By H. L. Wesseling
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Extra resources for A Cape of Asia: Essays on European History (AUP - Leiden University Press)
Does the business sector use the preferential tariff scheme? In order to avoid tariff fraud, whereby goods from third nations are transported through a member country to gain preferential access, FTA requires the importer to prove that the goods actually originated in the member countries. This requirement raises the question of whether FTA is effective in East Asia. 18 East Asia’s Economic Integration In Chapter 4, ‘Rules of Origin, Local Content, and Cumulative Local Content in East Asia: Application of an International Input–Output Analysis’, Ikuo Kuroiwa conducts an empirical study, based on the Asian international input–output tables developed by the Institute of Developing Economies, to address this very question.
This is related to the development of a logistics network as well as policy measures to exempt tariffs on intermediate goods. These measures contributed to a high regional trade ratio of 52 per cent in 2004. The production fragmentation has extended, covering gradually almost all countries in the region. The benefits of economic integration have trickled down to the rural areas, and then even to the so-called peripheries (unindustrialized small countries) such as Cambodia and Laos. Such evolution of the core–periphery structure is the result not only of de jure integration and FTAs but also of improvements in the business climates in individual countries.
It should, however, be noted that the current status of de facto economic integration is notably different from the situation in other parts of the world. 13 East Asian countries conducted unilateral tariff removals for semi-conductor related parts and components under the initiative of the Information Technology Agreement (ITA) in the latter half of the 1990s. In addition, there was extensive use of the duty-drawback system and other trade facilitating measures. Thus, international transactions by network-forming industries were conducted almost under free trade.