Provisional PARFTA (Pacific Rim Free Trade Agreement) and Its Economic Effect

Provisional PARFTA (Pacific Rim Free Trade Agreement) and Its Economic Effect

The U.S. economy, which has experienced huge trade deficits in 1980s, on the one hand, has launched the NAFTA against the European Community and Japan and, on the other hand, has forced the Asian countries to open their domestic market. However, in order to maintain a mutually beneficial world economic order and to maximize the effect of integration, it is necessary for the U.S. to expand the scope of NAFTA and to form PARFTA (Pacific Rim Free Trade Area). It is because PARFTA can attain remarkable level of intra-regional trade dependency, market size and negotiating power in comparison with NAFTA. In fact, market opening of Korea and Taiwan has not been as beneficial to the U.S. as it had hoped, while it further expanded Japanese surplus. A plausible way for the U.S. to ease the trade deficit is to use Korea and Taiwan as export bases to the Japanese market. This could be effective strategy to integrate world markets, while increasing negotiating power with Japan.