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Abstract

This paper provides a summary of the various concerns surroundingregionalism. First, it provides a brief review of regionalism with a generalexplanation of what regionalism means, especially in terms of regional tradeagreements. Second, it discusses the various benefits that allegedly arise due toregionalism. Third, in contrast, the disadvantages and problems associatedwith regionalism are discussed. In conclusion, it seeks to explain theimplications of regionalism in terms of economic integration, internationaltrade policies and the future of AsiaEurope relations. It suggests thatregionalism is inexorably progressing, that in the end we will all tend to sharein its benefits and that countries particularly in Asia and Europe shouldprepare themselves in light of these developments.

Introduction

Regionalism remains a controversial issue in our globalizing world. The speedof economic integration has further placed the prospects of regional basedmovements at the forefront of international policy circles. The forces ofregionalism are playing a critical role in shaping the international trade regimethat is emerging. Most of the countries in our world in fact are members of atleast one type of regional trade agreement whether it is a customs union, freetrade area or other type of preferential arrangement. In the end, however, thelingering question remains as to whether the growth of these regional groupshelps or hinders the development of our world, the multilateral trading systemand its members.

The ongoing debates surrounding the potential benefits and ills ofregionalism revolve around a variety of issues. Is regionalism a good idea?Who, if anyone, are the beneficiaries? Is regionalism-based trade policyinevitable? What should developing countries do? What kind of effect willregionalism have on Asia or Europe? How should we prepare ourselves ifinternational relations are largely influenced by regionalist concerns? How isregionalism related to globalization?

Sub-regionalism, regionalism,trans-regionalism. Implications for economicintegration and international trade policies

Joongi KimGraduate School of International Studies, Yonsei University, Seoul, Korea

ASIAEUROPE

JOURNAL Springer-Verlag 2003

Asia Europe Journal (2003) 1: 183196

Background of regionalism

What is regionalism?

Based on such classical economic theories as comparative advantage, the neo-classical economist tells us that potentially all countries can benefit throughfree and fair trade with each other.1 Evidence proves that unfettered trade willhelp countries develop and will ultimately lead to economic growth. To thisend, countries have voluntarily agreed to follow an international trade regimeunder the auspices of the General Agreement on Tariff and Trade (GATT) andthe World Trade Organization (WTO). The ultimate goal under this newregime is to lower trade barriers on a multilateral basis for the mutual benefitof all.

Trade-based regionalism has progressed for similar reasons on similarlines. The primary difference being that regionalism occurs on a plurilateral orbilateral basis of reducing trade barriers among countries within the sameregion rather than on a multilateral level with all countries involved. The mostprominent form of regionalism remains the regional trade agreement (RTA).Under an RTA, countries within the same region get together to grant eachother preferential benefits in terms of market access in an exclusive manner.Countries proceed in this manner typically because they feel closer toneighbouring countries and usually have higher trade volume within the sameregion. Those countries outside the region that are not part of an RTA thus aredenied these preferential benefits.

RTAs are therefore one of the most conspicuous special exceptions to oneof the cornerstone principles of the WTO, the granting of Most FavouredNation (MFN) status to member countries. Under MFN, all member countrieswithin the WTO are supposed to be treated the same in a non-discriminatoryfashion.2 But, under a RTA this dynamic changes. For instance, supposeMexico charges a tariff rate of 10% for roses. Then under MFN it must chargeall WTO member countries the same rate of 10%. But, because Mexico signedthe North American Free Trade Agreement (NAFTA) with Canada and the U.S,it can grant a preferential rate to roses from Canada or the U.S. for less than the10% rate.3

Nevertheless, it should be noted that once an RTA is established the totalamount of intra-RTA trade flows that are subject to preferential treatment arenot as large or immediate as might be expected for a variety of reasons. First,many tariffs are already MFN-bound at zero. For instance, among the Quadcountries consisting of Canada, E.U., Japan and the U.S. the share of importsentering under bound MFN zero rates already ranges from about 25% for Japanto somewhat over 40% for the E.U.. In addition, as one might expect mostRTAs tend to exclude the most sensitive sectors such as agriculture, whichminimizes the potential preferential benefits. Some countries even choose togive up free-trade treatment because the MFN duty is less than the cost of

