Economic Integration and Dynamics in Eastern Europe and Asia

Transcription

1 Economic Integration and Dynamics in Eastern Europe and Asia Prof. Dr. Paul. J.J. Welfens Prof. Dr. Andre Jungmittag Vladimir Udalow Tony Irawan Dr. Ralf Wiegert Lehrstuhl für Makroökonomische Theorie und Politik Bergische Universität Wuppertal Winter Term 2013/2014

2 2 Organization - Contact: Name: Vladimir Udalov Mail: udalov@wiwi.uni-wuppertal.de Phone number: 0202/ Room: M Office Hours: Mo, 12:00-13:00

3 3 Content of the Course 1. Economic Integration and Dynamics in Eastern Europe and Asia - Tony Irawan / Vladimir Udalow / Dr. Ralf Wiegert Date: TBA 2. Simulation Models for Policy Analysis - Prof. Paul.J.J.Welfens / Prof. Dr. Andre Jungmittag- Date: ( ) 4. Monetary Integration - Prof. Paul.J.J.Welfens Date: TBA

4 Illustration 4

5 5 Border Economic Perspective Documents Tariffs Non-Tariffs (NTB) etc

6 6 Documents Source: World Development Indicators (WDI)

7 7 Tariff rate, applied, simple mean, manufactured products (%) Source: World Development Indicators (WDI)

8 8 The List of NTBs implemented by ASEAN Member States Source: Ando and Obashi (2009) Irawan / Yushkova 2013

9 9 What is Economic Integration Balassa (1961) :"the abolition of discrimination within an area". Kahnert, et.al (1969) : "the process of removing progressively those discriminations which occur at national borders". Pinder (1969) : removal of discrimination between economic agents of the member countries Pelkmans (1984): elimination of economic frontiers between two or more economies Some economists argue that: Integration cooperation

10 10 Types of Economic Integration Based on Balassa (1961) The Theory of Economic Integration - 1. Free Trade Agreement (FTA) 2. Customs Union 3. Common Market 4. Economic Union

11 11 Types of Economic Integration 1. Free Trade Agreement (FTA) Member countries do not impose any trade barriers (zero tariffs) on goods produced within the union. However, each country keeps its own tariff barriers to trade with non-members. example: NAFTA (USA, Canada, Mexico); ASEAN; etc 2. Customs Union A FTA in which member countries apply a common external tariff on a good imported from outside countries. This common external tariff can, of course, differ across goods but not across union partners. example: European Community

12 12 Types of Economic Integration 3. Common Market A Custom Union which further allows free movement of labor and capital among member nations. example: European Union 4. Economic Union The monetary and fiscal policies of member states are harmonized and sometimes even completely unified. The extreme case Monetary Union. example: European Union

13 13 Types of Economic Integration Source: Mikic (2007)

14 14 PTAs in the real world Source: Bonapace and Mikic (2006) Irawan / Yushkova 2013

15 15 Advantages and Disadvantages of Economic Integration Trade Creation Versus Trade Diversion in the case of Custom Union (Viner, 1950) - Trade creation: Occurs when high cost domestic production is replaced by low cost imports from other members. - Trade diversion: Occurs when low cost imports from non-members are diverted to high cost imports from favoured trading partners. Rather than gaining tariff revenue on inexpensive imports from world markets, a country is importing more expensive products from a favoured trading partner but not gain any tariff revenue.

16 16 Advantages and Disadvantages of Economic Integration Country A HP: $8 Import tariff: $5/unit Country B HP: $6 Country C HP: $4

17 17 Advantages and Disadvantages of Economic Integration If Country A enters a custom union with Country B Country A HP: $8 Import Tariff: $5 /unit Country C HP: $4 Country B HP: $6

18 18 Advantages and Disadvantages of Economic Integration Country A HP: $8 Import tariff: $3/unit Country B HP: $6 Country C HP: $4

19 19 Advantages and Disadvantages of Economic Integration If Country A enters a custom union with Country B Country A HP: $8 Import Tariff: $3 /unit Country C HP: $4 Country B HP: $6

20 20 Why some countries are really careful to enter a particular FTA By using the idea of comparative advantage: why should we produce a particular product if we are less efficient than another country import JOIN FTA Consider 2 points: - vulnerability to external shock - existing producers production networks unemployment poverty Sensitive list and General Exception list example: AFTA Sensitive list: rice, sugar, wheat, garlic General Exception: weapons and ammunition

21 21 Evolution of Regional Trade Agreements in the World, Source: WTO Secretariat (2013)

22 22 Evolution of Preferential Trade Agreements in Asia-Pacific Source: Mikic (2007) By using Asia-Pacific Trade and Investment Agreements Database (APTIAD), Mikic (2007) found several interesting findings: - APTIAD was tracking 125 preferential trade agreements one party of which was a member of ESCAP out of 125 agreements of various types are in force: # 62 bilateral agreements # 11 regional trade agreements (RTAs) # 11 agreements between country and bloc # the residual is made up of agreements of different scope, e.g. global, and country-plurilateral, etc

23 23 Evolution of Preferential Trade Agreements in Asia-Pacific Source: Mikic (2007)

24 24 Source: Mikic (2007) Spaghetti bowl - ASEAN Free Trade Area - Asia-Pacific Trade Agreement - European Free Trade Association Melanesian Spearhead Group - Pacific Island Countries Trade Agreement - Commonwealth of Independent States FTA - South Pacific Regional Trade and Economic Cooperation - South Asian FTA - Bay of Bengal Initiative for Multi-sectoral Technical and Ec. Coop. - South African Cust. Uni

25 25 The next Possible Deals Transatlantic Trade and Investment Partnership (TTIP) A trade agreement that is presently being negotiated between the European Union and the United States. Both regions together make up approximately 50% of global output, 37 percent of world merchandise trade and 45 per cent of world trade in services (2002). Trans-Pacific Partnership (TPP) A free trade agreement currently being negotiated by nine countries: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Japan, the United States, and Vietnam, which together make up roughly 40 percent of global gross domestic product and about a third of world trade. Irawan / Yushkova 2013

26 26 THANK YOU. Irawan / Yushkova 2013