Competitive Fears: The EU, US and the Free Trade Agreements in East Asia

This paper charts the motivations behind the free trade agreements (FTAs) policies of the European Union and the United States in East Asia. FTAs grant preferential terms for trade and investment to their members and enhance the level of integration of the signatory economies. Whilst the benefits of FTAs are asymmetrical, offering advantages to particular economic sectors, notably exporters, and in the new generation agreements of the EU and USA, also to service providers, the overall net welfare gains for the larger economy tend to be minimal. Within this context, political economists have found that FTAs carry significant political motivations as well, ranging from altering domestic coalitions against liberalization, to locking in domestic reforms, or emulating others. This paper focuses on the political motivations behind the FTA policies of major economic powers (USA and EU) in East Asia. It develops an analytical framework of competitive diffusion by offering evidence of economic and geopolitical balancing taking place amongst these powers, as they prepare for an uncertain future.