Regional Trade Liberalisation in East Asia and the Asia-Pacific: the Role of China
Robert ScollayPECC Trade Forum
and NZ APEC Study CentreUniversity of Auckland
Background: Contrasting Periods1994-1999 v. 1999-2004 (1)
1994-99 No new PTAs in E Asia, only 2 among APEC members
in the Americas Principal emphasis on WTO and APEC process in
both E Asia and Asia-Pacific– i.e. focus on non-discrimination and “open regionalism”
Commitment to APEC’s Bogor goals unquestioned in both E Asia and Asia-Pacific
NE Asia an “empty box” in regional/global map of PTAs
E Asian regionalism overshadowed by APEC– Trans-Pacific emphasis
Background: 1994-1999 v. 1999-2004 (2)
1999-2004 14 new PTAs concluded in Asia-Pacific, many more “on
the way”– 5 are intra-E.Asia, 7 link E Asian economies to other APEC
economies
PTAs the central focus of trade policy– Doubts over outcome of WTO’s DDA, liberalisation no longer a
key focus of activity in APEC
Ability to reach Bogor goals increasingly questioned NE Asia a full player in the PTA “game” Rise of E Asian regionalism overshadowing APEC
Trends in Asia-Pacific PTAs (1)
Bilateral Agreements 14 PTAs since 1999 are all bilateral
– diverse regional linkages NE Asia-SE Asia (4) - includes China-Thailand Intra-NE Asia (1) - includes China-Hong Kong SE Asia-Australasia (4) Trans-Pacific: E Asia-Americas (3) Trans-Pacific: Australasia-Americas (1) Intra-American (1)
– Some between small/medium economies but most link a small/medium to a large economy tendency to “hub and spoke” patterns reinforced by “domino effect”
Trends in Asia-Pacific PTAs (2)
“Hub and Spoke” patterns– Based on US, Japan, China, some “secondary hubs”– obvious disadvantages for “typical” spoke
East Asian regionalism– Boosted by reaction to East Asian crisis– Initial emphasis on “ASEAN Plus Three”– Competing ASEAN-China and ASEAN-Japan initiatives
Series of bilaterals or blocs?
– ASEAN overtures to India and CER
ABAC Proposal for FTAAP (a “preferential APEC)
Key Role of NE Asia
% of world GDPNortheast Asia 20Japan 13.5China 4.0Korea 1.5
Southeast Asia 2Australasia 1.5
North America 36USA 32
APEC 61
Risks and Attractions of PTAs (1)
Risks well-known Trade and investment diversion Tendency to restrictive rules of origin Disadvantages of “hub and spoke” agreements Dangers of a “three bloc world” “stumbling blocks” or “building blocks” for
multilateral and APEC-wide liberalisation
Risks and Attractions of PTAs (2)
“Revealed preference” of governments for PTAs Faster progress? Easier political economy Address economy-specific concerns Reciprocation of binding commitments (unlike APEC) “Training” for unilateral or multilateral liberalisation Vehicles for delivery of regional public goods Reinforcing economic reforms Linkages to foreign policy and security objectives
Responses to the Proliferation of PTAs (1)
1) Priority to WTO Emphasise importance of successful DDA
outcome– Substantial MFN tariff reductions– More effective rules
Multilateral liberalisation reduces the negative effects of PTAs on excluded economues
Responses to the Proliferation of PTAs (2)
(2) Identify best practice – aim to minimise negative effects, maximise positive effects
contribute to APEC goals and more open multilateral trading system
PECC “Common Understanding” 2003 APEC “Best Practice for RTAs/FTAs in APEC”
Responses to the Proliferation of PTAs (3)
(3) Identify and promote the most economically beneficial PTA configurations
General conclusion: larger more inclusive configurations deliver the largest economic gains to members– ASEAN Plus Three in East Asia– FTAAP in Asia-Pacific region Question: is the objective East Asian integration or
Asia-Pacific integration?
