Introduction

During the last decade, Asian countries, especially East and Southeast Asia countries, have witnessed an ever increasing trend of regional integration with the dramatic proliferation of regional free trade agreements (FTAs), both concluded and still in the process of negotiation. This process of regional economic integration has been driven by the mutually reinforcing market forces and trade agreements (regional and preferential). According to data from the Asian Development Bank (ADB), the number of FTAs involving at least one Asian country has almost doubled, from 124 in 2005 to 220 in 2016. In addition, there are 67 FTAs being proposed and pending negotiation. This phenomenon is referred to as the “Asian noodle bowl” with the economies of ASEAN and East Asia becoming increasingly integrated. According to data from ADB, the 16 ASEAN+6 countries (10 ASEAN members plus Australia, PRC, India, Japan, the Republic of Korea and New Zealand) account disproportionately for over 62 per cent of total FTAs (being in effect and in negotiation) of the total 48 ADB member countries/economies in Asia.

The most important market force that drives international trade in recent years is the rise of global production networks operated by multinationals in which firms slice up a production chain into small production stages and then assigning them each to the most cost effective location across borders (ADB 2010; Helpman 2011). Globally operating firms have been taking advantage of these factors to exploit differences in factor prices (i.e. inputs and low-skilled labour) around the world (Blinder 2006; Baldwin-Edwards 2011) and multinationals are at the forefront of global production networks taking advantage of reductions of trade barriers, rapid advancements in production technology, and a decrease in transport and communication costs as explained by Athukorala (2013). He explains that firstly “rapid advancements in production technology have enabled the industry to slice up the value chain into finer, ‘portable’, components” (i.e. modular production technology with “standard fragments”); secondly “technological innovations in communication and transportation have shrunk the distance that once separated the world's nations, and improved speed, efficiency and economy of coordinating geographically dispersed production process”, and thirdly the “liberalization policy reforms across the world over the past four decades have considerably removed barriers to trade and foreign direct investment (FDI)”.