1 David Ricardo (1817) On the Principles of Political Economy and Taxation2 Art. I, General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh AgreementEstablishing the World Trade Organization, Annex 1A in THE LEGAL TEXTS, 33 ILM 1154(1994) [GATT 1994]3 North American Free Trade Agreement, Dec. 17, 1992, 32 I.L.M. 296 and 32 I.L.M. 605 (1993)

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complying with the burdensome rules of origin and other administrativerequirements. Finally, most RTAs include a transition period of generally up toten years for the phasing in of tariff reductions on more sensitive products anddelays any actual effects for a considerable time.

All in all, regionalism is considered to be preferable to multilateralism inpolitical terms. A government that is part of an RTA arguably has more controlover the distribution of gains among sectors, and can more easily protect lesscompetitive industries. When regional blocs are relatively less institutionalised,and nations can negotiate specific terms by sector or issue, preferential tradearrangements can be more easily utilized politically. From a politicalstandpoint, therefore many countries link the economic restructuring processto a broader scheme of regional integration.

In economic terms, however, multilateralism is argued to be the optimalpath toward maximum efficiency and economic growth. Regionalism thereforebecomes an unnecessary distortion. One of the critical issues that generateconsiderable interest from an economic perspective of course is whether RTAslead to a dynamic time-path or not. In this context, the question focuses onwhether the welfare costs imposed on non-members of RTAs cause fractureswithin a large region or do they encourage a further conglomeration ofdisparate blocs thus leading to a gradual elimination of barriers. If a dynamictime-path can found to exist through regionalism that promotes convergenceand harmonization, this could overcome the economic waste that is perceivedto exist.

Trends of regionalism

As of March 2002, 168 RTAs are known to be in force throughout the world.4

From a historic standpoint, the first wave of regionalism occurred in the 1950sand was ignited by the creation of the European Communities in 1957. At thetime, however, it did not expand beyond the bounds of Europe. In fact, it is

Fig. 1. RTAs notified to the GATT/WTO (19482002)

4 http://www.wto.org

Sub-regionalism, regionalism, trans-regionalism 185

significant to note that most RTAs have been concluded in the past 10 years.Since the establishment of the WTO in January 1995, for instance, a 125 newRTAs have been notified to the WTO, at an average of 15 notifications everyyear. Proliferation of RTAs has proceeded on an explosive level since then.This contrasts sharply with an average of less than three notifications per yearduring the entire four and half decades of the GATT-period before 1995. Thenetwork of RTAs interconnecting the globe in fact is now highly diversifiedwith many countries being members of several agreements at the same time. Interms of geographic distribution and based upon historical origins, RTAs stillcan be traced back to Europe. Nearly 60% of the RTAs notified to the WTOthat are in force at the end of 2000, for instance, were concluded amongEuropean countries.

The leading RTAs of our time include such well known arrangements as theEuropean Union (EU), the European Free Trade Association (EFTA), the NorthAmerican Free Trade Agreement (NAFTA), the Southern Common Market(MERCOSUR)5, the Association of Southeast Asian Nations (ASEAN), FreeTrade Area (AFTA)6, and the Common Market of Eastern and Southern Africa(COMESA)7 and many others.

