CHAPTER 9

ASIAN REGIONALISM
Learning objectives
At the end of the course the students should be able to:

 Define regionalism;
 Understand regionalism in the Asia and the Asia-Pacific; and
 Articulate a stance of regional trading agreement and be able to enumerate the
different organizations in the region and their functions.

REGIONALISM
Regionalism is in vogue, and it is here to stay, however, in the ultimate analysis, it is no
substitute for globalism. Given that the global economy is not governed by free market rules,
regionalism and globalism can function in a complementary manner, regionalism that is not
open, and is devoid of globalism, is antithetical for maximizing the global output, and therefore,
for global economic welfare. As we shall see in Section 7, open regionalism was pioneered by
Australia and New Zealand and id being practiced by the APEC forum. The paper begins with an
introduction of the contemporary regionalism, provides a definition of regionalism, and delves
into its various characteristics as well as the diversity of its texture. Relative to other regions,
the Asia-Pacific region caught on to regionalism late. In its institutional form, Asian
policymakers ignored the concept for a long time. Economic growth in Asia has a certain
characteristic pattern to it. Over the preceding half century, the high performing Asian
economies adopted outward-oriented strategies, promoting trade and foreign investment.
After a lag, this led to the expansion of intra-regional trade and investment. Asia-Pacific
regionalism was essentially market-led. Regional production networks were the consequence of
market-led economic dynamics of the region. Large corporations, including transnationals,
contributed to the growth of pan-Asian industrialization process. The institutional
arrangements followed the market initiatives. Some regional initiatives were taken, which are
operating with varying degrees of success. These regional initiatives can coexist with globalism
and serve as “building blocs.”

REGIONAL TRADING AGREEMENTS

Trade liberalization per se is a complex issue-albeit one governed by simple principles-
and regional trade liberalization is even more so. The current march of regionalism is certainly
not the first ever in history. Historically, regional trading arrangements can be traced back to
the sixteenth century when proposals for a union between England and Scotland were made in
1547-48. During the contemporary period, the Treaty of Rome (1957) forming the European
Economic Community (EEC) could be considered the beginning of regional trading blocs. The
EEC was the precursor to the first wave or regionalism in the 1960s. The Stockholm Convention
established the European Free Trade Area (EFTA) in 1959, and the Montevideo Treaty
established the Latin American Free Trade Area (LAFTA) in 1960. In 1963, the Yaounde
Convention between the EEC and former French. Belgium and Italian colonies in Africa gave
these countries preferential access to the EEC markets. Following the formation of the EEC,
there was a proliferation of regional agreements in the developing countries of Africa and Latin
America. However, this first wave of regionalism was weak and did not go far. With the notable
exception of EEC, the regional initiatives of the 1950s and the 1960s amounted to virtually
nothing this first wave of regionalism did not flourish outside Europe. Earlier regional initiatives
like the ANDEAN pact had collapsed.
The regional trading agreements (RTAs) of this period were neither large in number nor
as successful as those of recent years. One of the important reasons was that the United States
(US), the largest trading economy, was philosophically opposed to regionalism. The US
considered regional initiatives detraction from multilateral liberalization. It took an anti-regional
trade stance and championed the cause of free trade through the General Agreement on Tariffs
and Trade (GATT). However, the formation of EEC received US support because the US saw a
united Western Europe as an effective deterrent to the growing Soviet threat. During the
1990s, regionalism returned with a vengeance. A second global wave of regional initiatives took
place during the 1990s. It has also come to be known as the “new regionalism.” Here, the
chronological meaning of “new” is being taken. After the second wave started, a division of the
global economy into three trading blocs―never an issue in the first wave of regionalism―was
seriously debated by economists and political scientists. The beginning of the second wave can
be dated back to 1986-87 when the members of the EC hatched their Single Market plans to be
completed by 1992. In this context, 1988-89 was a watershed point because this is when the US
agreed to and implemented the Free Trade Area of Canada (CUSFTA) and abandoned 40 years
of stringent opposition to the principle of regional integration.
The US had considered regionalism an antithesis of multilateralism. During 1990-92, a
new customs union was agreed in the eastern half of South America, called MERCOSUR (or the
common market of the south). The North American Free Trade Association (NAFTA) was
created in 1994. The deeper integration in the EU and the establishment of NAFTA led to a
“domino effect” of renewed interest in RTAs. Failure to launch the new Round of MTNs in
Seattle in 1999 further heightened the popularity of RTAs globally. Old preferential trade areas
(PTAs), like the ANDEAN Pact and the Central American Common Market (CACM), began to be
resuscitated in the early 1990s. In Africa, new PTAs were created. Some of these were rebuilt
on the old foundations while others were languishing for a long time were revived. Important
illustrations include Union Economique et Monaitarie de l’Africa Occidentale (UEMOA) which
was created out of the Communaute Economique de l’Afrique Occidentale (CEAO), and the
Common Market of Eastern and Southern Africa (COMESA) which was revived. The Preferential
Trade Area for Eastern and Southern African States was enlarged, and the Union Duaniere et
Economique d’Africa Centrale (UDEAC) was strengthened. According to the World Trade
Organization (WTO), there were 13 different RTAs in Africa in 2000. In Asia, the Association of
Southeast Asian Nations (ASEAN) countries agreed in principle in 1991 on the ASEAN Free Trade
Area (AFTA). Historically, protectionist tendencies in Asia, North America, and South America
had stymied proposals for regional integration. The spread of serious regional arrangements to
these areas was a noteworthy change of attitude and the beginning of a new trend. The RTA
scenario underwent a radical transformation during the 1990s, albeit not all the RTAs were
negotiated with sincere trade-expansion and economic integration intentions. To be sure, some
had imprecise objectives and vague aspirations. In its new incarnation, regionalism engulfed all
major players of the global economy. If the APEC forum is counted as a planned or informal
regional trading arrangement of sorts, virtually countries on all continents are now members of
regional trade agreements.
Nearly all of WTO’s 140 members have notified participation in one or more RTAs,
although notifications may also refer to the accession of, new parties to an agreement that
already existed. 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. Regional economic integration can
potentially have many formal shapes and, therefore, names. It could cover a spectrum of
arrangements varying from preferential trading areas, to free trade areas, to the customs
union, to common markets and finally, to economic union. These are the five tiers or stages of
regional trading arrangements. Preferential trading areas are the first tier arrangement. In this
arrangement, trading partners grant partial non-discriminatory tariff reductions to each other.
They leave their different tariffs, non-tariff barriers (NTBs) and quantitative restrictions (QRs)
unchanged. In a free trade area, which is the second tier, members of a preferential trade area
eliminate all tariffs and non-tariff barriers (NTBs) among themselves, but each member can set
its tariff rates on imports from non-members (like Association of South East Asian Nations and
North American Free Trade Area). The third tier is a customs union in which members go
beyond removing tariff barriers among themselves and set a common level of trade barriers vis-
à-vis non-members (like the EU). These three stages of regionalization directly and exclusively
affect international trade of the member countries and together are known as shallow
integration.

The spectrum of Formal Regional Trading Arrangements

Three Shallow Integration Stages:
1. Preferential Trade Agreements Partial preference to trading
partners
2. Free Trade Area Elimination of all tariffs, QRs and NTBs
 3. Customs Union Common level of trade barriers vis-a-vis
non-members

Two Deep lntegration Stages:

1. Common Market Free movements of factors of production
2. Economic Union Integrating national economic policies
and a common currency

The fourth tier is a common market and is considered the first deep integration stage.
This stage attempts to harmonize some institutional arrangements and commercial and
financial laws. Beyond free exchange of goods and services, a common market entails free
movement of factors of production. The fifth stage is the economic union and goes a step
ahead of the free movement of goods, services and factors. An economic union, the last tier,
involves integrating national economic policies, including taxes and a common currency.
The new regionalism has several distinctive characteristics. First, while old regionalism
was essentially confined to RTAs between industrial economies or the developing economies,
the new regionalism is known for cross alliances between developing and industrial economies.
The new bonds forged by developing and industrial economies offer considerable potential for
gains from trade. The flip side is that this new relationship also has a great deal of potential for
adjustment problems and trade tensions. Second, while old regionalism was essentially limited
to RTA formations by contiguous economies, the new regionalism does not seem to be limited
to neighboring economies. In some recent or proposed cases, RTAs are intercontinental.
Although there may be coordination related problems, from the gains-from-trade perspective
this could be a healthy development. Third, under the new arrangement RTAs are not exclusive,
meaning thereby one country can simultaneously be a member of more than one RTA. This may
eventually turn out to be an aid in promoting multilateralism through RTAs. Fourth, while old
regionalism was limited to shallow integration, the new regionalism is more ambitious. A
number of recent agreements aspire for deep integration, with commitments to harmonization
of regulatory measures, freeing factor movements, and other close integrating measures.
Implications of RTAs for the global trading system have been extensively debated in
economic literature. More than 210 RTAs have been notified to the GATT and the WTO. Some
no longer exist. Many of the discontinued RTAs were superseded by redesigned agreements
among the same signatories. A large number of RTAs were concluded in the decade of the
1990s. Between 1995 and 2000, 90 RTAs covering goods or services, or both, have been notified
to the WTO. Currently, over 130 agreements are in force (WTO, 2000). The global network of
RTAs is highly complex, and many countries are members of several agreements, sometimes
with very different rules. Shallow integration is far more common than deep. A large majority of
existing RIAs is free trade areas. The only customs unions are the EU, the South African Customs
Union (SACU), MERCOSUR in South America, and CARICOM in the Caribbean. The ANDEAN Pact
and CACM have common partial tariffs. The EU now has 15 members and is moving ahead to
form a common market and further on to be an economic union, having a single currency. A
Eurozone of 12 economies already exists.
The enlargement of the EU is looming. Economic and political momentum behind EU
expansion is powerful. Prospects of doubling its current membership to 28 or even 30 before
2010 are clear. When the new members join in, it would be much more than a mere change of
scale. In late 2000, the front runners for joining the EU were Cyprus, Estonia, Poland, the Czech
Republic, and Slovenia. Eight more countries were applicants and likely to join later (Vedrine,
2000). The next wave of EU expansion would increase the union’s population by 30 percent, to
more than half a billion people, twice the total of the US. This would dwarf any previous
expansion. More importantly, the integration of the EU with emerging Europe is an economic
quantum leap. When Spain and Portugal joined the EU, their GDP per capita was already 70
percent of the EU average in purchasing power parity terms. The 1995 accession countries even
produced a higher output per capita than the existing union. The thirteen present candidates
post a purchasing-power adjusted GDP per capita of less than 40 percent of the EU average. In
Euro terms, this ratio is as low as 15 percent. Also, Central and Eastern Europe’s financial
sectors are far less developed than their EU counterparts (Suppel, 2000). The EU also has
known plans to bring the North African economies into its fold in the future.

