Trade Facilitation and a Northeast Asian Free Trade Arrangement *

Abstract

What will be the most efficient way of building a regional trade arrangement (RTA) in a globalizing world, especially for countries in Northeast Asia? We strongly suggest that the RTA should stress trade facilitation rather than following common guidance on tariff reduction. In order to support our argument, we attempted to analyze the net trade creation effect of trade facilitation among the countries in Northeast Asia including China, Korea, and Japan by using a survey analysis and a Gravity analysis. We found that each of the four trade facilitation indices we consider (customs procedures, standards and conformity, business mobility, information and communication technology) shows significantly positive effects on bilateral trade between the three Northeast Asian countries.