A wide variation can be found in the percentage of trade that countriesderive from those that are fellow RTA partners and those that are not. Anotherimportant fact is that RTAs are not a phenomenon limited to developedcountries. Overall, it should be noted that most developing countriesparticipate in RTAs. RTAs concluded among developing countries in factaccount for about 3040% of the total RTAs estimated to be currently in force.In previous rounds, developing countries attempted integration almostexclusively with other developing countries. In more current negotiations,

Map 1. Participation in RTAs in force as of March 2002; Boonekamp, p. 14

5 Treaty Establishing a Common Market, Mar. 26, 1991, Argentina, Brazil, Paraguay, Uruguay,30 I.L.M. 10416 Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEANFree Trade Area (AFTA), Jan. 28, 1992, art. 9, 31 I.L.M. 513, 520 (1992)7 http://www.comesa.int/backgrnd/backindex.htm

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FTAs are also being proposed between developing and developed countries.This is clearly a new dimension. Jordan and the U.S., Mexico and the E.U., theFormer Yugoslavia Republic of Macedonia (FYROM) and EU are some leadingexamples.

At the same time even among developing countries, regional experiencesdiffer considerably. East and Southeast Asia and Latin America for instance,differ considerably when compared to the approach taken by Africa. Countrieson the African continent when pursuing regional initiatives have tended tofocus on the establishment of customs unions or common markets, aggregat-ing a large number of countries over long transition periods that often last aslong as 20-30 years. Relatively, they do not have a wide network of bilateralRTAs. Countries in East and Southeast Asia instead, have, at least until recentlysought much more limited objectives usually in the form of free trade areas.Latin American countries on the other hand seem to have chosen a rather moremixed approach in their preferential trade arrangements with several customsunions and plurilateral regional initiatives in formation, but concomitantlybacked-up by an extensive network of bilateral RTAs.

Geographical distance need not lead to insignificant amounts of trade or theestablishment of RTAs. In the case of Africa and South Asia, for instance, theyexport 95% of their goods outside their regions. In the Western hemisphere,trade of most Latin American countries is very diversified as well. ExcludingMexico, roughly 55% of Latin Americas exports go to regions other than theWestern hemisphere. This suggests that preferential trade agreements cantranscend geographical location. Some examples would be Mexico-Israel,Canada-Chile, and Korea-Chile.8

Map 2. Projected participation in RTAs in 2007; Boonekamp, p. 15

8 Until recently, Korea had the dubious distinction of being the only WTO member countryin the world that was not part of an RTA, but finally signed an RTA with Chile on February 15,2003.


Free trade agreement

Free Trade Agreements or free-trade areas under the GATT/WTO arespecifically understood to mean a group of two or more customs territories inwhich the duties and other restrictive regulations of commerce are substan-tially eliminated.9 As of March 2002, the most common category of RTA is byfar the free trade agreement (FTA), accounting for over 70% of all RTAs.Among these, approximately half of all free trade agreements are bilateralagreements between two countries. Free trade agreements therefore represent amore preliminary stage of regionalism relative to customs unions.

The trend towards the conclusion of free trade agreements, which require alesser degree of integration and are faster to conclude, has intensified in recentyears. FTAs have thus been driving the expansive growth of RTAs as a wholesince the establishment of the WTO in 1995. The greatest concentration of thesefree trade agreements originated and remains in Europe. Overall, experts evenpredict that this concentration and consolidation of RTAs in Europe willcontinue over the next five years, rather than a net expansion of larger blocsoccurring.10 More recently, it should be noted that FTAs are also beingconcluded between developed and developing countries on a NorthSouthbasis beyond the traditional NorthNorth or SouthSouth paradigms. Perhaps,the most successful and prominent NorthSouth FTA would be consideredNAFTA.

Free trade agreements usually have their own dispute settlement proce-dures. Hence, the RTAs dispute settlement process can be viewed as beingeither duplicative to the WTO dispute settlement process or supportive in thatif settled early it can relieve the overloaded administrative burden at the WTO.Another problem that is cited is that dispute settlement bodies establishedunder RTAs frequently split upon the nationality of the members, thusfragmenting the potential for dispute resolution.

