Quantitative impacts of alternative East Asia Free Trade Areas: A Computable General Equilibrium (CGE) assessment

This paper analysis the relative economic effects of four East Asian Free Trade Area (FTA) options. A particular feature of the model, which is an extension from a standard CGE model, is the introduction of unemployment with the intention of assessing the changes in the real wage and unemployment in each region under each of those options. The simulation results suggest that a preferred strategy for member regions is the “East Asia FTA” multilateral agreement,1 which would yield higher gains in welfare and greater economic impacts than any of the other possible bilateral agreements – ASEAN–China, ASEAN–Japan and ASEAN–Korea. However, such an ‘ideal’ multilateral economic integration might be deterred by the uneasy relationship between Japan and other East Asian nations, reflecting their economic and political differences.