Transcript File - Yoo Soo HONG

IPE-K <Lecture Note 5 > 13.4.26
IPE-K: FTA and Regionalism
* Some parts of this note are summary of the references for teaching purpose only.
Semester: Spring 2013
Time: Friday 2-5 pm
Professor: Yoo Soo Hong
Office Hour: By Appointment
Mobile: 010-4001-8060
E-mail: [email protected]
Home P.: http://yoosoohong.weebly.com
1
1
Global View of Asia
 The 21st Century is the Asian Century.
 Regional blocs, including East Asia will be prominent.
 Principal blocs will be Europe, East Asia and the Americas.
 Asia will be almost half of the world’s economy by 2020.
2
Issues for Regionalism
 Lessons from EU
 Economic conditions
 Political / Diplomatic / IR conditions
 Leadership
 Institutional development
 How much transfer of sovereign power (right) ?
3
Three Mega-Regions
4
Main Regional FTAs/EPAs
5
Competitive Liberalization in Asia-Pacific
ASEAN+3 FTA
(ASEAN, Japan, China, Ko
rea)
November 2004
Proposed by China at ASEA
N+3 Summit
Population
(thousand)
Trade
(million $)
GDP
(million $)
Intra-regiona
l trade
2,059,400
2,533,847
9,899,420
43.1%
ASEAN+6 EPA
(ASEAN , Japan, China, Kore
a India, Australia, New Zealan
d)
August 2006
Proposed by Japan at ASEAN
Economic Ministers’ Meeting
Population
(thousand)
Trade
(million $)
GDP
(million $)
Intra-regiona
l trade
3,207,960
2,893,252
13,835,060
43.6%
Free Trade Area of
Asia-Pacific (FTAAP)
November 2006
Proposed by the US
Population
(thousand)
Trade
(million $)
GDP
(million $)
Intra-regiona
l trade
USA
Canad
a
Mexic
o
Peru
Chile
Hong
Kong
Taiwa
n
Russi
a
Papua
New
Guine
a
2,677,790
8,469,530
35,412,050
67.1%
6
Issues and Challenges in Regional Integration
 Sequencing: How should Asia sequence its integration efforts in the
areas of trade, monetary, and financial integration?
 Style: What is the appropriate style for Asian economic integration?
Specifically, how institution-intensive should Asia’s integration initiatives
be?
 Scope: What would be the scope of Asian economic integration in
terms of countries and sub-regions covered?
 Speed: How fast should Asia pursue regional integration in its various
dimensions/tracks, or what is the appropriate speed for Asian economic
integration?
7
Asia’s Importance in the Global Economy to Rise
 Asia now accounts for about 60% of the world’s population, 40% of the
global output, and 30% of world trade.
-
With the possible exception of the 1997-98 crisis years, Asia has been the
fastest growing region in the world economy for many decades.
 Impressive achievements in poverty reduction and improvements in socioeconomic conditions in the last few decades.
- China and India – two countries with over a billion people each – have
also joined the Asian economic success story.
 Most projections indicate that Asia’s importance in the global economy is
going to increase in the next few decades.
- Current assessment is that by 2020 most large Asian economies would
have graduated to middle income status.
8
Rise of Asia
 Regional Development
− There are already important and rapidly developing economic linkages
among parts of Asia, particularly in East Asia, where a grouping of ASEAN
plus Japan, China and Korea seems to be emerging. The politics of such a
grouping are not simple, for the Japan-China relationship is evolving as the
Chinese economy grows, and as it becomes clearer that China will overtake
Japan at some point in the not too distant future
− Some in East Asia talk of following the example of Europe by improving
trade and financial links, and later moving to a common market and unified
financial system. It is recognized that this will take a long time, but those
involved note correctly that it took the European Union a long time to evolve
to its current condition
− At present, there is much talk of an East Asian common currency. Whether
there would be a basis for such a currency depends on how China’s
financial and currency management systems evolve. Since China would
eventually be dominant in an East Asian economic bloc, its preferred
currency arrangements will determine the eventual outcome.
