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ASEAN formed the first RTA in 1992, and by the turn of the decade, ASEAN was signing or negotiating free trade agreements (FTAs) with Japan, China, South Korea, India, Australia–New Zealand, and the European Union.
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This region is responding to pressures from globalization, regionalism in the Americas and Europe, the rise of China and India, improved political relations in the region with the end of the Cold War, as well as market-driven trade and investment integration and the emergence of production networks. It is argued that despite its inherent limitations it is important for ASEAN countries to remain primarily committed to the principles of WTO and the process of multilateral trade negotiations.Įast Asia is catching up with the rest of the world in establishing regional trade arrangements (RTAs). What implication does these RTAs have for the WTO and ASEAN countries? Should ASEAN countries give regionalism priority over the WTO-based multilateral approach? To answer this questions, this paper will first summarize the motivations behind the formation of RTAs before presenting the merits and demerits of RTAs as an approach to achieve universal free trade and maximize developing countries' welfare. Most WTO members are now proposing new regional trading arrangements (RTAs), such as free trade agreements (FTAs). Despite its achievements since the first round of multilateral trade negotiations was held, the effectiveness of the process has been called into question. The fact that most countries are members of WTO reflects the worldwide belief in the benefits of a global free trade. The World Trade Organization (WTO) (formerly GATT) was established primarily to achieve free trade across the globe based on the principle of non-discrimination and the process of multilateral trade negotiations. Overall, we find that the ASEAN+3 CU with the minimum CET are the most desirable type of RTA for both East Asian member countries and the world economy as a whole. The East Asian CUs adopt a system of common external tariffs (CET) based on simple-averaged, import-weighted, consumption-weighted, and minimum rates. In addition to analyzing the trade effects of RTAs according to type, we quantitatively evaluate the welfare and output effects of CUs for East Asia (an ASEAN+3 CU and a China-Japan-Korea CU) compared to FTAs by applying a computable general equilibrium model analysis. In general, we find that a CU is a superior type of RTA to an FTA in terms of creating more intra-bloc trade. We quantitatively estimate the trade effect of CUs and FTAs by adopting a Gravity regression analysis. This paper is an attempt to fill this gap by applying two methodologies: an ex ante simulation approach and an ex-post econometric approach. However, there is a lack of empirical evidence to support the second-best theory of customs unions. Most of the theoretical analyses on the formation of CUs highlight stronger positive welfare effects compared to FTAs. As an alternative policy option to avoid the negative effect of trade deflection, customs unions (CUs) should be examined. In particular, the complicated web of hub-and-spoke type of overlapping free trade agreements (FTAs) can result in high costs for verifying rules of origin. The spaghetti bowl phenomenon expected from the proliferating East Asian regional trade agreements (RTAs) is worrisome. The authors suggest to make similar calculations for other countries to support the revealed pattern. Another important result of the study is that it provides the list of the first-priority countries for the new-coming FTAs for Russia and the EAEU partners in terms of efficiency in generating trade, that are - Egypt, Turkey, Algeria, Republic of Korea and Mongolia. Authors come to a conclusion that the already signed Russian RTAs and newly planned Russian common FTAs on behalf of the EAEU have a potential to generate trade. The focus of the methodology of the study lies in computations of three trade indices: export significance index (suggested by authors and based on the revealed comparative advantage index), trade intensity index and symmetric trade introversion index, which were calculated for the totality of trade partners of Russia for 2019 (193 countries) in order to identify the most promising countries to conclude new FTAs. In this study, the assessment is made of the significance for the Russian domestic policies of the already signed and planned FTAs. Setting up the RTAs has become an important priority of the EAEU’s common trade policy. However, after the EAEU creation in 2015, trade policies of the member countries have changed.
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Russian involvement in RTAs until recently was modest. The Regional Trade Agreements (RTA) as a legal format of trade between countries has been actively developed within the last decades.