1 Regionalism in East Asia: The Role of North East Asian Nations

Regionalism has now become a very popular phrase since this action has taken place into every inch of the World, East Asian region is no exception. For the past few years, regionalism has been progressing in East Asia in the form of Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs). The likes of Japan, Korea and China, as the economic front runners, are regarded to be the key actors in stimulating regional economic growth through some opulent trade arrangements. In this sense, the triangular trade agreement between Japan, Korea and China will become a significant ingredient that can cope with the necessary condition in creating East Asian welfare. Unfortunately, in the absence of such agreement, the present trade scheme between Japan, Korea and China is not sufficient to meet the target. The inefficient intra regional trade scheme is uncovered through Engle-Granger Cointegration and Error Correction Mechanism which operate as long run and short run measurement respectively. In order to accelerate the phase of growth, the more institutionalized approach is needed. This triangular trade arrangement then become a major boost that come up with the spillover effect for the ASEAN4 which represents the South East Asian nations as whole. In measuring the spillover effect, a static fixed effect model is estimated using the Two Stage Least Squares (2SLS