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EU, USA, China: Economic Balancing through Free Trade Agreements?

Maria Garcia

Process-tracing official documents and interview materials, this paper charts the motivations behind the free trade agreements (FTAs) strategies of the EU, USA, and China in the Asia Pacific region. Economists have cast doubts as to the benefits of individual FTAs between large economies and smaller ones, and the wisdom of limited agreements. Whilst the benefits of FTAs are asymmetrical, offering advantages to particular economic sectors, notably exporters and in the case 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, from altering domestic coalitions against liberalization, to locking in reforms, or emulating others. This paper focuses on the political motivations behind the FTA policies of the current three major economic powers. 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. The analysis places special emphasis on the investigation of the role of fear and uncertainty in the development of these FTA policies, which, at least in purely economic terms would seem a less beneficial alternative to the multilateral system or to FTAs amongst the major economies, and highlights the effects the policy choices of one of the parties has on the others by a series of chronological and content comparisons of sets of negotiations between these powers and states in the Asia Pacific.

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