This paper seeks to identify the appropriate form of a regional trading agreement in East Asia by examining empirically the intra-regional trade bias of various informal regional groups. The findings are as follows. First, it is difficult to verify empirically that the three Northeast Asian countries, China, Japan and Korea, are forming a regional trading bloc. Second China and ASEAN have no special relation in trade. Third, ASEAN+3 is emerging as a strong candidate for a natural trading bloc in East Asia. Fourth, there is little evidence that ASEAN+3 is centred around Japan, while the influence of the U.S. on the intra-regional trade in ASEAN+3 is positive and strong. Fifth, ASEAN+3 is characterized by openness to trade with the rest of the world. Finally, these results strongly suggest that ASEAN+3 would be the natural policy choice for the formation of regional trading agreements in East Asia. At the same time, ASEAN+3 will not diverge from the principles of open regionalism and multilateralism, when we consider its inherently open character and the positive influence of the U.S.

Executive Summary

I. Introduction

II. Empirical Framework and Data
1. Regional Trade Bias
2. Analytical Framework
3. Data

III. Are Trading Blocs Forming in East Asia
1. Do Korea, Japan and China Constitute a Regional Trading Bloc?
2. Does ASEAN+3 Constitute a Regional Trading Bloc?
3. Widening ASEAN+3

IV. The Characteristics of ASEAN+3
1. Are there Special Trade Relations with Japan and the U.S.?
2. Openness of ASEAN+3

V. Natural Choice of a Trading Bloc in East Asia

VI. Summery and Concluding Remarks

References
Appendix