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EU-Asia Free Trade Areas? Economic and Policy Considerations

Author

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  • Michael G. Plummer

    (Asian Development Bank Institute)

Abstract
In this paper, we analyzed key aspects of the changing economic relationship between the European Union (EU) and Asia, and explored the potential economic ramifications of deeper EU-Asian economic cooperation. We also investigated the possible costs to the EU of remaining disengaged from the Asian integration process and the likely impact of multi-nested EU-Asian trade agreements. Our empirical review of CGE models revealed trivial effects of several possible EU-Asian accords (e.g., EU-India, EU-ASEAN, EU-Republic of Korea). In part, this is a result of relatively small trade shares, open markets, and restrictions in the models, particularly in that they excluded behind-the-border effects. We also presented two CGE models that estimated the potential negative effects of Asian/Asia-Pacific regional accords on the EU, and likewise found small effects. Nevertheless, using a highly-disaggregated (partial equilibrium) approach, we argued that high-quality FTAs in Asia could be quite detrimental to the EU, particularly in key sectors. The push toward a Free Trade Area of the Asia Pacific could be particularly worrisome to the EU. We therefore concluded that it makes sense for the EU to be more aggressive in pursuing prospective trade agreements with Asia.

Suggested Citation

  • Michael G. Plummer, 2010. "EU-Asia Free Trade Areas? Economic and Policy Considerations," Trade Working Papers 23125, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:tradew:23125
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    File URL: http://www.eaber.org/node/23125
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    References listed on IDEAS

    as
    1. Michael Plummer & Ganeshan Wignaraja, 2009. "Integration Strategies for Asean: Alone, Together, or Together with Neighbors?," Palgrave Macmillan Books, in: Joseph Francois & Pradumna B. Rana & Ganeshan Wignaraja (ed.), Pan-Asian Integration, chapter 3, pages 163-206, Palgrave Macmillan.
    2. Michael G. Plummer, 2007. "‘Best Practices’ in Regional Trading Agreements: An Application to Asia," The World Economy, Wiley Blackwell, vol. 30(12), pages 1771-1796, December.
    3. Rana, Pradumna B., 2006. "Economic Integration in East Asia: Trends, Prospects, and a Possible Roadmap," Working Papers on Regional Economic Integration 2, Asian Development Bank.
    4. Mordechai E. Kreinin & Michael G. Plummer, 2002. "Economic Integration and Development," Books, Edward Elgar Publishing, number 2426.
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    Cited by:

    1. Kuwayama, Mikio & Rosales V., Osvaldo, 2012. "China and Latin America and the Caribbean: building a strategic economic and trade relationship," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2599 edited by Eclac, May.

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    More about this item

    Keywords

    EU-Asian economic cooperation; multi-nested trade agreements; CGE; free trade area;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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