9
 Economic Implications
− The rise of Asia, especially the rise of East Asia and of India, is already
reshaping the world economy.
− China has a comparative advantage in everything. Part of the anxiety must
derive from the discomforts of the adjustment process forced by the
dynamism of Asia.
− Most of the developing countries and most of China’s neighbors can count
the gains from China’s (and India’s) booming growth. China’s demand for
raw materials, which has produced a boom in commodity prices, has helped
many developing countries. China and India’s energy needs have helped
push oil and other energy prices to their highest sustained levels.
− The fact that the global economy has been growing very rapidly by historical
standards in the last few years despite concerns over global imbalances,
the years 2004-2006 will see high growth rates in Latin America and Africa,
due to the rise of Asia as to as the global engine of United States growth.
10
− Asian growth has benefited greatly from the relatively open
international trading system that was built up after World War Ⅱ. All the
East Asian miracle economies pursued export led growth strategies,
with the bulk of the exports going to industrial countries in the west.
− However the impact of China and India on the international financial
system does not depend mainly on the size of their quotas in the
international financial institutions.
11
 Political Implications
− Are we more sophisticated now than the world was a hundred years ago?
How long can the Pax Americana continue to maintain stability in Asia?
How wise will the sole superpower be in its future dealings in Asia? How
can China and India take their rightful places in the world and in their
regions without further confrontations?
− Does the fact that China and India are nuclear powers and so is Pakistan,
make the situation more stable as well as more dangerous? How will a
potentially nuclear Iran influence the equilibrium? How important is the
North Korean nuclear threat, and how long will Japan be willing to remain
non-nuclear in the face of that and other threats?
12
Regional Economic Integration
- Process whereby
countries in a
geographic
region cooperate
to either reduce
or eliminate
barriers to the
free flow of
products, people, or capital
13
Levels of Regional Integration
 Political Union
- Coordinate aspects of members’ economic and political systems
 Economic Union
- Remove barriers to trade, labor, and capital; set a common trade policy
against nonmembers; and coordinate members’ economic policies
 Common Market
- Remove all barriers to trade, labor, and capital
among members; and set a common trade policy
against nonmembers
 Customs Union
- Remove all barriers to trade among members, and set a common trade
policy against nonmembers
 Free-Trade Area
- Remove all barriers to trade among members, but each country has
own policies for nonmembers
14
Type and Scope of RTA
Custom removal
within the
region
Common
custom for nonmembers
Free movement
of prod. Factors
within the
region
Common
economic policy
adoption
Super-national
entity
FTA (NAFTA)
Custom Union
(Benelux CU)
Common Market
(EEC)
Economic Community
(EC)
Full Economic Integration
(EU)
15
Effects of Integration
 Potential benefits
 Trade creation
 Greater consensus
 Potential drawbacks
 Trade diversion
 Shifts in employment
 Political cooperation
 Creates jobs
 Loss of sovereignty
16
Main Regional, Intraregional, and Transregional
Forums in Asia
17
Source: ADB staff elaborations based in part on field interviews.
Evolution of Intra Regional Trade Shares (%)
18
 Regionalization in East Asia
- Concentration of economic activities (trade in goods and services,
capital, people, etc) in a particular region
Benefits of agglomeration > costs of agglomeration
- Measurement of regionalization in terms of trade:
Increasing intra-regional trade in world trade
Increasing intra-regional trade in region’s overall trade
 Two Types of Regionalization
- Market-driven regionalization
- Institution-driven regionalization
 Factors behind Market-driven Regionalization
- Rapid economic growth
- Trade and FDI liberalization: multilateral and unilateral liberalization
19
 Some Basics of Regionalism
- Trade creation or trade diversion?
- A recent IMF staff paper suggests that Asian FTAs have not led to
trade diversion.
- Building block or stumbling block?
- WTO consistency?
