AFTA and the Global Track

Abstract

The trade negotiations of the 1990s, and ASEAN's trade initiatives in particular, are proceeding on multiple tracks--regional (AFTA), super-regional (APEC) and global (WTO). This article explores why parallel tracks seem to be necessary and how they might be better coordinated. A key factor behind these trends is the competition for foreign investment. Countries are attempting to attract regional production systems that require large markets and draw on diverse factors of production by pursuing joint liberalization with regional partners. At the same time, they are also trying to avoid costly trade diversion and to maximize market access for their exports by participating in larger regional and global liberalization efforts, and by liberalizing unilaterally. These multiple objectives find expression in "open regionalism," which aims to achieve close regional integration but also extends liberalization to extra-regional partners. Evidence from quantitative modeling and from ASEAN's policy experience is used to support these observations.