Transforming East Asia: Regional Integration in a Trade War Era
trade-wars
Open Economies Review, 2023. With Karen Jackson.
We evaluate the trade and welfare implications of deeper East Asian integration — via a China-Japan-Korea free trade agreement — against the backdrop of continuing US-China trade tensions, using a structural gravity approach. For China, the FTA can offset continued trade tensions with the US; tariff reductions deliver larger welfare gains than reductions in non-tariff barriers, and a deeper agreement is more welfare-enhancing for all members. East Asian integration looks more attractive to its members in light of US tensions, not less.
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We evaluate the trade and welfare implications of deeper East Asian integration — via a China-Japan-Korea free trade agreement — against the backdrop of continuing US-China trade tensions, using a structural gravity approach. For China, the FTA can offset continued trade tensions with the US; tariff reductions deliver larger welfare gains than reductions in non-tariff barriers, and a deeper agreement is more welfare-enhancing for all members. East Asian integration looks more attractive to its members in light of US tensions, not less.
As US–China trade tensions escalated, East Asian economies deepened regional integration with each other rather than retreating into protectionism. We document this shift in trade patterns and ask whether it reflects deliberate diversification away from exposure to the US–China relationship, or simply the mechanical effect of existing regional trade agreements taking fuller effect.
Published in: Open Economies Review, 34(3), 657–672