Preferential Trade Agreements in Asia: Alternative Scenarios of “Hub and Spoke”

The proliferation of preferential trade agreements in Asia may result in a number of hub and spoke configures with Japan, China and ASEAN compete as regional hub of bilateral FTAs. Using a newly developed global CGE model with imperfect competition, increasing return to scale and heterogeneous firm, we explore the potential economic effects of alternative hub and spoke configurations in Asia. The simulations results suggest that the regionalism approach to integration in the Asian context can hardly act as building block of global trade liberalization, if it is confined to shallow integration only. However, the regional trade agreements involving deep integration measures provide promising path towards global free trade. * The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB) or its Board of Directors or the governments they represent. ADB makes no representation concerning and does not guarantee the source originality, accuracy, completeness, or reliability of any statement, information, data, finding, advice, opinion, or views presented.