEAN, the effectiveness of the AFTA, the role of network theory in explaining trade incentives, and the challenges of achieving regional economic harmonization.
What is the core research goal?
The goal is to provide a comprehensive analysis of why ASEAN countries opt for bilateral agreements and to evaluate whether this path effectively facilitates a transition toward a stable, multilateral trade network.
Which scientific methodology is applied?
The author uses a combination of economic literature review and mathematical network-modeling, specifically relying on the framework established by Goyal/Joshi (2006) to illustrate welfare gains.
What topics are covered in the main section of the paper?
The main section covers the history of ASEAN's economic cooperation, a theoretical model of bilateral trade incentives, and an assessment of current FTA proliferation across Asia.
Which keywords best describe this study?
Essential keywords include ASEAN, Free Trade Agreements (FTA), Bilateralism, Multilateralism, economic integration, trade liberalization, and welfare gains.
How does the "Noodle-Bowl" effect impact ASEAN trade?
The "Noodle-Bowl" effect describes the unmanageable and inconsistent pattern of overlapping trade agreements, which creates transaction costs and complicates the path toward a unified regional trade policy.
What is the significance of the "multiplier process"?
The multiplier process suggests that initial bilateral trade successes act as a catalyst, encouraging countries to engage in further agreements, eventually moving the entire network toward multilateralism.
What conclusion does the author reach regarding the future of ASEAN trade?
The author concludes that while bilateral agreements are useful, they are a stepping stone; long-term regional success depends on overcoming institutional hurdles to achieve genuine "open-regionalism."
- Quote paper
- Eugen Dimant (Author), 2010, The Transition from Bilateral to Multilateral Free Trade Agreements as a Multiplier Process, Munich, GRIN Verlag, https://www.grin.com/document/165864
