The new bilateralism in the Asia Pacific

For most of the past half-century, Western Pacific countries largely eschewed preferential trade agreements. Their preferred form of trade liberalisation was unilateral action on a non-discriminatory basis. In the past four years, however, more than 20 preferential schemes involving two or more Western Pacific countries have been put forward. The new interest in bilateralism is explained by: an increasing awareness of the weakness of existing regional institutions and initiatives; perceptions of positive demonstration effects from regional agreements elsewhere; and changing configurations of domestic economic interests. Contrary to arguments that emphasise a new sense of collective identity in East Asia post-crises, as many agreements have been proposed with prospective partners outside East Asia as with other East Asian countries. The agreements will have little impact on overall trade or economic growth because they typically involve countries that are relatively insignificant economic partners for one another. By exploiting ambiguities in wto rules, however, they enable governments to exclude sensitive domestic sectors. This 'liberalisation without political pain' has potentially negative consequences for the domestic political economy equation.