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September 21, 2009: Mr. Jeffrey Schott, Dr. Mireya Solis, Dr. Barbara Stallings, Dr. Saori Katada, Dr. Ellen Frost, and Dr. Antoni Estevadeordal

(Click to Enlarge) From left to right: Dr. Saori Katada, Dr. Barbara Stallings, and Dr. Mireya Solis discuss FTA diffusion in Asia.

Competitive Regionalism: FTA Diffusion in the Pacific Rim



(Washington D.C.) September 21–Though many have argued that the growing proliferation of bilateral free trade agreements (FTAs) in Asia is a force for regional integration, new research indicates that these FTAs may actually cause division in the region. In an East-West Center in Washington Asia Pacific Political Economy seminar, Dr. Mireya Solis, Associate Professor at American University, Dr. Barbara Stallings, William R. Rhodes Professor at Brown University, and Dr. Saori Katada, Associate Professor at the University of Southern California, released their new book Competitive Regionalism: FTA Diffusion in the Pacific Rim in which they discuss the rise of free trade agreements in Asia, analyze the reasons that governments become involved in such arrangements, and examine the impact of bilateral trade agreements on regionalism in the Asia Pacific. Mr. Jeffrey Schott, Senior Fellow at the Peterson Institute for International Economics hosted this seminar, while Dr. Ellen Frost of the Peterson Institute for International Economics and the National Defense University, and Dr. Antoni Estevadeordal of the Inter-American Development Bank served as discussants.

Bilateral free trade agreements have proliferated in the Asia Pacific region since the 1990s despite arguments by skeptical economists that the benefits of such agreements are questionable. Dr. Solis explained that while FTAs can create opportunities for business and trade, they are also often limited in scale, costly to run and manage, and are generally more beneficial for one partner country than they are for the other. Given these drawbacks to FTAs, Dr. Solis, Dr. Stallings, and Dr. Katada decided to research the reasons that countries enter into so many FTAs and the effect that these agreements have on inter-regional unity. To analyze and explain the behavior of governments entering into FTAs, the researchers used the theory of policy diffusion, which discusses the extent to which the adoption of a practice or policy by one actor, in this case a government in the Asia Pacific, would be subsequently copied by other actors.

Dr. Solis, Dr. Stallings, and Dr. Katada hypothesized that government implementers of FTAs might come in three categories: the innovators, the emulators, and the competitors. The innovators are the first governments to implement FTAs, blazing new ground in economic cooperation. The emulators copy the actions of the innovating governments, adopting policies and agreements similar to the ones that the innovators created in hopes of similarly improving their own economies. Finally, the competitors enter into FTAs in an effort to gain economic advantage over their neighbors or to impede their neighbors’ efforts to gain economic benefits for their own industries.

The authors determined that there is actually a diversity of reasons why countries join FTAs, and that the reasons for an individual country might change over time. They discovered that countries in the Asia Pacific were slow to initiate FTAs in the beginning, but gradually began to emulate the leaders, like the United States. However, over time, emulation changed to competition, as governments began to recognize the importance of beating their neighbors to get economic advantages for their own industries. This trend led the researchers to conclude that FTAs, while contributing somewhat to regional integration, are actually much more divisive than they were previously considered.

Dr. Ellen Frost and Dr. Antoni Estevadeordal noted that the authors’ research helped increase the understanding of the proliferation of FTAs in Asia. However, they both argued that there is perhaps more hope for bilateral FTAs to lead to regional economic integration than the authors’ conclusions suggest. Dr. Frost pointed out that FTAs between Northeast and Southeast Asia have greatly improved all manner of ties between these two regions in an unprecedented way, and that concerted effort by one of the major players in Asia such as Japan, China, or the United States might lead to more regional unification on economic issues. Dr. Estevadeordal pointed to the Latin American experience with bilateral trade agreements, which led to multilateral trade liberalism and tariff reduction, making the entire region open to the trade of all regional countries. All parties agreed that expansion of FTAs was likely to continue, and that the consequences of these ties would reach far beyond the sphere of economics. However, whether Asia can look forward to increasing interconnectedness or divisiveness due to its current FTA drive is yet uncertain.

Antoni Estevadeordal (PhD Harvard University) is the Manager of the Integration and Trade Sector at the Inter-American Development Bank (IDB). Before joining the IDB, he taught at the University of Barcelona and Harvard University. He has published widely in major economic journals, including American Economic Review , Quarterly Journal of Economics , Review of International Economics , and the Journal of World Trade . He has coordinated several IDB reports such as Beyond Borders: The New Regionalism in the Americas (2002); The Emergence of China: Opportunities and Challenges for Latin America and the Caribbean (2006); and Bridging Trade Agreements in the Americas (2009). He has co-edited several books including Integrating the Americas: FTAA and Beyond (2004) and Regional Rules in the Global Trading System (2009). He has published several books including Gatekeepers of Global Commerce: Rules of Origin and International Economic Integration (2008) and The Sovereign Remedy: Trade Agreements in a Globalizing World (2009).

Ellen Frost (PhD Harvard University) is a Visiting Fellow at the Peterson Institute for International Economics and an Adjunct Research Fellow at the National Defense University’s Institute of National Strategic Studies in Washington, DC. Her most recent book is Asia’s New Regionalism . Frost served in the U.S. government as Counselor to the U.S. Trade Representative (1993-95), Deputy Assistant Secretary of Defense for International Economic and Technology Affairs (1977-81), various positions in the Treasury Department (1974-77) and the State Department (1963), and Legislative Assistant in the U.S. Senate (1972-74). She is also the author of For Richer, For Poorer: The New US-Japan Relationship (1987) and Transatlantic Trade: A Strategic Agenda (1997), co-editor of The Global Century: Globalization and National Security (2001), and author of numerous articles and chapters. 

Saori N. Katada (PhD University of North Carolina at Chapel Hill) is Associate Professor at the School of International Relations at the University of Southern California. She is the author of Banking on Stability: Japan and the Cross-Pacific Dynamics of International Financial Crisis Management (University of Michigan Press, 2001, awarded Masayoshi Ohira Memorial Book Award). She also has two co-edited books and numerous articles.

Jeffrey J. Schott joined the Peterson Institute for International Economics in 1983 and is currently a senior fellow working on international trade policy and economic sanctions. During his tenure at the Institute, Schott was also a visiting lecturer at Princeton University (1994) and an adjunct professor at Georgetown University (1986-88). He was a senior associate at the Carnegie Endowment for International Peace (1982-83) and an official of the U.S. Treasury Department (1974-82) in international trade and energy policy. During the Tokyo Round of multilateral trade negotiations, he was a member of the U.S. delegation that negotiated the GATT Subsidies Code. Mr. Schott is also a member of the Advisory Committee on International Economic Policy of the US Department of State.

Mireya Sol