The political economy of FTAs
Samirul Ariff Othman | 19 May 2017 00:30

IN RECENT years there has been a tremendous increase in the number of Free Trade Agreements (FTAs), in which two or more nations agree to reduce trade barriers substantially. At present, much of the world is caught in an occasional frenzied effort to negotiate such agreements or join powerful regional trade blocs, or at least try to avoid being left out of such blocs as they coalesce in many regions around the globe.

FTAs are regarded as an efficient means to promote growth in trade, open markets and reduce trade barriers. China’s 2004 FTA with Asean can be cited as a benchmark. In four years, China-Asean trade had risen by at least 20% annually.

Similarly, the United States and the European Union were showing steady interest in forming FTAs with countries throughout the region. For any nation relying on trade, free trade, economic integration and market access are of utmost importance. And it goes without saying that the most desired markets to access are the largest ones.

While FTAs are generally viewed as economic pacts, their political significance is great. For example, looking back, with the US reducing its military presence in South Korea, and having to confront both rising anti-US nationalism and aggressive Chinese diplomatic efforts, it countered by offering South Korea an FTA, a pact more strategic than economic.