The Asian 'Noodle Bowl': Is it Serious for Business

A lively debate is taking place over the impact of free trade agreements (FTAs) on East Asia's business between those who view the agreements as a harmful Asian noodle bowl - i.e., overlapping regional trade agreements - of trade deals and others who see net beneficial effects in terms of regional liberalization and a building block to multilateral liberalization. A lack of enterprise-level data has made it difficult to resolve the debate. Providing new evidence from surveys of 609 East Asian firms (in Japan, Singapore, Republic of Korea [hereafter Korea], Thailand, and Philippines), this paper seeks to address the critical question of whether the Asian noodle bowl of multiple overlapping FTAs is harmful to business activity, particularly for small- and medium-sized enterprises (SMEs). The surveys suggest that the Asian noodle bowl does not seem to have severely harmed the region's business activity to date. Use of FTA preferences is higher than expected from previous studies (22% of responding firms). Furthermore, only 27% of responding firms said that multiple rules of origin significantly added to business cost. However, as more currently under negotiation FTAs take effect and the complexity of the Asian noodle bowl increases, the business impact is likely to intensify. Implementation of key policies and closer publicprivate sector cooperation can help mitigate negative effects and facilitate a more SMEinclusive business response to FTAs. Suggestions include: encouraging most favored nation (MFN) liberalization, rationalization of rules of origin, upgrading origin administration, increased awareness of FTA provisions, improving business participation in FTA consultations, and SME support

Asian FTAs: Trends and Challenges

Although a latecomer, economically important Asia has emerged at the forefront of global free trade agreement (FTA) activity. This has sparked concerns about the negative effects of Asian FTAs, including the noodle bowl problem. Amid slow progress in the World Trade Organization's (WTO) Doha negotiations and the global financial crisis, however, Asian regionalism seems to be here to stay and the focus for policymakers should be how best to minimize the costs of FTAs while maximizing their benefits. Adopting a pragmatic perspective, this paper examines key trends and challenges in Asian FTAs. It provides new evidence from firm surveys, analysis of specific agreements, and computable general equilibrium estimates. It makes a case for strengthening the support system for using FTAs, rationalizing rules of origin and upgrading their administration, ensuring better coverage of agricultural trade, forging comprehensive WTO-plus agreements, and encouraging a region-wide FTA. Political economy considerations suggest that a likely scenario is for FTA consolidation in Asia to be followed by connections with North America and Europe. In conclusion, a bottom-up approach to a Doha Round Agreement emerges from the analysis