Growing Together: Economic Integration for an Inclusive and - escap

CHAPTER TWO
57
Towards a broader integrated market
Simulation studies indicate that such an
agreement has the potential to generate the
largest welfare gains for the region (figure II.16)
of up to $140 billion or over 1 per cent of the
region’s GDP with broad and comprehensive
coverage. When trade facilitation measures
are also included in the agreement, as it
should be this case, the average gains are 36
per cent higher than without trade facilitation
measures. The additional gains accruing from
trade facilitation are largest in North and
Central Asia (almost 100 per cent higher),
reflecting the potential benefits for the
subregion’s landlocked developing countries,,
but they are also important for South-East Asia
(67 per cent higher), reflecting the potential
gains from integration for countries such
as Cambodia, the Lao People’s Democratic
Republic and Myanmar, whose current trade
costs are very large.
A comparative picture of the welfare impacts
from the three options in absolute terms and
as percentages of the GDP are summarized
in table II.10. It shows that even though the
overall magnitude of the welfare gains would
be at nearly $50 billion, APEA could be highly
rewarding for the members participating in
subregional groupings of ASEAN, SAARC, ECO
and PICTA. The ASEAN plus approach could
bring in up to $85 billion worth of welfare
gains with the accession of other economies.
The APTA-II approach, due to its universal
coverage, would generate the larger welfare
gains, of $140 billion, of the three approaches
considered. In addition, countries with special
needs such as least developed countries,
landlocked developing countries (LLDCs) and
small island developing States (SIDS), tend
to have higher welfare gains as a proportion
of GDP than others, corroborating results
discussed in chapter one. Furthermore, the
welfare gains for the countries with special
needs would rise if special and differential
treatment, technical and economic assistance
is provided to poorer regions, as proposed in
this study.
Reaching out across the region
As this chapter has highlighted, the Asia-
Pacific region has steadily been integrating
its markets for trade and investment, and to
a certain extent for labour is now a good time
to consolidate these initiatives and build on
them a broader integrated market that would
unleash the huge potential of efficiencyseeking
industrial restructuring for creating
value for all the participating economies
and subregions. A key factor supporting a
successful integration is infrastructure, which
is the focus of the next chapter.
ENDNOTES
1 ESCAP, 2011a and 2011b.
2 An important caveat is that this indicator does not
take into account the costs of trade and transportation.
3 Among the earliest initiatives is UNCTAD’s TRAINS
which is accessible through the World Bank’s WITS
software application but it has not been regularly
updated. A multiagency initiative (MAST) was started in
2006. A report on pilot studies, with new definition and
classification of NTMs was issued in 2010 (see UNCTAD,
2010b; and Basu, Kuwahara and Dumesnil, 2011).
4 For details, see ESCAP, “Facilitating Intraregional
Trade”, in Asia-Pacific Trade and Investment Report
2011: Post-crisis Trade and Investment Opportunities
(Bangkok, 2011a), pp. 89-100.
5 ADB and ESCAP, 2009.
6 The comprehensive trade cost estimate is an
objective measure based on macroeconomic data
rather than perception survey data. It is a very broad
aggregate measure of international trade costs
including, inter alia, direct and indirect costs related to
fulfilling regulatory import and export requirements as
well as costs resulting from differences in currencies,
languages, culture and geographical distance.
Domestic and international shipping and logistics costs
associated with imports and exports are also included.
7 Duval and Utoktham, 2011a.
8 Duval and Utoktham, 2011b.
9 For more details on this issue, see ESCAP, 2011c.
10 Source: WTO and UNCTAD, WTO International Trade
Statistics online (accessed 12 April 2012).