Customs unions

In terms of RTAs, customs unions go a step further than free trade agreementsand not only require substantial reduction of tariffs internally among membercountries but also provide for the establishment of a common external tariffand harmonization of trade policy vis-a`-vis non-member countries.11 The pre-eminent example of customs unions in our world remains the European Unionand to some extent MECOSUR as established between several Latin Americancountries. A customs union requires a common external tariff and, givenGATT bindings on most tariffs, ensures that all tariffs come down to the lowestlevel prevailing in the union at the time of its formation. Member countriesthus have to substantially liberalize their trade regimes to reach a commonexternal tariff. In other words, in a customs union such as the EU a product

9 Art. XXIV, para. 8(b). GATT 199410 Clemens Boonekamp, Regional Trade Integration Under Transformation, Seminar onRegionalism and the WTO, WTO Secretariat, Geneva, Apr. 26, 2002, p. 611 Art. XXIV, para. 8(a). GATT 1994

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such as perfume that comes from a non-member country outside the bloc willbe charged the same tariff rate no matter which E.U. country imports it.12

As a result, because of this additional process of establishing a commonexternal tariff with all countries that trade with the bloc, customs unionsarrangements naturally often take much longer to negotiate. They alsofrequently have long implementation phases relative to FTAs. Overall, customsunion agreements account for approximately 9% of all RTAs. The process,therefore, can be viewed as a much more advanced stage of economicintegration that more closely approximates the desired multilateral approachto trade liberalization. From this perspective, some suggest that to promotemultilateralism, FTAs should be restricted as much as possible and countriesshould be encouraged to adopt only customs unions.

Investment treaties

Another form of regionalism can be found in investment treaties. Under atypical Investment treaty, investments of nationals and companies from eithermember country mutually receive the better of national treatment or most-favoured-nation (MFN) treatment. This is granted both at the establishmentstage of the investment and in subsequent stages. Under a treaty, investmentsare guaranteed freedom from performance requirements such as requirementsto use local products or to export local goods. Hence, investment treaties arenot only negotiated on a bilateral or plurilateral basis among several partiesbut they focus solely on investments and not only on the trading of goods forinstance.

Within investment treaties, most of them also allow sectoral exceptions tonational and MFN treatment. Exceptions are typically designed to protectpolitically sensitive interests and to accommodate the derogations fromnational treatment and MFN treatment in domestic law. Exceptions typicallycan include for instance such sectors as air transportation, ocean and coastalshipping, banking, insurance, energy and power production. Except forownership of property, MFN exceptions are based on reciprocity provisions ingovernment laws and regulations.

Investment treaties of course pay particular attention to the regulation ofexpropriation by the home country. Expropriations for instance must occuronly in accordance with international legal standards. In other words, theymust occur for a public purpose in a non-discriminatory manner under dueprocess of law. Payment of prompt, adequate, and effective compensation mustbe granted in return for the expropriation. With regard to repatriation,investments are guaranteed the unrestricted transfer of funds in a freelyconvertible currency. With regard to disputes, nationals and companies, ininvestment disputes with the host government, have access to bindinginternational arbitration, without first resorting to domestic courts.

12 Of course the E.U. has integrated further and most member countries have evenestablished a European Monetary Union with not only a single currency, but also moresignificantly a single monetary policy determined by the European Central Bank


Given the similarity of issues and purpose, investment treaties while aslightly different breed, also represent a form of burgeoning regionalism.Bilateral investment treaties (BITs) act as a catalyst for mutual cooperation forinstance and sometimes precede many bilateral free trade agreements.

Merits of regionalism

Trade creation

One of the frequently cited gains from RTAs potentially comes from the effectsof trade creation. Trade creation is said to occur when a country with thecomparative advantage in a particular product is included within a particularRTA. For instance, if Brazil has a comparative advantage in leather productsand forms an RTA with Chile and Argentina, Chile and Argentina will lowertheir tariff barriers associated with leather products due to the RTA. Tradecreation is said to occur because of the RTA since Brazil will therefore be ableto capitalize on its competitive leather products based upon expanded exportsto Chile and Argentina. In this manner, regional preferential trade agreementspromote the interests of trade liberalization. The effects of trade creation areperceive to be greater than any contrary effects because countries will tend toestablish RTAs and trade far more with countries that have a greatercomparative advantage.

