Which way forward for East Asian regional integration? - CGE Model Analysis

Abstract

Among various distinctive formulations that have been developed simultaneously in East Asia as of 2009, this paper selected three major paths, ASEAN+3, ASEAN+6 and APEC, to quantitatively examine the economic impacts of Asian regionalization with the CGE model. This paper confirmed previous findings such as the magnitude of economic impact being proportional to the size of membership and the existence of trade diversion effect within all trade blocs. The subsequent KORUS and Korea-EU FTA imposition upon the built CGE base models further verified the effects of hub-and-spoke-ism in East Asia. Jointly, the simulation results implied that the economic impacts of a trade arrangement heavily depend on the subject economy’s reliance on trade with the participating states. It was also found that the impacts were directly proportional to the accrued trade balance of the subject spoke country with both the hub state and the hub-destination. This could have been exaggerated as the scope of this study was limited to East Asia where KORUS FTA was found to be more influential than Korea-EU FTA due to its exceptionally high reliance on the US. On the course of this research to verify the aforementioned findings, however, both GTAP 6 and 7 were adopted, and hence, the economic impacts of China’s accession to the WTO in the global trade system were also empirically proven.