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Is a region-wide free-trade area a realistic goal? So far, 183 free trade agreements have either been signed or are being proposed or negotiated across Asia. The share of intra-regional trade has risen to about 55 per cent last year from 40 per cent in the early 1990s. Aside from trade in goods, there is a need to focus on free trade in services. Given the stalled WTO talks, it is vital for Asian countries to pursue further market opening and structural reforms. In the neo-classical economic theory, it has been well established that global free trade would maximise economic benefits and minimise costs in individual countries and globally at the same time. However, in reality, completely free trade has never been realised even at the level of an individual country because policy decisions are made not only to pursue pure economic welfare but also to achieve other objectives according to domestic political and strategic preferences. Lately, the number of bilateral or regional free trade agreements (FTAs) has increased significantly. In East Asia, ASEAN Free Trade Agreement (AFTA) is the first regional FTA that has come into full operation in January 2003. In Northeast Asia, a region-wide FTA is yet to emerge. Japan, a longtime proponent of multilateral trade liberalisation, has signed a bilateral Japan-Singapore Economic Partnership Agreement (JSEPA) in 2002. Singapore has signed bilateral FTA with New Zealand, Australia, Japan, European Free Trade Area (EFTA), US and in negotiations with a number of other countries. Among ASEAN countries, Singapore, Thailand, the Philippines and Malaysia are keen on pursuing FTAs with extra-regional countries as an important and tangible policy option, though these countries accorded priority to AFTA as their most important trade liberalisation framework. In addition, ASEAN-China and ASEAN-Japan have initiated a framework agreement on comprehensive economic co-operation. The ASEAN-China agreement goes beyond and explicitly aims at the establishment of an ASEAN-China Free Trade Area within 10 years. China is the first country that concluded a framework agreement with ASEAN as a group. This could provide a strong incentive for ASEAN to act as a group in developing similar agreements with Japan and Korea, India and other countries. If ASEAN can become a strong and viable hub and introduce some consistency in its various bilateral agreements, it can turn the ASEAN-China framework agreement into a comprehensive, region-wide agreement. Without such a regional-wide consistency in bilateral trade rules, there is a great risk of having a "spaghetti bowl syndrome" in the East Asian FTAs and business network that will increase transaction costs, overlapping and impediment to a seamless East Asian marketplace. Increasingly, the East Asia Free Trade Area (EAFTA) has become an important agenda for East Asia. Because of the risk of overlapping bilateral FTAs, it is argued that East Asia needs to consolidate all its existing sub-regional FTAs in order to move forward towards the formation of EAFTA. Such region-wide FTA is theoretically optimal but very difficult to implement because of different levels of economic development and economic systems prevailing among East Asian countries. It is generally agreed that bilateral FTAs seem to provide a more practical approach to achieve a region-wide free trade area but there are risks of overlapping, inconsistency with the WTO principles and rules. It is also very important to note that free trade may not benefit the less developed countries in the region as much as developmental co-operation. Therefore, market liberalisation and free trade must be closely linked with trade facilitation and technical co-operation. The strategic linkage of FTAs and market liberalisation to ASEAN Vision 2020 and East Asia FTA needs to be elaborated to provide a clear balance sheet of the benefits and costs to regional countries with a view to enhance regional co-operation and a seamless East Asian market place.Free Trade Agreement and market liberalisation would contribute to regional growth and market liberalisation if the objectives converge with the principle of comparative advantage and market conditions. These conditions can be strengthened and institutionalised through domestic political, economic reforms and good governance. With a view to create a seamless regional marketplace, there are other important ancillary areas of trade facilitation. These are in the areas of harmonisation of customs, standardisation of products, rules of origins (ROO), dispute settlement mechanisms and competition policy. These policies are necessary to facilitate the efficient and effective implementation of bilateral and regional FTAs that are emerging in the region. Alternatively viewed, FTA proposals and comprehensive economic partnership initiatives can be interpreted as policy-induced measures to maximise the potential benefits and to reduce the potential short-run negative implications arising from the acceleration of globalisation and shortening of manufacturing product-cycle.
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