The Rise of Regionalism in Asia

This week, America and Singapore ironed out the final stumbling blocks to a bilateral free trade agreement (FTA). Such pacts are spreading like wildfire across Asia.

Until recently, most East Asian countries pursued non-discriminatory trade policies through unilateral liberalisation, the Asian/Pacific Economic Community, and the World Trade Organisation (WTO). As the US/Singapore deal shows, discriminatory bilateral and regional initiatives are growing more popular. An East Asian economic bloc forming around either China and/or Japan now seems plausible. Will all this deal-making sideline the region in the WTO?

East Asian countries have relatively liberal trade policies and are reasonably well integrated into the global economy. This, however, masks huge differences. Hong Kong and Singapore are free ports. South Korea and Taiwan liberalised substantially in recent years. Malaysia is fairly open but with significant protection, especially in services. Thai protectionism remains high. Indonesia and the Philippines are mired in political and economic instability. Myanmar, Vietnam, Cambodia, and Laos, all very poor, have higher levels of protection.

Now consider the two regional engines, Japan and China. Japan's sclerotic domestic economy makes it incapable of exerting regional leadership. On trade policy it is defensive, especially in its addiction to agricultural protectionism.