TEXTURE AND DIVERSITY

It is appropriate to outline the characteristic structures of RTAs and define them. Page
(2000) defined an RTA as country groups which have “created a legal framework of cooperation
covering an extensive economic relationship, with the intention that it will be of indefinite
duration, and with the possibility foreseen that the region will economically evolve in the
future.” The criterion of extensive economic linkage precludes single-issue alliances, while that
of permanence is uncontroversial. The criterion of evolution is obvious and reinforces exclusion
of groups formed for and limited, or a single, objective. The need for a dynamic evolution over
time is inevitable because countries’ economic structures constantly change and with that their
linkages with the members of their RTA. In an RTA, the economic and regulatory links between
trade and the rest of the economic systems of the members gradually harmonize and
strengthen. However, this strengthening process needs to be led by the trading relationship.
Formation of an RTA entails lowering of conventional trade barriers, which brings to the fore a
sequence of other differences in these economies which, if left unharmonized, would
necessarily have an adverse effect over trade expansion in the RTA (Page, 2000). The typology
suggested in Section 2 is revealing in this regard. The expansion path of an RTA seems to be
linear. It runs from freeing trade in goods and services of all tariff barriers within the RTA, to
capital and labor movements and the right of establishment, from tariffs to non-tariffs to non-
border measures, to taxes and other policies, and finally to common currencies and integration
of economic and financial policies. Regionalism can take many different forms, each with
different implications and nuances. For instance, it can be open or closed. Economic or political
forces motivate it. It can be promoted by coercive or benign forces. It can be operated in a
consensual or hierarchical manner. It can be a consequence of the decentralized operation of
markets or the determined actions of states. Differences between them reflect differences in
the objectives of the countries forming them. Some RTAs are part of the process that works
towards eventual deeper integration, while others are consciously stand-alone agreements.
Some are simple in structure, while others are complex, Therefore, RTAs are highly dissimilar,
and each RTA is sui generis. Other than the five formal forms identified in Section 2, there are
marked differences in content and form among RTAs, although most analytical discussions treat
them as identical phenomena. Members of an RTA can and do differ in important economic
features. One of the features of economic integration is the level of economic interdependence
among the member economies. For instance, trade as a proportion of GDP is high for most of
the member economies of the EU, whereas the members of APEC and NAFTA are less
interdependent. For the latter named two regions, trade between member states is lower as a
percentage of GDP. Extra-regional trade is the second important variable which tends to be
more widely spread for APEC and NAFTA than for the EU. The third dimension is the balance of
symmetry, that is, if member economies of an RTA are differently dependent on the other
regional economies for trade and investment, the economic relationships among them is likely
to be asymmetrical. The reverse is equally valid.
As all regions are a political entity, RTAs have an unmistakable political dimension.
Therefore, many of their objectives go beyond economic integration and take on a political
dimension. For instance, the early steps taken by France to create the EEC, including the
celebrated Coal and Steel Community, were largely driven by a strong proclivity to integrate
Europe economically to resolve political and security problems. Franco-German economic
integration was meant to tie Germany to France and the other European states, and thereby,
reduce its ability to engage in military aggression. Economic integration was used to minimize
the risks of war and political conflicts (Baun, 1996). This process can also work in reverse; that
is, economic integration can become a driving force behind political integration. Economic
agents in the neighboring states can stimulate deeper trade and investment ties, and the
resulting regional economic interdependence can create a demand for greater political
cooperation. Asia-Pacific region characterizes this kind of regional integration dynamics, which
is opposite of the top-down process encountered in Europe. Export-oriented Asian economies
have expanded trade and investment in the region without a political agenda. APEC and other
region wide political dialogues have tried to capitalize on it.
A wide diversity in content and form is found between RTAs among both developed and
industrial countries. While tariff elimination is common to all of them, differences commonly
exist on agreements related to (i) quantitative restrictions (QRs), (ii) positive or negative list
approaches, (ii) rules of origin, (iv) external tariffs, (v) timetable for liberalization, (vi) trade in
services, (vii) movement of labor and capital, (vi) promotion of industrialization, (ix) promotion
of trade objectives, and (x) payments arrangements. Whalley noted that RTAs between
industrial economies are generally concerned with and adopt variant approaches in dispute
settlement procedures, including dispute settlement for anti-dumping and countervailing
duties, and trade provisions relating to environment standards. They can be unipolar or
multipolar. They are also known to have complex sectoral arrangements in areas like textiles
and apparel and autos (Whalley, 2000). The EU has extensive sectoral arrangements in
agriculture, steel, inter regional resource transfers, labor mobility provisions. However, these
provisions are not to be found in NAFTA.
Notwithstanding the diversity in the current trend in regionalism, the following
characteristics are frequently―albeit not always―to be seen in many of the contemporary
RTAs. First, the current RTAs, as noted above, typically involves one or more small countries
linking up with one or more large industrial economies. Second, the small economies joining an
RTA now undertake significant economic reforms and restructuring. lt is true of the central
European and Latin American economies. Third, the trade liberalization that is affected is
largely confined to concessions given by the smaller partners of the RTA, not by the larger
economies. The latter group generally has fairly, if not quite, liberalized economies. Typically
the small countries get only small tariff advantage, because the larger partners of the RTA have
low tariffs, to begin with (Ethier, 1998).

ROLE OF TNCs IN RTA EXPANSION

Those who study the operations of large corporations, business and transnational
corporations (TNCS) in the large RTAs like the EU, NAFTA and APEC, inferred that there is not
only a great deal of acceptance of regional integration among them, but they play a proactive
role in their expansion. They are known for establishing horizontal and vertical production
linkages in several neighboring countries. Such ties are common in industries like auto,
chemicals and pharmaceuticals, machinery including precision machinery, and electronics. In
such a doing, TNCs increase ability to exploit scale economies not only in production but also all
along the value chain. They, in turn, lead to higher competitiveness. One of the direct impacts
of RTAs is the creation and expansion of FDI opportunities. Business Associations in various
regions support RTAs. In some RTAs, like in APEC, the role of business has been institutionalized
by creating bodies like Pacific Business Forum (PBF).
Global competition has intensified over the last quarter century, which has made
market access a strategic consideration. RTAs enable increased market access to corporations
and TNCs. With technological advancement, product life cycle has become short in many
products. This observation applies particularly to electronics, precision machinery, chemicals,
and pharmaceuticals. The global diffusion of technologies and innovation has become
increasingly rapid. The time span that competitors take to respond to new innovations has
shortened considerably, making market access more important for spreading the fixed costs of
innovation. Also, according to the current customer-friendly business practices in sophisticated
products, the local presence of the manufacturing firm or services provider is essential. RTAs
are known to facilitate it. Large corporations and TNCs in an RTA can also follow market trends
closely and acquire smaller innovative firms, which in turn makes them more competitive
(Fishlow and Haggard, 1992; Lawrence, 1996).
As the developing economies began to liberalize and reform their economies, several of
them sought to attract more FDI and pursue export-led growth. TNCS began to appear more
attractive to this sub-group of developing economies because they were reputed to bring in
knowledge about the newest technologies, management techniques, and strategies and ready-
made access to markets. Most developing economies that shifted towards a liberal trade
regime also shunned statism, Role of the state was reduced through privatization, which
attracted TNCs and foreign investors more towards this sub-group. Demand for FDI from the
developing economies increased pari passu with supply from the TNCs. As international
competition intensified, small cost advantages for TNCs began to have large consequences.
Large corporations and TNCs found that complete manufacture of complex products in one
country is not the most cost-effective method of production. With advances in information and
communication technology (ICT) and modes of transportation, they found that they could
manufacture a range of products more cost-effectively by sourcing from multiple locations in
the same contiguous region. Supply of raw materials, labor-intensive processes, and
technologically sophisticated processes began to be done in different countries in the same
region. Several Asian economies― particularly the newly industrialized economies (NIEs) and
ASEAN-4 (namely Indonesia, Malaysia, Philippines, and Thailand) and subsequently
China―participated in these plural country manufacturing processes. Production networks
(Section 6) or regionalization of global production picked up momentum since the mid-1980s.
As seen in Section 2, merely dismantling of tariffs and NTBs leads to a relatively shallow
form of regional integration. As opposed to this, the development of regional production
networks and the promotion of investment in services sectors requires a deeper form of
international integration than that in RTAs. It requires complete harmonization of other policies
including competition policies, product standards, regulatory regimes, investment codes,
environmental policies. Without harmonization of this kind, production integration becomes
difficult, expensive, or even impossible. Also, large investment firms and TNCs are not
encouraged to invest unless they are ensured of credible and stable governments and easy
access to foreign markets. Harmonized customs procedures also help. This promotes a deeper
form of international integration, which in turn is more comfortable to achieve at the regional
level.
When large corporations and TNCs are involved, regional agreements will move
members towards economic integration that are deep (Lawrence, 1996). Some analysts believe
that large corporations and TNCs have played a strong role in promoting regional and
multilateral liberalization in the recent past. While others disagree and believe that they are
essentially concerned with investment access and that trade liberalization is low on their
priority. Given the emergence of new modes of production operations and regional integration,
it seems more likely that they are interested in both, regional integration and investment.
Without trade liberalization, harmonization of standards and regulations their objective of
successful regionalization of their operations is not likely to be met fully.
The downside of this genre of deeper regional integration is that when small and large
economies, with unequal bargaining power, negotiate for an RTA, the larger and more
industrialized economies may successfully extract concessions of all kinds not just in trade nut
in non-trade issues from smaller economies. Panagariya (1999) suspected that the agenda for
deeper integration is likely to be determined by the larger, more industrialized economies, not
by their smaller less-industrialized partners. The expected role of the smaller economies would
be to adjust their norms and standards to this agenda. In the process, they may have to adopt
some policy measures that they consider unsuitable to them. A hegemonic power may gain at
the expense of the smaller partners of the RTA if it chooses to bargain sequentially rather than
simultaneously.

TRADE AND INVESTMENT PATTERNS IN THE ASIA-PACIFIC REGION

A great deal of evidence is available proving that trade was an animating force behind
rapid economic growth in Asia. Intra-regional trade played a substantial role in integrating
regional economies. On the eve of the out break of the Asian crisis in 1997, intra-regional trade
was approximately 51 percent of the total trade in Asia. Empirical evidence is available to
conclude that with rapid growth, the economic structure of the newly industrialized
economies12 (NIEs) of Asia, the four Southeast Asian economies in the Association of Southeast
Asian Nations13 (ASEAN-4), China and a lesser extent, the South Asian economies underwent
structural transformation, which had a direct bearing on factor endowments. Growth,
structural transformation and changing factor endowments also ushered in transformation in
the manufacturing sector. The Heckscher-Ohlin theory supports and explains the resulting
transformation in the comparative advantage of different Asian economies and country groups
(Das, 1998). However, Asian economies did not record high (or low) trade in relative and
absolute terms in certain products or sectors. Similarly, their trade was not concentrated in a
few select sectors (Das, 2000a).
Another germane observation in this regard is that there was no characteristic Asian
export path or Asian export route and few generalizations could be made in this regard for the
region. Japan had a higher income level and a larger range of manufactured exports. The export
pattern of Japan, and to a certain extent that of Singapore, was found to be more similar to
those of industrial economies than similar to that of other Asian economies. The export
patterns of Hong Kong SAR, Korea, and Taiwan were similar, and so were those of Malaysia,
Philippines, and Thailand. Over the years, similarities between these patterns increased.
Indonesia was not comparable to these two country groups because of its oil exports. In the
early stages of industrialization, Indonesia appeared a laggard because its exports were limited
to oil and lumber. Noland (1997) examined the determinants of export patterns by estimating
crossnational regressions of factor endowments on trade flows and generating a variety of
descriptive statistics from these regressions. The main result of his regressions is that the factor
endowment models cannot adequately explain the trade pattern of Japan and to a lesser extent
of Korea and Taiwan. In the case of Japan, the growth in Japanese exports was less than what
would be explained on the basis of its factor accumulation. When regional dummies variables
were introduced to capture group effects, there was a tendency for the Asian dummies to be
positive with respect to gross exports and insignificant with respect to net export, leading to the
inference that these economies are unusually trade oriented.
The successful subgroups among Asian economies and their performance can be divided
in the following manner. Following Japan, the NIEs were the first and the most successful in
export-led or trade-induced growth, followed by the ASEAN-4 and subsequently China. By 2000,
China had become the largest developing-country exporter, accounting for 3.5 percent of global
merchandise exports. The South Asian economies were the last to embark on this path. A
complex mix of bilateral trade ties, neo-mercantilism policy stance, and diversified multilateral
trade regime drove trade patterns in the region. Market forces played a notable role in the
developments of these trends. As the economies grew, Asian trade not only expanded rapidly;
it also advanced regional conventions like AFTA and APEC. There was a steady growth of the
internal Asian markets and, therefore, intra-regional trade. The WTO league tables of leading
exporters for 2000 included China (9th), Hong Kong (11th), Korea (12th), Taiwan (14th),
Singapore (15th), Malaysia (17th), Thailand (23rd), and Indonesia (26th). As statistical data in
Section 6 shows, by the latter half of the 1990s, most successful Asian trading economies were
trading as much as 50 percent with the other regional economies. The only exception in this
regard was Indonesia. Apart from this, only China saw its intra-regional trade share decline
during the 1990s because of the expansion of its trade share with the US. Most of the
successful exporters in Asia held or reduced their share of trade with Japan, the dominant
regional trader. Although Japan’s significance as a regional trade partner has declined over the
years, in absolute terms, it has expanded its exports in the region. During the last decade and a
half, the most rapid growth in trade opportunities came instead from the four NIEs, as well as
the other emerging economies of Southeast Asia.
The market expansion that took place in Asia was both vertical and horizontal. First, the
NIEs and then the other emerging market Asian economies fit into the lower tiers of complex
trade hierarchies. However, this was a dynamic scenario. This tendency was conspicuous in
association with the large flows of FDI into China and Southeast Asia. Over the last decade and
a half, Japan, Taiwan, and Korea have provided massive amounts of FDI to China and Southeast
Asian economies and in the process increased their commitments in these markets. Firms in
these countries have built subsidiaries or partnerships in China and the Southeast Asian
economies, who in turn export intermediate goods to the investor firms’ home countries. These
intermediate goods can be exported to the subsidiaries of the investing firms in other parts of
the world. This kind of trade expansion is usually supported by complex commercial alliances in
which the new partners enjoy many growth externalities (Lee, and Roland-Holst, 1998). Trade
between China, Hong Kong SAR and Taiwan-together referred to as greater China is increasingly
closely linked and large. China’s trade dependence on Hong Kong has declined considerably
since 1990, because of its capability to trade directly has increased. China trades much more
directly both intra-regionally and outside the region. Hong Kong is still the largest trade partner
and an important entrepot for China.

