China's Emergence and the Implications of Prospective Free Trade Agreements in East Asia


China's accelerated global emergence has changed trade patterns in the Asia-Pacific region and exerted important influence on its trilateral relationship with Japan and the United States. In this paper, we evaluate the effects of multilateral and regional trade policy scenarios that are particularly relevant to China, Japan, and the United States using a dynamic global computable general equilibrium (CGE) model. Our results suggest that the three countries would gain substantially from a trilateral free trade agreement and could realize large fractions of the residual gains from global trade liberalization. We contrast this with prospective free trade agreements (FTAs) in East Asia, and we find that these FTAs largely benefit smaller member economies (e.g., ASEAN countries).

Keywords: FTA, China, East Asia, Trilateralism, CGE model

JEL classifications: F13; F15

Hiro LEE
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7023
Fax: (81) 78 803 7059

Department of Economics, Mills College
Department of Agricultural and Resource Economics, University of California, Berkeley

Dominique van der MENSORUGGHE
The World Bank, Washington, USA