Building blocks for multilateralism

As history demonstrates, multilateral trade negotiations themselves are adaunting task that can take years to evolve. These prospects have grown morechallenging especially given the rapid increase in the membership of the WTO.Since the Kennedy Round that concluded in 1967, almost 100 countries, forinstance, have joined the GATT/WTO system. Multiply this by the number ofgoods, services and issues subject to negotiation and the practical difficultiesthat arise are endless. It is thus suggested that a division of the world intotrading blocs such as Europe, the Americas, and Asia is a more efficientmethod to ultimately achieve multilateral free trade. Under this framework,negotiations for trade liberalization can proceed far more easily and quicklywhen conducted among three parties, for instance, rather than through thecacophony of 150 different trade representatives each with their own agendaand interests. It is far more simple and efficient.

Regional agreements can also allegedly proceed on a bilateral or plurilateralbasis and accelerate and provide the momentum to deepen trade liberalization.Many believe that that complex policy issues such as services, investment,intellectual property protection, competition policy, technical standards andgovernment procurement can better be resolved among a limited circle of like-minded friends rather than a diverse multitude of different countries. RTAscan act to stimulate growth and demand for extra-regional exports for thosethat belong to the bloc.

From a different perspective, regional-based preferential agreements mighthelp attract inward-looking regimes to the multilateral trading system. Many

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countries face considerable domestic political recalcitrance against free tradeinitiatives. These places might feel more comfortable negotiating RTAs withregional neighbours than with remote nations. It might be far more politicallypalatable, persuasive and economically smoother to proceed with countries ofthe same region where much greater degree of familiarity and hencepredictability exists. Countries will therefore be more willing to cede theirpolitical sovereignty in this case. Once these inward-looking countries canovercome this initial intransigence it could naturally help them open the doorto more full-fledged multilateral participation.

In addition to the potential reduction traditional tariff barriers, theproliferation of non-tariff barriers in the developed world has also maderegional integration an attractive policy option for many countries. Non-tariffbarriers are much more difficult to address, and thus by reaching anunderstanding on tariff issues, countries can then proceed to deeperintegration. Long an opponent of regionalism, countries such as the UnitedStates itself has begun to espouse the regionalist approach and remain some ofthe most prominent converts to the overall benefit of RTAs as building blocksto multilateral trade liberalization.

Enhances cooperation and security

Economic integration through regionalism can be viewed as another means toenhance international cooperation. In the former Soviet Union, for example,political disintegration has been replaced by regional economic integration andserves as an important link in maintaining trade and relations among thevarious republics. Currently, Russia, Kazakhstan, Belarus, Kyrgyzstan, andTajikistan are members of a customs union now named the Eurasian EconomicCommunity (EURASEC), which was signed in 2000. The more intertwinedcountries become through vast networks of trade, the more mutuallydependent they become and the more they will seek to preserve peace andsecurity. Thus, in terms of international relations, political instability isfrequently generated by regional conflicts and rivalries between neighbouringcountries based upon differences in religion, history and culture. By promotingregional stability first, economic based regional integration can provide acrucial means for countries to lay down their arms and cooperate together formutual prosperity. This could be one of the most essential steps on the road tomultilateral free trade policies.

Demerits of regionalism

Trade diversion

In contrast to trade creation, however, trade diversion can just as equallyoccur. Trade diversion will happen when the country with the comparativeadvantage is denied this competitive status. In other words, as with theprevious example, if Brazil has a comparative advantage in leather productsbut Chile and Argentina form an RTA between themselves, trade diversionmight occur if Chile begins to buy leather from Argentina instead of from


Brazil. This would occur, for instance, if Argentinean leather is imported tariff-free into Chile as a result of the RTA but Brazilian leather is still charged aconsiderable tariff that would artificially make them more expensive. Brazil willtherefore be unable to realize gains from its competitive leather productswhereas inefficient Argentinean producers claim the benefits.