SPREADING PRODUCTION NETWORKS

The above exposition shows that the trend towards becoming natural trading partners
took several decades of an intensive process of intra-trade and investment among the Asia-
Pacific economies. Changes in currency value configuration and economic complementaries
buttressed this trend. Gradually production locus shifted from the firms to networks of regional
production. Production networks soon became a significant force driving the process of
economic integration in East and Southeast Asia as well as of globalization. They went far
beyond horizontal and vertical integration of production. The integration of Malaysia, Thailand
and the Pearl River basin of China with northeastern Asian output has been one of the most
marked changes in the spatial organization of the Asian economy since the Plaza Accord.
Although superficially this trend lent credence to Akamatsu’s (1961) age-old flying geese
hypothesis, emerging organizational and spatial changes in production undermined many of its
key assumptions. His hypothesis, somewhat simplistically, failed to grasp the complexities of
technological changes and technology transfer. The regionalization of production networks in
Asia came to be organized in ways that belied the neatness of the avian analogy. The product
life cycle theory explains regionalization of production much more convincingly. It takes
individual products as disembodies” from larger industrial structures, whereby the life cycle of
any given product can be treated in isolation from a myriad of other products and the
organizational foundations that initially spawned it. These new production modes or production
linkages are most conspicuous in the electronics industry Chen and Ku, 2000). This industry
provides the most revealing illustration of how production linkages in Asia are more complex
than the trade and investment data describe them. One of the most striking changes in regional
production since the Plaza Agreement has been the rapid shift of much of Northeast Asia’s low-
end consumer electronics production to Malaysia first and then to Thailand. Most prominent
was the massive investment by the Japanese electronics industry. A similar pattern was
followed by Taiwanese and, to a lesser extent, Korean electronics investment in Malaysia and
Thailand. This great infusion of investment in the electronics industry represents the transfer in
a mere five years (1996-90) of much of low-end, export-oriented consumer electronics
assembly industry that had been built up in Japan, Korea, and Taiwan since the 1950s.
Northeast Asian investment in the ASEAN economies brought a number of changes to the
structure of production and exchange in the electronics industry.
During the late 1980s, the production networks began to spread to Guangdong and
Fujian in China, and a borderless economy is encompassing a much larger region with different
comparative advantages began to emerge. This subregions rapidly enlarged due to the
complementarities that existed among the economies. It now includes Hong Kong SAR, Macao,
Taiwan, and Southern provinces of China like Guangdong, Hainan, Fujian, Zhejiang, and
Shanghai. Geographically proximate regions possessing different resource endowments tended
to develop close trade and investment ties, further intensifying the production networks. As
Taiwan moved into high technology industries and Hong Kong SAR moved towards becoming a
services economy, China was well placed to receive the “sunset” industries that were being
phased out from both the NIEs. This reduced the pain of phasing out of these sunset industries
of Hong Kong SAR and Taiwan, and to a lesser extent in Korea and Singapore. In the process,
the sunset industries got a new lease of life through relocation, and the pace of industrialization
in China quickened. This was China’s opportunity to move up the industrial value chain into
high-tech faster
Early in 2001, the government in Taiwan was considering removing all investment value
ceiling on projects intended for the mainland, but close off certain “strategic industries” like
high-end electronics. Consequently, mutual industrial dependence of the two economies was
on the rise (Sender, 2001). Malaysia and Thailand also integrated with this part of China by
developing close trade and investment links. Together this sub-region of Asia has shown
enormous dynamism and, therefore, it is bound to expand in size, level of sophistication, and
scope of cooperation. A clarification is necessary here. When the so-called sunset industries
were moving from the NIE to China, the latter was not the recipient of old industries. Hong
Kong SAR transferred all its computer hardware sector to China by the early 1990s, which can
hardly be called an outmoded industry.
Over the last quarter century, two virtuous circles of economic growth operated in Asia.
The first was the virtuous domestic circle, that is an openness to trade and investment giving
rise to rapid growth and reinforcing it. The second was a virtuous regional circle, which explains
the diffusion of economic growth from one group of economies to another. Increased
networking among firms, that were themselves competitors is now commonly seen in Japan,
the NIEs, ASEAN-4, and China. The tread-creating effect of investment stands to logic in the
context of dynamic networking firms. These are some of the newest trends in the regional
economy. The result is closer and increasingly cohesive economic ties and greater
regionalization of Asian economies14 (Das 1996).

REGIONALISM IN THE ASIA-PACIFIC

Notwithstanding the high level of market-driven intra-trade, historically the Asian-Pacific
economies did not display as much enthusiasm for RTAs as those in the EU and Latin America.
Formal regional trading arrangements are neither many nor have gone very far in Asia. The first
wave of regionalism in the 1960s almost passed the region. The contemporary genesis of
regionalism can be traced back to a proposal for a counter-regional economic grouping to the
EEC as it began to unfold after the signing of the Treaty of Rome. Kiyoshi Kojima (1968) is
credited with posting the concept of the first ever regional organization for Asia, which he
named the Organization for Pacific Trade and Development (OPTAD). Kojima also introduced
the concept of a Pacific Free Trade Area (PAFTA). Under the aegis of OPTAD, a series of annual
conferences were organized on Asia-Pacific trade and developmental issues, beginning with the
first in Tokyo in 1968.
The Pacific Economic Co-operation Conference (PECC) was born in September 1980 and
was the expression of the next wave of regionalism. It was a product of the Canberra seminar
on the Pacific Community. In 1992, the PECC membership consisted of Australia, Brunei
Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New
Zealand, Peru, Philippines, Russia, Singapore, Taiwan, Thailand, the US, and the Pacific Island
Nations. OPTAD became an institutional member of the PECC. Both China and Taiwan were
admitted to a full participation of PECC in 1986, which became the new reality of Asia-Pacific
regionalism in the 1980s.
Other than regional cooperation and integration, there are several areas in Asia where
subregional cooperation is taking place. Towards the end of the 1980s, this new type of
localized economic co-operation began to appear. The sub-regional blocs began to develop
independent of each other. While there were differences, two common features of these
regional groupings were the participation of two or more countries, and the inclusion of only
parts of these countries. The groupings were given various names but the tem “growth
triangle” gradually emerged as a popularly accepted generic term. These growth triangles are
the outcome of a complex interplay of key factors, including massive flows of FDI, outward-
oriented development strategies, differences in factor costs and factor endowments, and the
need for each country to have an element of balanced spatial development. Although these
groupings are still relatively new, given the likely continued existence of these key factors,
growth triangles have probably established their place within the region. The following
subregions are presently operational: (i) the Southern China Growth triangle, which includes
Fujian province of China, Hong Kong and Taiwan, (ii) the Johor-Singapore-Riau Growth Triangle,
(iii) the Tumen River Area in Northeast Asia, which comprises China, Japan, the two Koreas, and
Eastern Russia, and (iv) the Fast Asian Growth Area, which comprises Brunei Darussalam,
Indonesia, Malaysia and Philippines. There are two smaller growth triangles, namely, (i)
Indonesia, Malaysia, Singapore Growth Triangle and (ii) Indonesia, Malaysia, and Thailand
Growth Triangle.
In their most basic form, these growth triangles exploit complementarities between
geographically contiguous areas of different Asian countries to gain a competitive edge in
export promotion. To be effective, they require close cooperation between the private and
public sectors of each of the countries involved. As a rule of thumb, the private sector provides
the capital for investment, and the public sector provides infrastructure development, fiscal
incentives, and a favorable administrative framework. Interest in forming growth triangles was
heightened during the 1990s by the success of the southern part of China in achieving high
rates of growth through economic cooperation with neighboring economies.
At the beginning of the 21st century, proclivity towards regionalism in Asia began to
strengthen. Led by Singapore, political leadership in Asia grew increasingly inclined towards it.
There were strident calls to take advantage of new opportunities and meet unprecedented
economic challenges. To this end, it was felt that Asian economies needed to work proactively
towards regionalism (McNulty 2001). As the latest advances in the ICT were revolutionizing
work, business, economies, and lifestyle, it became more important to integrate Asian
economies regionally. In several high-technology sectors including ICT, resources of a large
geographical area can be integrated for the benefit of the region. A large pool of talented Asian
professional takes off for the industrial economies. By encouraging further regional integration
in terms of investment and trade, Asia can create a synergy which in turn would hold back its
talented professionals.
Although there are not many RTAs in the Asia-Pacific region, the existing ones do show an
impressive variety in the range of these agreements. In chronological order, they include
Australia-New Zealand Closer Economic Relations (ANZ-CER or only CER) agreement, ASEAN
Free Trade Area (AFTA), APEC, and SAARC Preferential Trade Area (SAPTA). The history and
objectives of these RTAs vary widely. Of these, only CER and AFTA can be treated as integrated
RTAs. Of the other RTAs, some are formal, and others are not. Some are successful, and others
are there only in a name. Some are more than a decade old, while others are inchoate, little
more than a concept.

