What lessons do you draw from this article and should the United States welcome or resist this initiative? Please suppor your arguement fully.;Attachment Preview;Asia Trade_The Noodle Bowl.docx;Why trade agreements are all the rage in Asia;THESE are worrying times for world trade. Despite a recent levelling out after the first quarters;collapse, the World Trade Organisation reckons global trade volumes will be around 10% lower;this year than in 2008. Trade ministers convened in New Delhi this week to talk about;resurrecting the Doha trade talksbut those talks remain moribund. Yet amid the general gloom;activity on one sort of tradebilateral free-trade agreements (FTAs)continues at a feverish;pace in Asia. This month, another deal was signed, this time between India and South Korea.;The agreement is the first between two of Asias four biggest economies (India, China, Japan and;South Korea). But the stream of FTAs, typically between one large economy and a smaller;partner, has become a flood in the past decade. From just six in 1991, their number had increased;to 42 by 1999. But almost three times as many have been signed since, bringing the number of;such agreements in Asia to 166 by June this year, according to the Asian Development Bank;(ADB).;Still more62 at last countare at various stages of negotiation, including one between Japan;and India. China and Taiwan are in talks about a deal, which shows just how deeply FTA fever;has taken hold of Asia (trade deals are even used as a way to bridge the gulf between the two;Chinas). And apart from bilateral agreements, several countries, including China and Japan, now;have signed trade deals with the Association of South-East Asian Nations (ASEAN), a regional;body.;Asian countries enthusiasm for bilateral agreements is palpable, and they have reason to want to;bolster intra-Asian trade. The growth of global supply chains means that parts made in one Asian;country from raw materials imported from another are re-exported to a third for final assembly.;These countries hope that more bilateral agreements will enable more specialisation. India, for;example, hopes that its new FTA will allow it to become a hub for Korean electronics companies;seeking to exploit lower labour costs to make goods destined for markets in the Middle East.;Added to all this is the fact that Asias big economies are set to provide the world with most of its;growth this year, and emerging Asia will continue to be the worlds fastest-growing region for;several years. Strategic rivalries complete the list of incentives. Many think that India has;jumped into the fray because China has been signing one pact after another.;But economists caution that the proliferation of FTAs is unlikely to do wonders for the regions;trade. Aaditya Mattoo, of the World Bank, points out that because trade barriers in Asia are;already relatively low, the benefit of a small further reduction in barriers in one market is tiny.;Bilateral deals come laden with complicated rules about where products originaterules which;impose substantial costs of labelling and certification on firms. The more overlapping deals there;are, the more complex the rules and the higher the costs. Those who follow Asias FTA mania;refer to this as the noodle bowl. No wonder few firms actually want to use FTAs. An ADB;survey of exporters in Japan, South Korea, Singapore and Thailand in 2007-08 found that only;22% took advantage of them. Certainly, the huge rise in trade deals seems to have done nothing;to boost the share of the continents trade that is intra-Asian.;Countries may worry that a multilateral deal would erode the preferential terms they got through;bilateral ones. If so, the flurry of bilateral deals may have come at the expense of a world trade;agreement. Gary Hufbauer of the Peterson Institute of International Economics in Washington;DC, thinks that China and India have decided they would rather pursue bilateral FTAs than;make the necessary concessions to push Doha across the finish line.;Some would dispute that. India, widely blamed for contributing to the collapse of the Doha talks;in July 2008, is now holding a summit of trade ministers which aims to bridge the gap between;world leaders repeated promises to complete the round by 2010 and the reality that, as one WTO;insider puts it, nothing is happening on the ground. Indian politics should allow greater;negotiating flexibility, if talks restart, thanks to a stronger government and an opposition in;disarray. But a deal will require America to build up domestic support for more open trade. Until;that happens, Asian countries may content themselves with a fuller noodle bowl.
Paper#34002 | Written in 18-Jul-2015Price : $32