This type of trade diversion runs counter to the general free trade andefficiency principles. It distorts the efficient allocation of resources. Theinefficient producer within the RTA is artificially benefiting at the expense ofthe efficient producer outside of the RTA. It should be added that in terms ofweighing the potential gains from trade creation versus the potential loses fromtrade diversion that economists have not been able to conclusively prove therelative benefits of regionalism-based trade creation. The attraction ofregionalism is supposed to lie outside the trade creation effects.

Of course, it is also argued that the additional gains from FTAs that aregenerated through trade creation are exaggerated because tariff rates on awhole have dramatically declined. Since just after World War II, for instance,average tariff rates have dropped from 40% to less than 4% after the UruguayRounds in 1994. Similarly, the prospects for intra-regional trade expansion arenot as a good as imagined because of the similarity of natural endowments ofcountries within a given region. Usually coming from the same geographicalregions, they do not have sufficient differences to benefit each other.

Deepens factionalism

Regionalism can also be viewed as a direct threat to multilateralism. Tradeliberalization might occur in a piecemeal fashion through RTAs, but without acoordinated effort by all, it will become a losing proposition in the end. Thefew trading blocs that emerge from regionalism will become more intransigentto compromise. The larger a bloc becomes the more vested interests it has torepresent, which makes it that much more difficult to reach a consensus. Thelarger a bloc the more difficult it is to negotiate on behalf of the entire bloc.Countries in a RTA are less conducive to deeper integration as a whole. The EUis cited as an example but they are exceptional outliers because they share aunique symmetry in terms of size and resources, and historical and politicalconsiderations.

Furthermore, although considered a public good, free trade inherentlysuffers from the usual free-rider problem, which is only exacerbated by theforces of regionalism. Countries that are be lured to join RTAs will have littleincentive to unilaterally push the RTA to expand. The larger the RTA becomesthe more it will seek to extract concessions from new parties.

Some countries as in those in Africa and Central Asia maintain two or moreoverlapping plurilateral RTAs at the same time. In addition to the difficulty ofsustaining membership in two or more overlapping plurilateral RTAs, thiscould lead to the consolidation of RTAs and rationalization among participantswho may be forced to align themselves with one or other regional groupingagainst their natural inclinations. Similarly, on a foreign policy level,regionalism leads countries to play favourites among their trading partners.Those that are excluded are abandoned and it therefore reduces internationalrelations to a mutually self-destructive factionalism.

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Even when developing countries and developed countries sign an RTA themajor economic powers tend to dominate the bloc. All in all, thereforeregionalism only fractionalises our world. It makes it more difficult to establisha mutually cooperative multilateral trading environment.

Negative effects related with globalization

Despite the promised fruit it offers, globalization still carries much baggageand still bears many controversial thorns. Globalization, many believe, widensthe gap between the rich and poor, not only among countries, but also forthose within a given state. It allows multinational companies to utilize theireconomies of scale to exploit weaker competitors. It also creates a dangerousdependent environment for many countries. In our zero-sum world, it isargued that efficiency gains to the winners mean loss of welfare and jobsecurity for the losers. From these perspectives, regionalism merely operates asanother means to expedite the process and exacerbate the ills of globalization.By accelerating the trade liberalization process, regionalism further precipi-tates the harsh realities of globalization. The stark contrast between winner andlosers of globalization merely worsen. Of course, this perspective denies thatcomparative advantages can be realized and that absolute advantages willprevail.

Slippery slope of exceptions

Preferential trade agreements represent a second-best option. The ultimategoal remains trade liberalization for all countries on a global basis. Yet, RTAsare the most conspicuous exception to one of the most important WTOobligation of MFN. If multilateral trade liberalization is our ultimate goal, thenregional-based approaches merely delays this inevitable process. It exacts anunnecessary transaction cost because it acts as detour on the way. Thededication of resources to the negotiation and maintenance of agreements atthe regional level may obviously divert attention from negotiations that shouldclearly proceed at the multilateral level.