ANZ-CERR
Australia and New Zealand were known for their long-standing deep-rooted protectionist
policies. Until the 1970s, they had the highest average levels of protection for their import-
competing manufacturing industries in the OECD countries. Economists cited them as examples
of slow-growing countries with high levels of protection and an inability o adjust to changes. In
1965, Australia and New Zealand agreed on the establishment of a free trade area. This was the
first formal RTA in the Asia-Pacific region. Technically a CER (which is the same as ANZCER) is a
free trade area because each country retains independence in its trade policies with non-
members. During the decades of the 1980s and 1990s, the two economies pursued sets of
trade policies which shares many elements and which together represent a style of trade policy
that is distinctive. The common elements included a fast clip unilateral reduction in barriers to
trade with other nations, a sharp movement away from NTBs, particularly from QRs. The earlier
agreement was superseded by the 1983 CER agreement, which was intended to put the CER on
an auto-pilot. The provisions of the agreements were substantially widened and deepened. The
“negative list” still covered some 40 percent of trans-Tasman trade in manufactured goods. The
last QRs were not due to be removed until 1995. All border restrictions were to be ended within
twelve years. Tariffs were to be phased out by 1988, performance-based export incentives by
1987, and QRs and tariff quotas by 1995. In reality, these targets were met by July 1990, some
five years ahead of schedule. Besides, anti-dumping actions against the trans-Tasman partner
ceased from the same date.
A comprehensive review of the CER was conducted in 1988, in which the two
governments among other things addressed the issue of domestic production subsidies. This
issue had caused a great deal of angry discussions in the mid-1980s. In 1988, the two partners
of the CER decided that industry assistance should be avoided where it would have a distortive
impact over the trans-Tasman competition Australia’s Export Facilitation Scheme for passenger
motor vehicle was initially excluded from this arrangement, but the exclusion was later
withdrawn. During the late 1980s, there was a change in the mindset of the policymakers. Both
Australia and New Zealand became fairly aggressive trade reformers. Building on the
achievements of free trade in goods, the two governments raised their sights to the more
ambitious objective of creating a single trans-Tasman market. An important condition for the
creation of a “single market” is the removal of administrative and the so-called “behind-the-
border” impediments to trade and investment flows. The process of removing these
impediments has come to be described as “facilitation,” to distinguish it from the removal of
traditional trade barriers, described as “liberalization”. The CER used facilitation well through
measures such as liberalization and integration of purchasing procedures, harmonization of
standards and conformance procedures, harmonization of some aspects of business law, and
streamlining and harmonization of customs procedures (BIE, 1995). Further facilitation
measures continued to be introduced, with notable addition being the agreement on food
standards in 1996 and food standards measures.
A Protocol on Services was concluded in 1988, providing for MFN and national treatment
for services providers in both the countries, albeit with some exceptions. The “negative” list of
services excluded from free trade is limited and more transparent than the “positive” list
approach adopted by the General Agreement on Trade in Services (GATS). However, some
frictions are remaining in the CER over liberalization of some services sectors and investment
regulations in Australia. A review of this agreement was carried out in 1992. It led to several
modifications being made, including the commitment to harmonize business law and
competition policy.
The CER is well advanced as an RTA. It has enjoyed smooth and uncontroversial progress
towards a single market because of the unilateral liberalization and deregulation that has
occurred in Australia and New Zealand over the last 15 years. The common system of
government, law and customs and a shared language have been important. The CER agreement
contained provisions on the application of countervailing measures, subsidies and government
procurement, As noted, antidumping provisions do not apply to trade between Australia and
New Zealand. This is an important innovative step in CER and has attracted international
attention. Any “unfair trade” claims are treated according to national competition laws in the
country where the complaint occurs. Disputes are settled by consultation. An important feature
of this progress is that it was achieved with simple rules. There is no administrative organization
or secretariat to supervise the agreement. Lloyd (1997) described CER as the “most clean and
most outwardly open of all the RTAs approved under the GATT.” Lloyd also considers CER
among the regional trading arrangements second only to the EU, particularly in its development
of facilitation measures.
A notable feature of the CER is that it has been achieved by strong unilateral movements
towards free trade and deregulation in both the partner economies. It exemplifies “open
regionalism” because regional liberalization in CER has progressed with liberalization vis-à-vis
countries outside the region. The other region, perhaps the only other, regional trading
arrangement in the world that achieved substantial regional liberalization along with
substantial unilateral liberalization is ASEAN.
As the CER is an RTA of an advanced variety, it needs to be judged by standards of a
highly-developed regional arrangement like the EU or NAFTA. Intra-CER trade is a small share of
each partner’s total trade. Although Australia is New Zealand’s largest trading partner, in the
1990s its share of New Zealand’s exports ranged between 18 and 21 percent, with its share of
New Zealand’s imports only slightly higher at 20 to 22 percent. The only aberration was 1996
when the share of New Zealand’s imports shot up to 24 percent. As opposed to this, New
Zealand’s share in Australia’s trade has remained even lower. During the 1990s, New Zealand
accounted for 4 to 5 percent of Australia’s imports and 5 to 7 percent of its exports (Scollay,
2000). Also, the growth in the share of intra-CER trade of the two countries total trade has not
been dramatic. The significance of intra-trade and CER rises markedly when trade in
manufactured goods is taken into account. Manufactures dominate the intra-trade of Australia
and New Zealand, which is completely unlike their pattern of exports to the rest of the world.
Another interesting feature is that whereas Australia is a net importer from the rest of the
world as a whole in each of thirteen major categories of manufactured goods, it is a net
exporter to New Zealand in all but three of those categories (Scollay, 2000).
McMillan (1993) and Scollay (1994) have inferred that significant reduction in external
barriers against third countries has accompanied the elimination of boundaries between the
two partner economies of the CER. This is a welfare-enhancing condition. Substantial unilateral
trade liberalization took place in Australia and New Zealand, while they eliminated trade
barriers between each other. The efficiency improvements imposed on the manufacturing
sector through unilateral trade liberalization thus helped to ensure that the manufactured
goods trade stimulated by CER would also be primarily welfare enhancing.
Using the gravity model for the CER, Frankel (1997) reports CER as being highly significant
statistically. It had a slight upward trend, reaching 1.7 in 1970. Empirical tests show that the
antipodean pair trades 5.5 times as much as an otherwise similar pair of countries. The
openness term shows that trade by Australia and New Zealand with other partners is
consistently low. However, the openness term has no discernible impact on the block
coefficient. In the future, further rationalization in the trans-Tasman market place would not
only integrate the two partner economies closer, and it would help them in making the
profound adjustments that would be required as the APEC vision of free trade and investment
in the Asia-Pacific region.

AFTA
The second RTA in the Asia-Pacific region was related to ASEAN countries. In August 1967,
ASEAN was established between five Southeast Asian economies, namely, Indonesia, Malaysia,
the Philippines, Singapore, and Thailand. As the earlier regional initiatives among developing
economies were not known for their success, ASEAN restricted its scope to cooperation on
strategic and political. Its objectives were to promote peace, stability. It needs to be
emphasized that ASEAN was not born as a sub-regional economic organization. Brunei
Darussalam joined ASEAN in 1984. Strengthening trade and economic linkages did not occur to
ASEAN economies until 1978 when ASEAN put into force an Agreement on ASEAN PTA. This PTA
granted 10 to 15 percent margins of preferences on 71 commodities and industrial products. A
stronger free-trade proposal had fallen through during the negotiations. The PTA was weak and
inconsequential, as the most important sectors were exempted from the system of preferences
that they were supposed to grant each other. Product-by-product nature of negotiations,
nongenuine offers of preferences, high domestic content requirements, and the limited nature
of preferences themselves rendered the PTA little ineffective. It had little impact over trade
between ASEAN countries. In an infamous example, Indonesia removed mutual trade barriers
on the imports of snow shovels. Over the 1985-87 period, the ASEAN leaders agreed to Expand
the list of sectors covered by the PTA and also to increase the margin of preferences. However,
until the end of the 1980s, the fraction of goods eligible regional preferences was. still only of
the order of 3 percent of the total. Thus, ASEAN had little success on the economic integration
front. Between 1967 and 1992, it remained more or less a political organization.
In January 1991, the ASEAN countries agreed to upgrade the PTA and establish an ASEAN
Free Trade Area (AFTA). The proposal was made by Thailand and accepted by all the members a
year later during the fourth ASEAN Summit meeting in Singapore in January 1992. It breathed a
new life into ASEAN. The original goal of AFTA was to reduce tariff rates on intra-ASEAN trade
to between zero and 5 percent within 15 years beginning 1993. The principal instrument for
adopting this objective was the common effective preferential tariff (CEPT) plan. The CEPT plan
divided goods into two categories: (i) the fast-track goods whose tariffs would be reduced to 0
to 5 percent within 7 to 10 years depending upon whether the initial tariff was below or above
20 percent, and (ii) the normal track goods on which taxes would be reduced more slowly and
in two stages. Subsequently, during the 1993 and 1994 ASEAN summit meetings the rate of
planned tariff liberalization was accelerated and other changes were adopted, whereby 11,000
tariff items―which included 20 percent of total tariff lines―were to reduce tariffs by January
1994. Members decided that the fast-track tariff lines would be liberalized by 2000 and
standard track tariff reductions would be achieved by the year 2003 instead of 2008. Vietnam,
which joined ASEAN in 1995 and AFTA in 1996, was granted a ten-year implementation period
ending 2006. By 2000, the membership of ASEAN had expanded to ten with the inclusion of
Laos Peoples Democratic Republic, Myanmar, and Cambodia.
AFTA can indeed make a useful contribution to trade and welfare in the region. However,
CEPT has severe limitations. First, it emphasizes on tariffs, which have become less important
relative to regulatory NTBs as impediments to trade in the ASEAN countries. Second, CEPT also
focuses on merchandise trade, which has been declining in importance relative to trade in
services and investment. Third, most analysts consider the CEPT timetable to be slow. The
justification given was that it would provide business enterprises time to adjust and restructure.
Besides, the AFTA economies have not overcome all their disagreements. More importantly,
the CEPT agenda covered less than half of intra-ASEAN merchandise trade. Broadening CEPT to
give a more comprehensive coverage of intra-ASEAN trade is vitally important. At the time of
the creation of ASEAN, most member economies had only embarked on their industrialization
programs and lacked the confidence to let their tariff barriers and NTBs down: They have now
developed a great deal of confidence, thanks to rapid outward-oriented industrial
development. Many member economies have succeeded in learning about global trade
regulations and negotiations. AFTA has begun addressing trade facilitation issues. An ASEAN
Consultative Committee on Standards and Quantity was established to work on harmonization
of standards, testing, and accreditation of laboratories, conformity assessment, and technical
information. A Consultative Forum on FDI met in 1993, and there were plans to hold
macroeconomic consultations. However, the trade facilitation agenda was slow to get off the
ground. To make things worse, it was overtaken by that of the APEC forum. Disagreements
among members have persisted. During the October 2000 meeting of the ASEAN, Malaysia
scuttled the timetable for lowering tariff barriers. There was a possibility of a Chain reaction
whereby other members could decide to keep tariffs on favored local industries (AWSJ, 2000).
As noted above, the gravity model for AFTA shows evidence that the ASEAN bloc is highly
open (Frankel and Wei, 1997). It has been found that the dummy for ASEAN is extremely large
and statistically significant. Two ASEAN economies, literally interpreted, trade 600 percent
more than two economies otherwise identical. Since Singapore plays an entrepot role, its
exports and imports exceed its GDP. Hence, Singapore’s extreme openness can be reflected in
the Bias within ASEAN. A Singapore dummy was added to Singapore to examine this, which was
found to have a positive and substantial coefficient. The ASEAN dummy coefficient was reduced
but remained large and statistically significant quantitatively. Thus, one can infer that the
extreme openness of Singapore did not explain all the ASEAN countries ‘ inward bias and that,
despite the multitude of problems and delays, the ASEAN economies are likely to tend to
expand their trade with each other.

