Asian Economic Integration: ASEAN+3+1 or ASEAN+1s?

This paper presents the economic rationale for a regional trade bloc in Asia comprising the ASEAN economies, China, Japan, Korea and India, i.e. the ASEAN+4. The inclusion of India in the trade bloc is justified on the basis of increasingly intense trade relations between India and ASEAN+3 and also the increasing importance that India has come to acquire as a market for the ASEAN+3. Alternative approaches to the alignment of ASEAN and the plus four economies for the formation of the ASEAN+4 trade bloc have been evaluated in terms of their efficiency costs. Efficiency costs are determined by the extent of trade distortion and trade diversion implied by each country's participation in the proposed trade bloc. The findings of this analysis underscore the efficiency of a prior alignment with ASEAN for all the plus four economies.