- Trade realism
 RTAs have obvious benefit for members
- Second-best choice
- Scale economy and competition
- More attractive to FDI
- Political and geopolitics benefits
20
 Regionalism or not?
- Economic gains are not the only determining factor.
- Multiple objectives of regionalism:
•
•
•
•
•
Regional politics and stability
Strengthen domestic policy reform
Increasing multilateral bargaining power
Securing market access
Forming strategic linkages
21
 Why integrates?
-
Trade within the Asian region is far from reaching its potential, and policies that
facilitate integration and more efficient regional trade accelerate growth and
expand its basis, especially for lower-income Asia.
-
Tariff barriers are only part of the challenge to further economic integration and
trade expansion in the region. A deeper and more inclusive Asian Free Trade Area
can achieve for its members larger benefits than that would arise from
global trade liberalization along WTO lines.
-
The economies of the ASEAN have the most to gain (in domestic terms) from
Asian economic integration, provided that this happens in a relatively uniform
way.
 The Economic Role of China in Asian Economic Integration
-
China becomes the major market for many Asian economies
China’s rise as the major factor in shaping the new division of labor (productionsharing network)
22
Economic Integration in Asia
23
Intensity of FTA Activity in Asia
 Growth of FTA in East Asia
-
The number of concluded FTAs includes Singapore (20), the PRC
(12), Japan (11), India (11), Thailand (11), and Malaysia (10), with
many more FTAs under negotiation. It is noteworthy that ASEAN—with
one of the oldest trade agreements in Asia—is emerging as the major
regional hub linking ASEAN members with the region’s larger
economies. Having enacted FTAs with the PRC, Japan, and the
Republic of Korea, ASEAN recently implemented regional agreements
with India and with Australia and New Zealand jointly, and is in FTA
discussions with the EU.
- The varying degrees of intensity of FTA activity across economies in
Asia can be related to several factors, including economic size, per
capita income, levels of protection, economic geography, and
production network strategies of MNCs.
24
- Singapore is by far the most active Asian economy in terms of the
number and geographic coverage of FTAs. With its strategic location,
the region’s most open economy, and world-class infrastructure and
logistics, the country is the regional headquarters for many leading
MNCs.
- Singapore is seeking access to new overseas markets, particularly for
services and investments. The country is a founding member of the
ASEAN Free Trade Area (AFTA) and has implemented bilateral
agreements with the largest Asian economies—the PRC, India, Japan,
and the Republic of Korea—as well as economies outside the region,
including the United States (US) and Australia.
25
-
As a supporter of multilateralism, Japan was a latecomer to FTAs. The
region’s first developed economy, Japan has the strongest base of
giant MNCs involved in production networks and supply chains
throughout Asia. One motivation for Japan’s engagement in FTAs is to
provide a market-friendly and predictable regional business
environment for its MNCs. Japan has rapidly implemented bilateral
economic partnership agreements (EPAs) with 10 countries,5 an
agreement with ASEAN, is negotiating agreements with Australia and
India, and is about to reopen negotiations with the Republic of Korea.
26
- The two Asian giant developing economies, the PRC and India, are
forming FTAs to ensure market access for goods and expand regional
coverage for outward investment. To this end, the PRC implemented
separate FTAs on goods and services with ASEAN and is now
finalizing its negotiations on an investment agreement. The PRC has
also forged bilateral comprehensive economic partnership agreements
(CEPAs) with Hong Kong, China and Macau, China; FTAs with Chile
and Pakistan; and is a member of the Asia–Pacific Trade Agreement
(APTA). In addition, the PRC concluded FTAs with Singapore and New
Zealand in 2008, and an Economic Cooperation Framework Agreement
with Taipei,China in 2010. India is a member of APTA and has a
comprehensive agreement with Singapore. It also has agreements with
its South Asian neighbors.
27
FTAs in Asia by Country and Subregion
Source: Asia Region Integration Center website. www. Aric.adb.org
(accessed 15 February 2012)
28
Growth of Concluded FTAs in Asia
(number of FTAs by economy)
FTA = free trade agreement.