ASEAN: overview
 1. Association of Southeast Asian Nations
2. Ten member states
 Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,
Thailand, & Vietnam
3. home to 600 million people
4. collective GDP of US$2 trillion
ASEAN: founding (1967)
1. Five founding members:
 Thailand, Malaysia, Singapore, Indonesia, Philippines
2. Bangkok Declaration of 1967:
 accelerate economic growth
 promote regional peace and stability
 contain the spread of communism
End of Cold War
1. ASEAN Free Trade Area
2. initiated at ASEAN summit in 1992
3. a comprehensive program of regional tariff reduction
4. the program later broadened and accelerated
5. reaffirmed during the Asian Financial Crisis of 1997-98
Expansion of ASEAN
1. 1995: Vietnam
2. 1997: Laos
3. 1997:Myanmar
4. 1999: Cambodia
ASEAN: external links
1. A joint forum with Japan was established in 1977
2. A cooperation agreement with the European Community was signed in 1980
3. “ASEAN + 3”: regular series of meeting at the cabinet and head-of-government levels
with Japan, China, and South Korea since 1997
ASEAN and the U>S>
1. Investment:
 U.S. direct investment of US$157 billion in ASEAN
 nearly three times more than in China
 Ten times more than in India
2. Trade:
  4th largest export market ($76 billion) for the U.S.
 U.S. imported $123 billion from ASEAN
Northeast Asia
1. Japan, South Korea, North Korea
2. Mainland China, Hong Kong, Taiwan
3. Mongolia, Russia
4. Compared with Southeast Asia and Western Europe, Northeast Asia has lagged behind
 in developing mechanisms or institutions
 of coordination, cooperation, or integration
5. especially considering the immense economic potentials in the region
 natural resources
 human infrastructure

APEC
The forum of APEC was launched in 1989. Australian Prime Minister Bob Hawke launched
the idea of creating a multilateral forum to enhance economic cooperation between Asia and
Pacific economies. Australia and Japan co-sponsored the concept. APEC’s genesis lies in the
particular circumstances of the late 1980s. The EU promised to reinforce its customs union and
create SEM, Canada, and the US were negotiating NAFTA expansion of their free trade area,
and the Uruguay Round was stumbling. In a period when the failure of the multilateral trading
system was a real threat, Asian economies were afraid of being left out of the move towards
RTAS. Australia was concerned about being left out of an Asian regional body, which was being
suggested by Malaysia.
APEC had a fairly humble beginning and was initially greeted with sufficient skepticism.
Initially, the basic objectives of the APEC forum were economic cooperation and consultation.
Although APEC was born as a regional arrangement of sorts, it had adopted the difficult, if
somewhat paradoxical, the mission of combating preferential regionalism. Accordingly,
members explored various ways in which regionalism can be open. As noted above, this kind of
open regionalism was pioneered by CER.
APEC began with foreign and economic ministers meetings and several relatively small
projects. Since then, however, it has grown in scope and prominence and, with the agreement
to hold annual summit meetings of heads of state, has achieved a more significant status. The
first such meeting was held in Seattle on Blake Island in 1993. At the 28th launch time, APEC
had twelve members. Five of them were industrial economies (Australia, Canada, Japan, New
Zealand, and the United States), six members of ASEAN (Indonesia, Malaysia, the Philippines,
Singapore, Thailand, and Brunei Darussalam) and the Republic of Korea. Between 1989 and
1994, six more countries joined APEC, increasing membership to eighteen (China, Hong Kong
SAR, and Taiwan in 1991 and Mexico, Papua New Guinea and Chile in 1994). A moratorium on
membership for three years was adopted in 1996. Peru, Russia, and Vietnam were admitted to
APEC as soon as it came to an end, bringing their membership to 21. The inclusion criterion was
that the aspiring member must be on the Pacific Ocean and have close relationships with
existing members as well as accepting the 2020 goal of trade liberalization (see Bogor targets
below). Although membership for the next ten years has now been closed, APEC represents the
largest and most diverse group of countries ever assembled. Spanning both sides of the Pacific
Ocean and incorporating two of the four global trade superpowers―the US and Japan―APEC
encompasses 40% of the world’s population in 2000, 54% of global GDP, and 42% of its trade.
Until 1994, despite the creation of the Secretariat of APEC and the Group of Eminent
Persons, APEC remained a rather loose consultative forum in line with the original goals behind
its creation. This was the prerequisite for ASEAN economies continued participation in APEC. It
was criticized as a mere “talking shop” by scholars in the early 1990s (Pomfret, 1995). Initially,
ASEAN members were hesitant to join APEC because they feared being overshadowed by a
larger group of large industrial economies. Since then, though, they have adopted the cause of
APEC as their own. Part of the responsibility for upgrading ASEAN PTA to ASEAN Free Trade
Area or AFTA was to join APEC. A significant development of the early 1990s was the more
active involvement of Australia in Asian economies and economic diplomacy.
APEC’s nature, training, and operating process differed fundamentally from that of the EU
or NAFTA. These differences came from the three main driving forces behind APEC’s creation.
First, post-war growth and integration had a unique process for Asian economies. As
explained above, this was the market-led process of economic integration. Second, there were
huge stakes in the global trading system in many of the regional economies. Despite their
diversity, dynamic Asian economies under the aegis of the GATT were more firmly committed
to the multilateral trading system than the other developing economies. In the GATT system,
they saw several tangible advantages. First, under the aegis of the GATT, they benefited from
lowering tariff barriers under different rounds of MTNs. Several of them also benefited from the
“special and differential treatment” under Part IV of the GATT Articles of Agreement. These
economies, therefore, enjoyed considerable scope for autonomy in domestic policy.
Moreover, while Asian economies remained avid GATT supporters, they looked with
suspicion at regionalism in other parts of the globe. After forming a formal RTA, they were
neither totally convinced of the benefits nor passionate (Lawrence, 1996). They considered
RTAs to be unnecessary dependence on large economies. To the extent that Mexico or Canada
depends on the US market, developing Asian economies did not depend on the Japanese mark
There was no political logic for the Asian economies that primarily brought the EU economies
together in the form of an inward-looking RTA. Unlike Europeans, the dream of eventually
becoming a United States of Asia was nurtured by a few Asians. To support such regional
arrangements, historical, cultural and economic differences between Asian economies are far
too high. Political power distribution in Asia has been and continues to be, highly skewed.
Japan’s economic prowess or China’s geopolitical power would long dominate the region. In the
context of APEC, the US would be economically and geopolitically the most powerful country.
These considerations have been important in shaping the Asia Pacific region’s major
regional arrangement initiative. Consequently, APEC was neither conceived as an RTA nor had a
treaty underpinning its plan for trade, liberalization. Funabashi (1995) accused APEC of “four
noun-searching adjectives.” This criticism was unfair as members of the APEC agreed to form a
“community.” They were also clear about their community definition. It was not meant to be a
quasi-federal arrangement community like the EU, nor was it intended to set up a large
organization. It was also not to be a common market or a customs union in the foreseeable
future. Instead, it was decided that APEC would promote trade and investment through a mix
of trade liberalization, trade facilitation, and economic cooperation policies. Initiatives to
streamline standards, improve customs procedures, coordinate competition policies, and
mediate disputes included trade facilitation. Economic cooperation included support for
development and cooperation on human resources, infrastructure, energy, and environment
projects. Trade facilitation related research under APEC is widely regarded as pioneering and
respectable, including by the WTO (Moore, 2000).
APEC progressed gradually ahead of its initial goals, better organized and structured,
starting with areas where members agreed. A significant point of time for APEC was 1993 when
the US hosted the first Seattle Economic Leaders Meeting and suggested that APEC aim to
create an Asia-Pacific economic community, something like an Asia-Pacific EU. Since then, APEC
has made significant progress in trade liberalization and facilitation. The ambitious Bogor
Declaration was adopted by members at the Sixth Ministerial and Leaders Meeting in 1994,
with specific targets for trade liberalization in the region. The 18 participating leaders declared
their intention to turn the APEC forum into a free trade and investment area. The goals
Included trade liberalization for the five industrial economies by 2010 and the remaining
members of the APEC by 2020. During the Seventh Ministerial and Leaders Meeting, the
guidelines for implementing the Bogor Plan were embodied in the 1995 Osaka Action Agenda.
During
the formulation of the Manila Action Plan (Yamazawa, 2000), they were further refined at the
eighth meeting of ministers and leaders in 1996.
The commitment from Bogor presented both risks and opportunities. The main advantage
could be to achieve improved market access beyond what was feasible under WTO regulations.
APEC’s size has significant political implications. Lawrence pointed out that at a single point in
time, the GATT or WTO never set a complete schedule for achieving global free trade. When
APEC members committed themselves as a long-term goal to free trade, they are likely to focus
on making progress in small steps towards free trade. This would create momentum for trade
barriers to be reduced, starting with the least political resistance from sectors. This, in turn,
could push free trade into the global trading system.
 Moreover, many Asian economies were concerned about being shut out of the NAFTA
market after NAFTA was created, but since both Canada and Mexico are part of APEC, an APEC-
wide free trade area would not allow that to happen. Similarly, some Asian economies
apprehended that the US might lose interest in the Asia – Pacific region, but the initiatives of
APEC would once again help to keep the US involved. Unlike these plausible advantages, the
risk lay in more promising and losing credibility in the process (Lawrence, 1996).
There are two remarkable APEC features. Unlike other free trade agreements, the
achievement of Bogor’s objectives has so far been based on (i) individual or national action
plans rather than rigid target application to all Member States, and (ii) concessions to all non-
Member Trading Partners in terms of reducing trade and non-trade barriers have been
extended. This is based on the open regionalism principle noted above 15. This strategy runs
contrary to the 1950s and 1960s closed regionalism. There are misperceptions about the term
open regionalism because there have been few attempts to define the term systematically.
Some people love an oxymoron. The argument went as follows: how can it be confined to a
region if an arrangement is open?
Two remarkable attempts were made to the President of the United States by the
Eminent Persons Group (APEC, 1994) and the Council of Economic Advisors (CEA. 1995). There
are two similar definitions. The CEA definition reads as follows: “Open regionalism refers to
non-exclusive and open-minded multi-stakeholder agreements. First, it requires that multi-
stakeholder initiatives fully comply with Article XXIV of the GATT, which prohibits an increase in
common external barriers.
Moreover, plurilateral agreements do not require members to pursue additional
liberalization either on a reciprocal or unilateral basis with non-members. Since member
countries can unilaterally select their external tariffs, open agreements are less likely to develop
into competing blocs of bargaining. Finally, open regionalism implies that plurilateral
agreements both enable and encourage non-members to join. “At its Osaka meeting in 1995,
APEC formally embraced open regionalism and the Osaka Action Agenda was based on the
voluntary nature of the APEC process, an essential corollary to the idea of open regionalism
(APEC, 1995a). APEC took the view that liberalization can be achieved only through individual
members ‘ voluntary actions. As the members level of economic development was diverse, it
was believed that having one set of rules would not be effective for all members. This thought
was contrary to the WTO’s position, married to the principle of “single undertaking” and tariff
binding.
Accordingly, one of the most important open regionalism criteria is the freedom for
member countries to further liberalize unilaterally or on a reciprocal basis with non-members.
It should be noted that individual members are not allowed to lower their tariffs in a customs
union. A common customs union external tariff cannot be lowered unless all members agree on
it. Political commitments are voluntary under open regionalism and are not legally binding. This
voluntary liberalization strategy was considered unprecedented when adopted. In addition to
reducing tariffs and NTBS and removing barriers to trade in services, its comprehensive
coverage also requires harmonization of rules and standards and other facilitation measures.
Until a country group attempts to form an economic union, the last named ones will not be
attempted. All the eighteen members announced their action plans (LAP) during the APEC
meeting in Manila and started implementing IAPs in January 1997. Some scholars view these
features of APEC as positive and likely to lead to significant progress towards Bogor’s goals,
although with some modifications (Petri, 1997). Others, however, disagree and see these
characteristics as obstacles to serious liberalization and negotiations. The earlier apprehension
about the APEC forum persists in some quarters, and some analysts still believe that APEC can
be reduced to little more than a “chat forum” with such characteristics (Flamm and Lincoln,
1998).
It was noted above that APEC’s immediate agenda includes trade liberalization,
facilitation of trade and economic cooperation. Monetary and macroeconomic cooperation and
development projects and technical cooperation have been launched accordingly. Many of
these policy measures came from the deeper integration agenda and may be more feasible
than a formal RTA. In some areas, therefore, APEC could be more successful in achieving deeper
integration than in achieving shallow integration. The Pacific Business Forum, which was
formed after the Seattle Summit in 1993, promoted several of these issues with great
enthusiasm. This forum includes representatives of businesses from across the APEC region.
The business leaders also presented a vision paper that included, among other things, calls for
rapid trade liberalization, a peaceful investment code, facilitating customs procedures, setting
up a business-person visa, and setting up a small and medium-sized business foundation.
If the members of APEC go beyond tariffs and NTBs dismantling and consider agreements
on domestic practices that reinforce market forces, trade with an entry of non-members would
become easier, which in turn would have trade creation effect rather than trade diversion
effect. For instance, harmonized regulations, more efficient customs procedures, or increased
regulatory transparency would automatically help both insiders and outsiders in APEC. This
would also impart new meaning to open regionalism. In many Asian economies interest in
deregulation has grown. Some countries might find it easier to undertake these measures if
they were part of a regional agreement.
APEC declarations and statements recognized the superiority of the global trading system,
permitted by the WTO, and stressed the need to implement regional trade liberalization within
the WTO, framework. APEC Ministerial Declaration recognized the WTOS primacy and the need
to strengthen the multilateral trading system after the conclusion of the Uruguay Round. (The
1995b APEC). After 1996, the APEC changed its position and called for regional and multilateral
cooperation on trade liberalization. At this stage, APEC appeared more inclined towards its
regional identity and was even keen to highlight its WTO differences. Ministers noted in the
Vancouver Declaration that”... regional and multilateral trade and investment initiatives
complement and support each other” (APEC, 1997)
 The gravity model was maintained until 1992 for the APEC trade flows for the members of
the APEC (Frankel and Wei, 1997)
Results reveal that the APEC group, which includes the US as its member, is one of all
possible implicit trade blocs in the Asia-Pacific region that shows the strongest intra-regional
bias. This exercise of regression revealed that two members of the APEC trade 200 percent
more than two economies otherwise identical. Controlling for an APEC effect has significantly
reduced the coefficient on the bloc in East Asia: it has become marginally significant at 10
percent. This suggested that East and Southeast Asian economies did not trade substantially
more than other APEC countries, although they traded a lot among themselves. There was a
pan-Asia block effect even after controlling for an APEC effect that exhibited a strong inward
bias.
Regionalization has late, lost momentum through APEC, and APEC has become almost
moribund, if not an “ailing regional organization.” One of the concerns at the APEC leaders’
Summit of 2000 was backsliding on the agreements made during the previous APEC meetings.
As the APEC agreement to achieve free trade and investment by 2010 and 2020 was non-
binding and voluntary, in the wake of the 1997 Asian crisis, this agenda fizzled, flapped and
collapsed completely. Serious problems faced the IAPs. In the absence of credible progress
towards the objective of free trade and investment, some members of the APEC are turning to
subregional arrangements to achieve these objectives (discussed below). The private sector,
APEC Business Advisory Council found in 2000, in an assessment of three key areas, that in
many cases the IAPs contained incomplete information on how members intend to fulfill their
commitments. The culpability for the stagnation of APEC lies with Japan and the US, the two
largest economies. They showed little leadership, which APEC so desperately needed. US
policymakers allowed global liberalization to stagnate as they lost domestic policy control by
pandering to particular interests. Japan has blocked attempts to pursue a sectoral liberalization
approach within APEC (Wain, 2000). Partly out of frustration with APEC, members have been
pursuing increasingly alternative institutional arrangements to achieve their priority economic
goal. They took the form of sub-regional commercial and financial pacts, discussed in detail
below. These initiatives took place primarily within East Asia and the Pacific but also included
some of the APEC’s trans-Pacific members. To ensure that the proliferating sub-regional
arrangements do not eventually serve to fragment the APEC initiative, immediate scrutiny of
the organization’s progress and achievements is warranted.

