The purpose of this paper is to analyze the relative importance of scale economies and imperfect competition in an Asia-based FTA. The CGE model used in this paper utilizes firm-level product differentiation in a multi-region framework, but the CGE model can be modified into two versions, with perfect competition and imperfect competition with scale economies. The paper shows that the imperfectly-competitive models predict substantially different results from a model with perfect competition. This suggests that CGE modelers should be more concerned with the specification of market structure in order to avoid underestimating the welfare effects of forming an FTA.