Reciprocal Trade Agreements in Asia: Credible Commitment to Trade Liberalization or Paper Tigers?

By Hicks, Raymond; Kim, Soo Yeon | Journal of East Asian Studies, January-April 2012 | Go to article overview

Reciprocal Trade Agreements in Asia: Credible Commitment to Trade Liberalization or Paper Tigers?


Hicks, Raymond, Kim, Soo Yeon, Journal of East Asian Studies


Reciprocal trade agreements (RTAs) have proliferated rapidly in Asia in recent years, an unprecedented phenomenon in a region in which state-led institution-building efforts were largely unsuccessful during the Cold War years. In this article, we investigate the qualitative provisions of RTAs in Asia, focusing on agreements that are professedly geared toward trade liberalization through reciprocal exchanges of trade concessions. We build on the concept of credible commitment--that states "tie their hands" through international agreements and thus signal strong commitment to trade liberalization. We argue that a broad range of agreement provisions will affect an RTA's ability to achieve its primary objective: trade liberalization. We present a coding scheme that measures the strength of a wide variety of provisions in the legal texts of RTAs. Using quantitative analysis, we analyze the impact of various components of Asia's RTAs on participants' trade flows. KEYWORDS: trade agreements, Asia, trade, credible commitment

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RECIPROCAL TRADE AGREEMENTS (RTAs) HAVE "PROLIFERATED" RAPIDLY IN Asia since the mid-1990s and especially in the aftermath of the Asian financial crisis. The dramatic rise in trade agreements is an unprecedented phenomenon for Asia, where state-led institution-building efforts were largely unsuccessful during the Cold War years. Through the mid-1990s, the region saw few RTAs in force, and the prevailing mode of trade cooperation involved the Asia-Pacific Economic Cooperation (APEC) forum formed in 1989 and the more regionally delimited Association of Southeast Asian Nations (ASEAN), which in 1992 announced its intention to form the ASEAN Free Trade Area (AFTA). (1) The shift toward RTAs, especially bilateral trade agreements, represents a marked departure from previous trends (Ravenhill 2003, 2008a, 2008b). Earlier initiatives in trade governance consisted mainly of APEC's multilateralism and open regionalism, which involved concerted unilateral trade liberalization and the practice of most-favored nation (MFN) for members and nonmembers alike. (2)

The recent "rush" for RTAs in Asia, as unprecedented as it is for the region, is nevertheless consistent with the global trend of an ever expanding network of trade agreements outside the World Trade Organization (WTO). RTA formation has become an increasingly important part of economic integration in the region, and the "noodle bowl" configuration of RTA projects is a key component of the institutional architecture for economic cooperation that is emerging in the region, one that has seen the active participation of important trading nations such as China and India. The rapid spread of RTAs raises the question of whether these do indeed represent strong state commitments to trade liberalization or are "paper tigers" that are merely symbolic declarations. We engage this important question both theoretically and empirically. We identify the key components of trade liberalization that are encoded in the texts of RTAs and evaluate their success in actually expanding trade among participants.

In this article we analyze fifty-seven RTAs in Asia that were signed or were in effect as of 2006. (3) The theoretical argument focuses on the qualitative aspects of RTAs--namely, the degree to which they constitute mechanisms of "credible commitment" by tying the hands of governments with respect to trade policy. RTAs, as do trade agreements more generally, resolve the prisoner's dilemma problem that is inherent to trade, thus producing cooperation that would be difficult absent such institutional obligations. We argue that RTAs differ widely in the quality of this "credible commitment." In doing so, we depart from the prevailing practice of relying on a dichotomous formulation: the presence or absence of an RTA. Instead, we present a nineteen-point coding scheme to code the quality of commitments in RTAs and develop a comprehensive index based on the coding scheme.

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