NAFTA+3.ASEAN+3
Grouping is the newest idea in regional integration in Asia. In 1998, this group held its first
summit and two more in the years that followed. The membership includes the economies of
ASEAN, plus China, Japan, and (Republic of) Korea. The solutions applied by the IMF and
Western governments to resolve the Asian crisis disappointed Asian governments. Therefore,
regional governments turned to creating home-grown solutions to their potential future
economic and financial problems. The failure to reform the global financial architecture has
created a push for greater cooperation between ASEAN+3 countries in the monetary and
economic spheres (FT, 2000). This group has started to hold regular meetings with their finance
ministers and has a “vision group” to guide their work. With more sophisticated machinery than
NAFTA (Economist, 2000b), it has become the most active RTA outside Europe. The coin’s flip
side is that it is still at an early stage and the three new partners have not been integrated. In
financial matters, ASEAN+3 is proceeding faster than in trade. This emphasis is blamed for the
Asian crisis of 1997-98. Members of this group announced a regional system of currency swaps
in the Chang Mai Declaration (1999) to help them deal with future Asian crises. This facility was
created for economies of ASEAN+3, although there was no formal institution. This plan is similar
to that drawn up in the early 1960s by the Group of Ten Industrial Nations when they faced the
post-war era’s first global monetary hiccups. The institutions of Bretton Woods expressed
strong support for expanding financial cooperation on the Chiang Mai initiative. They see it as a
complement to the IMF’s financial aid to the Asian economies that undertook financial and
corporate restructuring (Kohler, 2001).
Also evolving are sub-regional financial structures. ASEAN has created a surveillance
mechanism to use sophisticated early-warning indicators to try to anticipate and prevent future
crises. The economies of Northeast Asia are jointly keeping an eye on short-term movements of
capital in their economies and nearby. Much is said about common currency baskets and joint
intervention arrangements to replace both the past discredited dollar pegs and the expensive
free floats imposed by the Asian crisis. Japan has actively promoted the creation of a currency
swap network to protect Asian economies from Speculative attacks (FT, 2000).
Although the Asian Monetary Fund (AMF) proposal was flatly rejected in 1998, it started
to evolve in the latter half of 2000. China criticized Japan’s original AMF proposal, backed the
initiative firmly in 2000. Hong Kong SAR and the Philippines proposed an Asian currency unit
(ACU) following the euro. This is an idea that will come to fruition for years. However, it
wouldn’t even have been taken seriously by any of the group members a few years ago. As
credible economic initiative, ASEAN+3 emerges. It will only be evident in the medium term
whether it would be a force to reckon with.

SMALLER RECENT INITIATIVES

As mentioned above, during the year 2000 there was a new fervor for bilateral and
plurilateral free trade agreements. Australia Canada, Chile, Japan, Mexico, South Korea, New
Zealand, Singapore, and the United States rushed to sew up a web of bilateral free trade deals.
Japan has historically relied entirely on the multilateral system, but now it is actively pursuing
preferential trade agreements with Korea, Mexico, and Singapore, Japan and Korea expect to
later use their bilateral deals as a bridge to other constellations of free trade. New Zealand was
Singapore, the other two Asian economies that traditionally relied on the multilateral trading
system and negotiated preferential trade agreement. On 14 November 200017, the two
economies signed a bilateral agreement establishing a “Closer Economic Partnership” or CEP.
The deal was characterized as a model for another bilateral agreement by the two partners.
The provisions of the CEP agreement include free trade in goods, clear rules of origin,
prohibition of export subsidies, open position on investment, free trade in services to be
phased in over ten years, harmonization of professional qualifications and technical standards
and access to all government procurement in the other country.
Singapore and the US also agreed to negotiate a free trade agreement in November 2000
(de Jonquieres, 2000). Singapore is also exploring bilateral trade opportunities with Canada and
Korea. Likewise, New Zealand tried to negotiate these CEP deals with Chile and the United
States in early 2001, and Australia negotiated similar deals with the United States. Likewise,
AFTA negotiates a connection deals the CER. A free-trade area of Northeast Asia is being
studied in China, Japan, and Korea. It is likely to merge with AFTA covering Eastern and
Southeast Asia as a whole. These CEPs had a demonstration effect, and the Philippines began in
January 2001 to discuss, not negotiate, similar CEPs with the US and Thailand with Korea.
There are five reasons why at the beginning of the 21st century, bilateral trade pacts and
financial initiatives jumped into action. The first and most important is the Asian financial crisis
(1997-98), which has mauled the region as a whole. Asian economies were affected by the
decline of the leading financial powers to help the crisis. As noted earlier, there persisted on
this count a lot of disappointment among Asian policymakers. Second, the Seattle debacle and
resistance to the launch of the next WTO round of MTNs have caused the Asian economic
policymakers a great deal of concern. They became particularly anxious about their globalized
economic sectors such as telecommunications, banking and finance, information technology,
agriculture, and domestic airlines. They hoped that tight bilateral trade pacts could
complement multilateral arrangements. It may not be correct to expect bilateral trade pacts to
correct regional ills, as it would take more than bilateral deals to resolve these problems
(Bhatia, 2000). Third, one of the factors was always the inspiration given by European
integration and the SEM. Fourth, regional political and economic leadership was deprived of the
poor quality of leadership on the global economic arena provided by the US and the EU
(Areddy, 2000; Economist, 2000). Fifth, impatience with the APEC and ASEAN impasse was
another cogent motivation behind the bilateral free trade agreements. Some of the perceptions
may not be correct, but Asia seems to have decided that either Washington or the West does
not want to be in the thrall. It does not reject multilateral institutions, nor does it reject
international capital markets. It would continue to be involved in trade and investment
globalization. It seems, however, that Asian economies have planned to work within the global
economic framework, but are a third pillar of the global economy that is more independent.
Not all recent initiatives are likely to be successful, but the changing mindset in Asia is
what matters. Asian economies, especially Japan, have become less willing to submit to US
leadership unconditionally. Partially defensive was Japan’s motivation behind regional
initiatives. It understood that the euro’s development could eventually push the world into two
currency blocks, squeezing the yen out of the global currency markets. It was a healthy
development for the region if that led Japan to play a more effective and constructive role of its
own in Asia. As the largest regional economy and the second largest global economy, Japan is
apt to play a leading role in Asia over the long term and contribute to regional stability.

CONCLUSION
Somewhat paradoxically, regionalism was on the rise during the 1990s in an otherwise
globally integrating economy. The new regionalism has several distinctive characteristics, which
are discussed in this paper. RTAs take different forms, and each has different implications and
nuances. RTAs are not only accepted by TNCs, but they also have been playing a proactive role
in promoting them. One of the useful instruments was FDI made by TNCs while the other was
regional production networks set up by them. RTAs provide increased access to corporations
and TNCs. Large TNCs tended to move RTAs towards economic integration that was deep.
Intraregional trade played an effective role in promoting regional integration, particularly in
Asia It also impacted the economic structure of the regional economies. The market expansion
that took place in Asia was both vertical and horizontal. Regionalism in the Asia-Pacific region
was essentially market-driven. Although there are not many RTAs in the Asia-pacific region, the
existing ones do show an impressive variety. In chronological order, they include ANZ-CER
agreement, AFTA, APEC and SAPTA. The history and objectives of these RTAs vary widely. Of
these, only ANZ-CER and AFTA can be treated as integrated RTAS. the other RTAs, some are
formal others are not. APEC is wedded to the concept of “open regionalism.” Now all of these
RTAS are successful. Asia economies did not display a great deal of enthusiasm for RTAs
formation until the end of the 20th century. Born out of a perception of a slow pace of global
integration, failure of the new round of ultilateral trade negotiations to take off in Seattle in
1999 and failure of APEC to achieve its objectives in a timely manner, initiatives for bilateral
trade agreements begun to rapidly multiply in the Asia-Pacific region in 2000 and 2001.