Similarly, the WTO is already filled, or some would consider riddled, withexceptions beginning from the minute to the more controversial issues such assecurity, the environment, health, conservation and agriculture. RTAs grant acomprehensive exception from MFN covering all goods and services betweenthe member countries involved. RTAs just add another expansive exception togeneral WTO obligations, weakening the stature and authority of the WTO andthe commitment to multilateral problem solving as a result.

Transaction costs

Preferential trade agreements generate a host of unnecessary transaction costs.First, because companies will seek to qualify for the benefits that are granted tocountries within a RTA the administration of preferential rules of originbecomes burdensome and complex. Differing rules of origin among different


countries for example creates a maze of criteria for the granting of origin thatraises the transaction costs trade. Similarly, membership in a number ofdifferent RTAs for a given country can result in the duplication andmaintenance of tariff schedules for each preferential partner with differentphase-out periods.

Conclusion

Implications for economic integration, international trade policiesand the future of AsiaEurope relations

Against this background, WTO Members at the most recent Fourth MinisterialConference that was held in Doha in November 2001 summarized theircollective view on RTAs. First, they stressed their commitment to the WTO asthe unique forum for global trade rule making and liberalization. At the sametime, however, they also recognized that regional trade agreements can playan important role in promoting the liberalization and expansion of trade andin fostering development. 13 Consequently, they also stressed the need for aharmonious relationship between the multilateral and regional processes. Theyagreed that despite some problems RTAs overall benefit the internationaltrading system.

All in all, regionalism appears here to stay even though empirical studiesindicate that results of these RTAs might be inconclusive.14 In seeking todetermine what a snap shot of the future will entail for Asia and Europerelations, it is unclear in the short term. In fact, the immediate effects ofregionalism upon Asian and Europe relations in the future at the momentappear remote.

Within in Asia, for instance, the focus in terms of RTAs has so far beenmore inward looking. For instance, by the early 2000, more than 20 RTAs havebeen proposed among the various members of Asia Pacific EconomicCooperation Process (APEC). Free trade agreements have been enactedbetween New Zealand and Singapore, Japan and Singapore, SAPTA.15 The openregionalism typically associated with the Asia Pacific Economic Cooperation(APEC) appears to be counteracted by a drive towards preferential tradeinitiatives. Geographical distance itself does not appear to be a significantdisincentive for East Asia. The countries in Asia Pacific thus have the lowestpercentages of relative trade with RTA partner countries.16 This situation mostlikely stems from the tremendous volume of trans-Pacific trade by countries inthe Asian region. For instance, East Asia exports more than 65% of its goods todestinations outside East Asia.

13 WTO Ministerial declaration WT/MIN(01)/DEC/1, para 4 (Nov. 20, 2001)14 Gilber, John, Robert Schollay, Bijit Bora, Assessing Regional Trading Arrangements in theAsia-Pacific, Policy Issues in International Trade and Commodities, Study Series No. 15,UNCTAD (2001), p. 3015 SAPTA consists of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka,South Asian Association for Regional Cooperation (SAARC) Preferential Trading Arrange-ment16 Boonekamp, para.24

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As might be expected, European countries on the other hand not onlyparticipate in the greatest number of RTAs but they also derive around 60 to80% of their imports from RTA partners. This suggests that Europe is morefocused on concentrating and expanding RTAs within their continental regionfor the time being. This deep regionalism-based integration and focus in itselfwill keep them at bay for a considerable time.

Thus, from a macro-perspective it appears that regionalism is progressingin Asia and Europe on a more continental basis within their respective regions.Bilateral and plurilateral RTAs might be pursued between some countries butthey would most likely not be considerable. In the long run, once thesecontinental blocs consolidate they will approach each other with Asia morelikely being the initiators. They should be able to make substantive progress atthis later stage and eventually their interaction should promote multilateraleconomic integration.

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