Preferential Trade Agreements of China, Japan and Korea: Towards Deeper Integration

Abstract

While the negotiations of the World Trade Organization (WTO) have not shown much progress, preferential trade agreements (PTAs) have become the main tool for pursuing liberalization in international trade for decades. Modern PTAs have evolved, including not only liberalization in trade in goods, but also in investment, services and many other aspects of trade. Moreover, regulatory coherence and harmonization has been emphasized, due to the prevalence of multinationals and global value chains. Under the WTO regime, the tariffs of China, Japan and Korea are relatively low. Given the active supply chain in the region and the low level of tariff rates, it is in the three countries’ interest to pursue deeper integration: harmonization of domestic economic policies removing behind-the-border barriers. Modern PTAs include deep integration provisions to increase compatibility across different member countries, to facilitate international trade. Deep integration PTAs go beyond the existing WTO agreements and include provisions dealing with new trade issues.