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Contents Introduction

What would be the most efficient way of enhancing positive trade creation effect in a globalizing world, especially for countries in Northeast Asia? We argue that improvement in trade facilitation measures in East Asian countries, China, Japan and Korea, can serve as an effective policy alternative to complement tariff reduction policy. In order to support our argument, we attempted to analyze the net trade creation effect of trade facilitation among the countries in Northeast Asia including China, Korea, and Japan by using a survey analysis and a Gravity analysis. We found that each of the four trade facilitation indices we considered (customs procedures, standards and conformity, business mobility, information and communication technology) shows significantly positive effects on bilateral trade between the three Northeast Asian countries.