Note: FTAs in Asia cover all FTAs with at least one Asian economy. Here, Asia includes
the 16 economies included in the figure.
Source: ADB’s FTA Database (available: www.aric.adb.org), downloaded August 2010.
29
Benefits of FTA
 Increase in Trade and Expansion of Foreign Markets
- Trade creation effects and trade diversion effects
 Enhance Technological Capability and Competitiveness
- Product differentiation and new technology development for enhancing
international competitiveness
 Induce FDI and Capital Accumulation
- FDI positively effects capital accumulation, technology transfer,
employment, exports, etc.
 Improve Economic System Through Opening
- Transforming the system through learning and for world standards
 Enhance negotiation leverage and credibility against foreign
partners
30
 Institution-driven Regionalization in East Asia
- Regional cooperation APEC: Trade and FDI liberalization and facilitation,
Economic and technical cooperation
- Bilateral and multilateral cooperation:
Free trade agreements (Economic Partnership Agreements for
comprehensive contents), ‘Chiang Mai Initiative’ (Currency swap), etc
- ASEAN, AFTA, AIA (ASEAN Investment Area), etc.
- ASEAN+3 (China, Japan, Korea)
 Recent Surge of FTAs in East Asia
-Trend: East Asian economies started showing strong interest in FTAs
toward the end of 1990s.
-Special characteristics: Comprehensive FTA (EPA) covering trade and FDI
liberalization, facilitation, economic cooperation: APEC’s three pillars
31
 The Factors behind the Proliferation of FTAs in East Asia
- Increase in market access
- Sharp increase in FTAs in the world
- Slow progress in trade liberalization under the WTO
- Promote liberalization and policy reforms
- Financial crisis in 1997-1998
- Rivalry among East Asian countries (competitive FTAs, China-Japan,
among ASEAN members)
 Motives behind FTA for Selected East Asian Countries
- Japan, Promote economic growth in East Asia: Increasing dependence
on East Asia, Improve business environment for Japanese firms
- China, Promote economic relations with East Asia
- Korea, Play a role of facilitator for institutional regionalization in East Asia,
Reunification of Korean Peninsula
- ASEAN, Maintain bargaining power in East Asia, Receive economic assistance
32
Arguments Surrounding Economic Integration
 Trade Creation and Trade Diversion
- Trade creation – Increased exports by new members to other members
resulting from membership
-
Trade diversion – Decreased exports to members of the economic
union by nonmember nations often resulting in the advantage shifting
away from the lower-cost producer to the higher cost producer
 Reduced Import Prices – Results from importers’ efforts to remain
competitive despite tariffs imposed
33
 Increased Competition and Economies of Scale
- The larger market created also means more competing firms which
can result in greater efficiency and lower consumer prices
- Internal and external economies of scale – Lower production costs
from greater production or free mobility of factors of production
 Higher Factor Productivity
- Movement of labor and capital from areas of low productivity to areas
of high productivity
- Poorer countries may lose badly needed investment capital or labor
to a more profitable richer country
- More developed countries may lose companies who move to areas
where operating costs are lower
 Regionalism versus Nationalism – The greatest impediment to
economic integration
34
Regional Groupings – Asia
 Integration in Asia
- Market forces are compelling Asia to move toward formal integration
- Association of Southeast Asian Nations (ASEAN) was very informal
- ASEAN Free Trade Area (AFTA) formed in 1991 reduced tariffs and
set goal for customs union by 2010
- East Asia Economic Group (EAEG) has been proposed
- Asia Pacific Economic Cooperation (APEC) has set goals of
liberalizing trade
- South Asian Association for Regional Cooperation (SAARC) on Indian
subcontinent in 1985
35
Regional Cooperation and Integration
 Recent Progress
- With the global economy immersed in double-track growth- emerging
economies expanding faster than advanced countries- Asia is forging
ahead in part due to increased regional integration.