APEC
The forum of APEC was launched in 1989. Australian Prime Minister Bob Hawke launched
the idea of creating a multilateral forum to enhance economic cooperation between Asia and
Pacific economies. Australia and Japan co-sponsored the concept. APEC’s genesis lies in the
particular circumstances of the late 1980s. The EU promised to reinforce its customs union and
create SEM, Canada, and the US were negotiating NAFTA expansion of their free trade area,
and the Uruguay Round was stumbling. In a period when the failure of the multilateral trading
system was a real threat, Asian economies were afraid of being left out of the move towards
RTAS. Australia was concerned about being left out of an Asian regional body, which was being
suggested by Malaysia.
 APEC had a fairly humble beginning and was initially greeted with sufficient skepticism.
Initially, the basic objectives of the APEC forum were economic cooperation and consultation.
Although APEC was born as a regional arrangement of sorts, it had adopted the difficult, if
somewhat paradoxical, the mission of combating preferential regionalism. Accordingly,
members explored various ways in which regionalism can be open. As noted above, this kind of
open regionalism was pioneered by CER.
APEC began with foreign and economic ministers meetings and several relatively small
projects. Since then, however, it has grown in scope and prominence and, with the agreement
to hold annual summit meetings of heads of state, has achieved a more significant status. The
first such meeting was held in Seattle on Blake Island in 1993. At the 28th launch time, APEC
had twelve members. Five of them were industrial economies (Australia, Canada, Japan, New
Zealand, and the United States), six members of ASEAN (Indonesia, Malaysia, the Philippines,
Singapore, Thailand, and Brunei Darussalam) and the Republic of Korea. Between 1989 and
1994, six more countries joined APEC, increasing membership to eighteen (China, Hong Kong
SAR, and Taiwan in 1991 and Mexico, Papua New Guinea and Chile in 1994). A moratorium on
membership for three years was adopted in 1996. Peru, Russia, and Vietnam were admitted to
APEC as soon as it came to an end, bringing their membership to 21. The inclusion criterion was
that the aspiring member must be on the Pacific Ocean and have close relationships with
existing members as well as accepting the 2020 goal of trade liberalization (see Bogor targets
below). Although membership for the next ten years has now been closed, APEC represents the
largest and most diverse group of countries ever assembled. Spanning both sides of the Pacific
Ocean and incorporating two of the four global trade superpowers―the US and Japan―APEC
encompasses 40% of the world’s population in 2000, 54% of global GDP, and 42% of its trade.
Until 1994, despite the creation of the Secretariat of APEC and the Group of Eminent
Persons, APEC remained a rather loose consultative forum in line with the original goals behind
its creation. This was the prerequisite for ASEAN economies continued participation in APEC. It
was criticized as a mere “talking shop” by scholars in the early 1990s (Pomfret, 1995). Initially,
ASEAN members were hesitant to join APEC because they feared being overshadowed by a
larger group of large industrial economies. Since then, though, they have adopted the cause of
APEC as their own. Part of the responsibility for upgrading ASEAN PTA to ASEAN Free Trade
Area or AFTA was to join APEC. A significant development of the early 1990s was the more
active involvement of Australia in Asian economies and economic diplomacy.
APEC’s nature, training, and operating process differed fundamentally from that of the EU
or NAFTA. These differences came from the three main driving forces behind APEC’s creation.
First, post-war growth and integration had a unique process for Asian economies. As
explained above, this was the market-led process of economic integration. Second, there were
huge stakes in the global trading system in many of the regional economies. Despite their
diversity, dynamic Asian economies under the aegis of the GATT were more firmly committed
to the multilateral trading system than the other developing economies. In the GATT system,
they saw several tangible advantages. First, under the aegis of the GATT, they benefited from
lowering tariff barriers under different rounds of MTNs. Several of them also benefited from the
“special and differential treatment” under Part IV of the GATT Articles of Agreement. These
economies, therefore, enjoyed considerable scope for autonomy in domestic policy.
Moreover, while Asian economies remained avid GATT supporters, they looked with
suspicion at regionalism in other parts of the globe. After forming a formal RTA, they were
neither totally convinced of the benefits nor passionate (Lawrence, 1996). They considered
RTAs to be unnecessary dependence on large economies. To the extent that Mexico or Canada
depends on the US market, developing Asian economies did not depend on the Japanese mark
There was no political logic for the Asian economies that primarily brought the EU economies
together in the form of an inward-looking RTA. Unlike Europeans, the dream of eventually
becoming a United States of Asia was nurtured by a few Asians. To support such regional
arrangements, historical, cultural and economic differences between Asian economies are far
too high. Political power distribution in Asia has been and continues to be, highly skewed.
Japan’s economic prowess or China’s geopolitical power would long dominate the region. In the
context of APEC, the US would be economically and geopolitically the most powerful country.
These considerations have been important in shaping the Asia Pacific region’s major
regional arrangement initiative. Consequently, APEC was neither conceived as an RTA nor had a
treaty underpinning its plan for trade, liberalization. Funabashi (1995) accused APEC of “four
noun-searching adjectives.” This criticism was unfair as members of the APEC agreed to form a
“community.” They were also clear about their community definition. It was not meant to be a
quasi-federal arrangement community like the EU, nor was it intended to set up a large
organization. It was also not to be a common market or a customs union in the foreseeable
future. Instead, it was decided that APEC would promote trade and investment through a mix
of trade liberalization, trade facilitation, and economic cooperation policies. Initiatives to
streamline standards, improve customs procedures, coordinate competition policies, and
mediate disputes included trade facilitation. Economic cooperation included support for
development and cooperation on human resources, infrastructure, energy, and environment
projects. Trade facilitation related research under APEC is widely regarded as pioneering and
respectable, including by the WTO (Moore, 2000).
APEC progressed gradually ahead of its initial goals, better organized and structured,
starting with areas where members agreed. A significant point of time for APEC was 1993 when
the US hosted the first Seattle Economic Leaders Meeting and suggested that APEC aim to
create an Asia-Pacific economic community, something like an Asia-Pacific EU. Since then, APEC
has made significant progress in trade liberalization and facilitation. The ambitious Bogor
Declaration was adopted by members at the Sixth Ministerial and Leaders Meeting in 1994,
with specific targets for trade liberalization in the region. The 18 participating leaders declared
their intention to turn the APEC forum into a free trade and investment area. The goals
Included trade liberalization for the five industrial economies by 2010 and the remaining
members of the APEC by 2020. During the Seventh Ministerial and Leaders Meeting, the
guidelines for implementing the Bogor Plan were embodied in the 1995 Osaka Action Agenda.
During the formulation of the Manila Action Plan (Yamazawa, 2000), they were further refined
at the eighth meeting of ministers and leaders in 1996.
The commitment from Bogor presented both risks and opportunities. The main advantage
could be to achieve improved market access beyond what was feasible under WTO regulations.
APEC’s size has significant political implications. Lawrence pointed out that at a single point in
time, the GATT or WTO never set a complete schedule for achieving global free trade. When
APEC members committed themselves as a long-term goal to free trade, they are likely to focus
on making progress in small steps towards free trade. This would create momentum for trade
barriers to be reduced, starting with the least political resistance from sectors. This, in turn,
could push free trade into the global trading system.
Moreover, many Asian economies were concerned about being shut out of the NAFTA
market after NAFTA was created, but since both Canada and Mexico are part of APEC, an APEC-
wide free trade area would not allow that to happen. Similarly, some Asian economies
apprehended that the US might lose interest in the Asia – Pacific region, but the initiatives of
APEC would once again help to keep the US involved. Unlike these plausible advantages, the
risk lay in more promising and losing credibility in the process (Lawrence, 1996).
There are two remarkable APEC features. Unlike other free trade agreements, the
achievement of Bogor’s objectives has so far been based on (i) individual or national action
plans rather than rigid target application to all Member States, and (ii) concessions to all non-
Member Trading Partners in terms of reducing trade and non-trade barriers have been
extended. This is based on the open regionalism principle noted above 15. This strategy runs
contrary to the 1950s and 1960s closed regionalism. There are misperceptions about the term
open regionalism because there have been few attempts to define the term systematically.
Some people love an oxymoron. The argument went as follows: how can it be confined to a
region if an arrangement is open?
Two remarkable attempts were made to the President of the United States by the
Eminent Persons Group (APEC, 1994) and the Council of Economic Advisors (CEA. 1995). There
are two similar definitions. The CEA definition reads as follows: “Open regionalism refers to
non-exclusive and open-minded multi-stakeholder agreements. First, it requires that multi-
stakeholder initiatives fully comply with Article XXIV of the GATT, which prohibits an increase in
common external barriers.
Moreover, plurilateral agreements do not require members to pursue additional
liberalization either on a reciprocal or unilateral basis with non-members. Since member
countries can unilaterally select their external tariffs, open agreements are less likely to develop
into competing blocs of bargaining. Finally, open regionalism implies that plurilateral
agreements both enable and encourage non-members to join. “At its Osaka meeting in 1995,
APEC formally embraced open regionalism and the Osaka Action Agenda was based on the
voluntary nature of the APEC process, an essential corollary to the idea of open regionalism
(APEC, 1995a). APEC took the view that liberalization can be achieved only through individual
members ‘ voluntary actions. As the members level of economic development was diverse, it
was believed that having one set of rules would not be effective for all members. This thought
was contrary to the WTO’s position, married to the principle of “single undertaking” and tariff
binding.
Accordingly, one of the most important open regionalism criteria is the freedom for
member countries to further liberalize unilaterally or on a reciprocal basis with non-members.
It should be noted that individual members are not allowed to lower their tariffs in a customs
union. A common customs union external tariff cannot be lowered unless all members agree on
it. Political commitments are voluntary under open regionalism and are not legally binding. This
voluntary liberalization strategy was considered unprecedented when adopted. In addition to
reducing tariffs and NTBS and removing barriers to trade in services, its comprehensive
coverage also requires harmonization of rules and standards and other facilitation measures.
Until a country group attempts to form an economic union, the last named ones will not be
attempted. All the eighteen members announced their action plans (LAP) during the APEC
meeting in Manila and started implementing IAPs in January 1997. Some scholars view these
features of APEC as positive and likely to lead to significant progress towards Bogor’s goals,
although with some modifications (Petri, 1997). Others, however, disagree and see these
characteristics as obstacles to serious liberalization and negotiations. The earlier apprehension
about the APEC forum persists in some quarters, and some analysts still believe that APEC can
be reduced to little more than a “chat forum” with such characteristics (Flamm and Lincoln,
1998).
It was noted above that APEC’s immediate agenda includes trade liberalization,
facilitation of trade and economic cooperation. Monetary and macroeconomic cooperation and
development projects and technical cooperation have been launched accordingly. Many of
these policy measures came from the deeper integration agenda and may be more feasible
than a formal RTA. In some areas, therefore, APEC could be more successful in achieving deeper
integration than in achieving shallow integration. The Pacific Business Forum, which was
formed after the Seattle Summit in 1993, promoted several of these issues with great
enthusiasm. This forum includes representatives of businesses from across the APEC region.
The business leaders also presented a vision paper that included, among other things, calls for
rapid trade liberalization, a peaceful investment code, facilitating customs procedures, setting
up a business-person visa, and setting up a small and medium-sized business foundation.
If the members of APEC go beyond tariffs and NTBs dismantling and consider agreements
on domestic practices that reinforce market forces, trade with an entry of non-members would
become easier, which in turn would have trade creation effect rather than trade diversion
effect. For instance, harmonized regulations, more efficient customs procedures, or increased
regulatory transparency would automatically help both insiders and outsiders in APEC. This
would also impart new meaning to open regionalism. In many Asian economies interest in
deregulation has grown. Some countries might find it easier to undertake these measures if
they were part of a regional agreement.
APEC declarations and statements recognized the superiority of the global trading system,
permitted by the WTO, and stressed the need to implement regional trade liberalization within
the WTO, framework. APEC Ministerial Declaration recognized the WTOS primacy and the need
to strengthen the multilateral trading system after the conclusion of the Uruguay Round. (The
1995b APEC). After 1996, the APEC changed its position and called for regional and multilateral
cooperation on trade liberalization. At this stage, APEC appeared more inclined towards its
regional identity and was even keen to highlight its WTO differences. Ministers noted in the
Vancouver Declaration that”... regional and multilateral trade and investment initiatives
complement and support each other” (APEC, 1997)
The gravity model was maintained until 1992 for the APEC trade flows for the members of
the APEC (Frankel and Wei, 1997)
Results reveal that the APEC group, which includes the US as its member, is one of all
possible implicit trade blocs in the Asia-Pacific region that shows the strongest intra-regional
bias. This exercise of regression revealed that two members of the APEC trade 200 percent
more than two economies otherwise identical. Controlling for an APEC effect has significantly
reduced the coefficient on the bloc in East Asia: it has become marginally significant at 10
percent. This suggested that East and Southeast Asian economies did not trade substantially
more than other APEC countries, although they traded a lot among themselves. There was a
pan-Asia block effect even after controlling for an APEC effect that exhibited a strong inward
bias.
Regionalization has late, lost momentum through APEC, and APEC has become almost
moribund, if not an “ailing regional organization.” One of the concerns at the APEC leaders’
Summit of 2000 was backsliding on the agreements made during the previous APEC meetings.
As the APEC agreement to achieve free trade and investment by 2010 and 2020 was non-
binding and voluntary, in the wake of the 1997 Asian crisis, this agenda fizzled, flapped and
collapsed completely. Serious problems faced the IAPs. In the absence of credible progress
towards the objective of free trade and investment, some members of the APEC are turning to
subregional arrangements to achieve these objectives (discussed below). The private sector,
APEC Business Advisory Council found in 2000, in an assessment of three key areas, that in
many cases the IAPs contained incomplete information on how members intend to fulfill their
commitments. The culpability for the stagnation of APEC lies with Japan and the US, the two
largest economies. They showed little leadership, which APEC so desperately needed. US
policymakers allowed global liberalization to stagnate as they lost domestic policy control by
pandering to particular interests. Japan has blocked attempts to pursue a sectoral liberalization
approach within APEC (Wain, 2000). Partly out of frustration with APEC, members have been
pursuing increasingly alternative institutional arrangements to achieve their priority economic
goal. They took the form of sub-regional commercial and financial pacts, discussed in detail
below. These initiatives took place primarily within East Asia and the Pacific but also included
some of the APEC’s trans-Pacific members. To ensure that the proliferating sub-regional
arrangements do not eventually serve to fragment the APEC initiative, immediate scrutiny of
the organization’s progress and achievements is warranted.

