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The Economic Logic of Asian Preferential Trade Agreements: The Role of Intra-Industry Trade

Published online by Cambridge University Press:  21 March 2016

Mark S. Manger
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Abstract

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Are preferential trade agreements (PTAs) in the Asia-Pacific region merely a political phenomenon with no economic basis, as some critics say? I challenge this interpretation; in this article I present an explanatory model based on intra-industry trade to indicate what economic interests should drive Japanese and South Korean PTAs with ASEAN partners, and derive specific predictions. An analysis of the actual tariff barrier elimination in the agreements suggests important, but highly specific, economic benefits. First, preference margins are substantively greater for intra-industry trade, and second, intra-industry trade is much less likely to be excluded from tariff reductions when imported into Japan or South Korea. This indicates that PTAs help firms specialize their production throughout the region, and provides an economic rationale for these agreements. A qualitative case study of the Japan-Malaysia PTA and a statistical analysis of tariff liberalization in the PTAs of Japan and South Korea with the ASEAN countries support this view.

Keywords

preferential trade agreementsfree trade agreementsJapanSouth KoreaASEANintra-industry tradetrade policy
Type
Articles
Information
Journal of East Asian Studies , Volume 14 , Issue 2 , August 2014 , pp. 151 - 184
Copyright
Copyright © East Asia Institute 

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