The Noodle Bowl

Large economies like China, Japan and India have signed free trade agreements (FTA) with the regional grouping ASEAN. But in the absence of a comprehensive, multi-lateral free trade agreement, Asian countries are settling for bi-lateral FTAs. But this trend is not necessarily in response to the stalled Doha round of trade talks. Bi-laterial FTAs have increased from six in 1991 to 166 by mid-year 2009. One reason for such growth is because the supply chain has lengthened with manufacturing and assembly occurring over a number of countries. But competition is also a motivating factor: China has inked a number of deals and now India is following suit. In the end, FTAs seem to provide little boost to trade, according to data compiled by the Asian Development Bank. Moreover, FTAs can erode simplicity and efficiency of trade as products shipped across multiple borders must contain the appropriate labels and certifications. As bi-lateral FTAs proliferate and create more byzantine and intertwined rules, they may come to resemble the pejorative name for Asia’s love affair with such agreements: “noodle bowl”. – YaleGlobal