NAFTA+3.ASEAN+3
Grouping is the newest idea in regional integration in Asia. In 1998, this group held its first
summit and two more in the years that followed. The membership includes the economies of
ASEAN, plus China, Japan, and (Republic of) Korea. The solutions applied by the IMF and
Western governments to resolve the Asian crisis disappointed Asian governments. Therefore,
regional governments turned to creating home-grown solutions to their potential future
economic and financial problems. The failure to reform the global financial architecture has
created a push for greater cooperation between ASEAN+3 countries in the monetary and
economic spheres (FT, 2000). This group has started to hold regular meetings with their finance
ministers and has a “vision group” to guide their work. With more sophisticated machinery than
NAFTA (Economist, 2000b), it has become the most active RTA outside Europe. The coin’s flip
side is that it is still at an early stage and the three new partners have not been integrated. In
financial matters, ASEAN+3 is proceeding faster than in trade. This emphasis is blamed for the
Asian crisis of 1997-98. Members of this group announced a regional system of currency swaps
in the Chang Mai Declaration (1999) to help them deal with future Asian crises. This facility was
created for economies of ASEAN+3, although there was no formal institution. This plan is similar
to that drawn up in the early 1960s by the Group of Ten Industrial Nations when they faced the
post-war era’s first global monetary hiccups. The institutions of Bretton Woods expressed
strong support for expanding financial cooperation on the Chiang Mai initiative. They see it as a
complement to the IMF’s financial aid to the Asian economies that undertook financial and
corporate restructuring (Kohler, 2001).
Also evolving are sub-regional financial structures. ASEAN has created a surveillance
mechanism to use sophisticated early-warning indicators to try to anticipate and prevent future
crises. The economies of Northeast Asia are jointly keeping an eye on short-term movements of
capital in their economies and nearby. Much is said about common currency baskets and joint
intervention arrangements to replace both the past discredited dollar pegs and the expensive
free floats imposed by the Asian crisis. Japan has actively promoted the creation of a currency
swap network to protect Asian economies from Speculative attacks (FT, 2000).
Although the Asian Monetary Fund (AMF) proposal was flatly rejected in 1998, it started
to evolve in the latter half of 2000. China criticized Japan’s original AMF proposal, backed the
initiative firmly in 2000. Hong Kong SAR and the Philippines proposed an Asian currency unit
(ACU) following the euro. This is an idea that will come to fruition for years. However, it
wouldn’t even have been taken seriously by any of the group members a few years ago. As
credible economic initiative, ASEAN+3 emerges. It will only be evident in the medium term
whether it would be a force to reckon with.

SMALLER RECENT INITIATIVES

As mentioned above, during the year 2000 there was a new fervor for bilateral and
plurilateral free trade agreements. Australia Canada, Chile, Japan, Mexico, South Korea, New
Zealand, Singapore,
and the United States rushed to sew up a web of bilateral free trade deals. Japan has
historically relied entirely on the multilateral system, but now it is actively pursuing preferential
trade agreements with Korea, Mexico, and Singapore, Japan and Korea expect to later use their
bilateral deals as a bridge to other constellations of free trade. New Zealand was Singapore, the
other two Asian economies that traditionally relied on the multilateral trading system and
negotiated preferential trade agreement. On 14 November 200017, the two economies signed
a bilateral agreement establishing a “Closer Economic Partnership” or CEP. The deal was
characterized as a model for another bilateral agreement by the two partners. The provisions of
the CEP agreement include free trade in goods, clear rules of origin, prohibition of export
subsidies, open position on investment, free trade in services to be phased in over ten years,
harmonization of professional qualifications and technical standards and access to all
government procurement in the other country.
Singapore and the US also agreed to negotiate a free trade agreement in November 2000
(de Jonquieres, 2000). Singapore is also exploring bilateral trade opportunities with Canada and
Korea. Likewise, New Zealand tried to negotiate these CEP deals with Chile and the United
States in early 2001, and Australia negotiated similar deals with the United States. Likewise,
AFTA negotiates a connection deals the CER. A free-trade area of Northeast Asia is being
studied in China, Japan, and Korea. It is likely to merge with AFTA covering Eastern and
Southeast Asia as a whole. These CEPs had a demonstration effect, and the Philippines began in
January 2001 to discuss, not negotiate, similar CEPs with the US and Thailand with Korea.
There are five reasons why at the beginning of the 21st century, bilateral trade pacts and
financial initiatives jumped into action. The first and most important is the Asian financial crisis
(1997-98), which has mauled the region as a whole. Asian economies were affected by the
decline of the leading financial powers to help the crisis. As noted earlier, there persisted on
this count a lot of disappointment among Asian policymakers. Second, the Seattle debacle and
resistance to the launch of the next WTO round of MTNs have caused the Asian economic
policymakers a great deal of concern. They became particularly anxious about their globalized
economic sectors such as telecommunications, banking and finance, information technology,
agriculture, and domestic airlines. They hoped that tight bilateral trade pacts could
complement multilateral arrangements. It may not be correct to expect bilateral trade pacts to
correct regional ills, as it would take more than bilateral deals to resolve these problems
(Bhatia, 2000). Third, one of the factors was always the inspiration given by European
integration and the SEM. Fourth, regional political and economic leadership was deprived of the
poor quality of leadership on the global economic arena provided by the US and the EU
(Areddy, 2000; Economist, 2000). Fifth, impatience with the APEC and ASEAN impasse was
another cogent motivation behind the bilateral free trade agreements. Some of the perceptions
may not be correct, but Asia seems to have decided that either Washington or the West does
not want to be in the thrall. It does not reject multilateral institutions, nor does it reject
international capital markets. It would continue to be involved in trade and investment
globalization. It seems, however, that Asian economies have planned to work within the global
economic framework, but are a third pillar of the global economy that is more independent.
Not all recent initiatives are likely to be successful, but the changing mindset in Asia is
what matters. Asian economies, especially Japan, have become less willing to submit to US
leadership unconditionally. Partially defensive was Japan’s motivation behind regional
initiatives. It understood that the euro’s development could eventually push the world into two
currency blocks, squeezing the yen out of the global currency markets. It was a healthy
development for the region if that led Japan to play a more effective and constructive role of its
own in Asia. As the largest regional economy and the second largest global economy, Japan is
apt to play a leading role in Asia over the long term and contribute to regional stability.

CONCLUSION
Somewhat paradoxically, regionalism was on the rise during the 1990s in an otherwise
globally integrating economy. The new regionalism has several distinctive characteristics, which
are discussed in this paper. RTAs take different forms, and each has different implications and
nuances. RTAs are not only accepted by TNCs, but they also have been playing a proactive role
in promoting them. One of the useful instruments was FDI made by TNCs while the other was
regional production networks set up by them. RTAs provide increased access to corporations
and TNCs. Large TNCs tended to move RTAs towards economic integration that was deep.
Intraregional trade played an effective role in promoting regional integration, particularly in
Asia It also impacted the economic structure of the regional economies. The market expansion
that took place in Asia was both vertical and horizontal. Regionalism in the Asia-Pacific region
was essentially market-driven. Although there are not many RTAs in the Asia-pacific region, the
existing ones do show an impressive variety. In chronological order, they include ANZ-CER
agreement, AFTA, APEC and SAPTA. The history and objectives of these RTAs vary widely. Of
these, only ANZ-CER and AFTA can be treated as integrated RTAS. the other RTAs, some are
formal others are not. APEC is wedded to the concept of “open regionalism.” Now all of these
RTAS are successful. Asia economies did not display a great deal of enthusiasm for RTAs
formation until the end of the 20th century. Born out of a perception of a slow pace of global
integration, failure of the new round of ultilateral trade negotiations to take off in Seattle in
1999 and failure of APEC to achieve its objectives in a timely manner, initiatives for bilateral
trade agreements begun to rapidly multiply in the Asia-Pacific region in 2000 and 2001.

Name: Section: ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟ ͟

ACTIVITY 9

DIRECTION: Supply the meaning of the following acronyms and give their main purpose or
mission.

1. ASEAN
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
2. APEC
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
3. WTO
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
4. AFTA
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
5. TNCs
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
6. EU
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
7. CACM
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
8. RTAs
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
9. NAFTA
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟
10. EEC
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟͟
͟