The initial conditions in East Asia form an important foundation for an
EAFTA. As East Asian countries have been undergoing continuous trade
and investment liberalization, an EAFTA with trade and investment as its
core is highly desirable. MFN tariff rates in the region have already been
brought down substantially, and the strong trade-FDI nexus has led to the
emergence of internationally competitive production networks involving
East Asian economies. It is thus in the interests of East Asian countries to
strengthen market-driven integration in the region by institutionalizing it.
East Asia should strive for a high quality FTA by being comprehensive in
scope, removing trade and investment barriers, strengthening capacity
and fostering open regionalism. It will lead to further deepening of
economic integration, enhance the competitiveness of production
networks, and progressively reduce gaps among East Asian countries. A
number of bilateral and sub-regional agreements concluded in East Asia
are aimed at comprehensive agreements. These initiatives have been
dubbed as “FTA-plus” and “WTO-plus”, and their scope extend beyond
the traditional FTA and beyond what is covered in the WTO.