Responses to the Proliferation of PTAs (4)
Welfare Effects of Alternative Trade Liberalisation Scenarios: Three Major Northeast Asian Economies
(Equivalent Variation: US$million)
-4000
0
4000
8000
12000
16000
ASEAN-China ASEAN-Japan ASEAN Plus 3FTA
FTAAP APEC MFN Global MFN
China
Japan
Korea
Responses to the Proliferation of PTAs (5)
Welfare Effects of Alternative Trade Liberalisation Scenarios: Southeast Asia, APEC Non-East Asia, and Non-APEC
(Equivalent Variation: US$million)
-20000
-15000
-10000
-5000
0
5000
10000
15000
20000
25000
ASEAN-China ASEAN-Japan ASEAN Plus 3FTA
FTAAP APEC MFN Global MFN
Southeast Asia-6
APEC Non-East Asia
Non-APEC South America
Other Non-APEC
Responses to the Proliferation of PTAs (6)
East Asian v. Asia-Pacific Perspectives In East Asia, ASEAN Plus 3 FTA produces best economic
outcome for members, worst economic outcome for other APEC members– Move to FTAAP turns losses to gains for other APEC members and
yields greater gains overall– But not all ASEAN Plus Three economies gain more from FTAAP
Asia-Pacific v. Global Perspective In Asia-Pacific, FTAAP produces best economic outcome
for APEC members, worst for rest of world– Move to global liberalisation benefits most groups and yields
greatest gains overall potential to catalyse global liberalisation via WTO?
– But not all APEC members gain more from global liberalisation
Responses to the Proliferation of PTAs (6)
China v. NE Asian Perspectives Welfare gains from ASEAN Plus Three exceed those
from ASEAN Plus One initiatives for all three NE Asian economies– But gains for China from ASEAN Plus Three are modest– Substantial gains for China materialise with FTAAP
Gains from FTAAP substantially exceeds gains from ASEAN Plus Three for all 3 NE Asian economies
Further gains for China and Japan from global liberalisation but not for Japan
Recent Steps in Evolution of China’s Prospective PTA Links (1)
Steps towards E. Asian free trade Pre-2004
– China-ASEAN FTA negotiations commenced, China concluded bilateral PTA with Thailand
– China-Hong Kong CEPA concluded– Japan-Singapore PTA concluded– Japan commenced negotiations with Korea and Thailand
2004– China re-committed to plurilateral approach in China-ASEAN FTA– Conclusion of Japan-Philippine and Korea-Singapore FTAs– Japan also negotiating with Malaysia– Confirmation of E Asian summit in 2005
Remaining gaps in PTAs concluded or under negotiation– Japan/Korea link to China– Completion of Japan/Korea links with SE Asia
Recent Steps in Evolution of China’s Prospective PTA Links (2)
Additional steps towards W. Pacific free trade Pre-2004
– Singapore PTAs with Australia and New Zealand
2004– China announced FTA negotiations with NZ, foreshadowed
negotiations with Australia– Thailand PTAs concluded with Australia and New Zealand– Negotiations announced for AFTA-CER FTA
Additional remaining gaps in PTAs concluded or under negotiation– Japan/Korea links with Australia and New Zealand
Recent Steps in Evolution of China’s Prospective PTA Links (3)
Steps towards trans-Pacific free trade Pre-2004
– Conclusion of Singapore-US and Korea-Chile FTAs– Singapore-Canada and Singapore-Chile-NZ negotiations
under way 2004
– Conclusion of Japan-Mexico and US-Australia FTAs– Negotiations commenced for US-Thailand FTA– Announcement of China-Chile and Japan-Chile negotiations,
also Peru-Thailand? Principal remaining gaps in PTAs concluded or under
negotiation– Absence of proposals for NE Asia-N. America free trade
(except recently concluded Japan-Mexico FTA)
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