- Asia is leading growth in global trade through increased openness, with
intraregional and “South- South” trade growing faster than trade with
traditional markets in the US and Europe.
- The depth of trade integration varies across subregions, with the
emphasis on intermediate goods trade reflecting expanding regional
production networks.
36
Regional Cooperation and Integration
- Cooperation in trade policy has developed most effectively in Asia
through a combination of unilateral actions. But some regional free
trade agreements (FTAs) also help foster intraregional trade flows, with
the number of FTAs involving at least one Asian country dramatically
increasing over the past decade. The degree of trade integration will
likely increase.
- Asia’s financial integration lags behind trade integration. The region’s
financial markets remain more integrated through global markets than
among themselves, but signs since the 2008/09 global crisis show
financial integration has accelerated; yet subregional variations remain
significant.
- Indeed, Asia’s infrastructure gap is huge, requiring more cross-border
connectivity to strengthen intraregional trade and regional demand.
37
Regional Cooperation and Integration
- In addition to physical infrastructure, for effective connectivity Asia
needs to strengthen its soft infrastructure—policy, legal, regulatory and
institutional frameworks, along with systems and procedures.
- International transmigration—including labor mobility within Asia—is
increasingly important as migrants contribute to growth both in host
economies and via remittances back home.
- Regional integration can expand markets and input sources, better
allocating resources across the region, thus accelerating economic
growth. It can also improve risk-sharing. But there are also downside
risks, ranging from potential contagion to growing income inequality
and polarization.
38
Integration Perspectives
 The current system of overlapping FTAs seems to gain a certain level of
appreciation; economic/political momentum toward plurilateral framework
may not be very strong in East Asia.
 ASEAN+3 vs. ASEAN+6
– Consolidated FTA: not worthwhile discussing seriously without CJK FTA
– Forum competition: depending on attractiveness of topics, willingness
for dialogue partners to participate in, and the feeling of ownership by
ASEAN
 East Asia vs. Asia-Pacific
– Approach and agenda are different (pragmatism vs. rule-oriented,
advanced-country-oriented vs. development); can go both at the same
time.
– Effective interactions of the two would provide an alternative framework
for G2.
 Asia-Pacific is likely to lead further development of FTA networking/consoli
dation in the coming years.
39
 Forming a Regionwide FTA
- There is increasing recognition in Asia of the merits in forming a
regionwide FTA as a means to consolidate the plethora of bilateral
and plurilateral agreements.
- Such an FTA would confer various economic benefits: increase market
access to goods, services, skills, and technology; increase market size
to permit specialization and realization of economies of scale; facilitate
the FDI activities and technology transfer of MNCs; and permit
simplification of tariff schedules, rules, and standard.
40
 EAS (East Asia Summit)
- The East Asia Summit (EAS) is a forum for dialogue on broad strategic,
political and economic issues of common interest and concern with the aim
of promoting peace, stability and economic prosperity in East Asia. It is an
open, inclusive, transparent and outward-looking forum, which strives to
strengthen global norms and universally recognized values with ASEAN as
the driving force working in partnership with the other participants of the
East Asia Summit.
41
 ASEAN + 3
-
The leaders of Japan, China, and Korea were invited to the informal ASEAN leaders'
meeting in December 1997, in the midst of the Asian financial crisis, which de facto
initiated the ASEAN 3 process. Many ministerial processes have been created within
the ASEAN 3 framework, including processes for foreign affairs; economy and trade;
macroeconomics and finance; environment, energy, health, labor, science, and
technology; and social welfare. China regards ASEAN 3 as a natural grouping for
East Asia's trade and investment cooperation and has proposed an EAFTA.
-
The ASEAN 3 leaders agreed in 2004 that the establishment of an "East Asian
Community" is a long-term objective and affirmed the role of ASEAN 3 as the main
vehicle for this eventual establishment. The East Asia Study Group (EASG 2002) had
identified seventeen concrete short-term measures and nine medium- to long-term
measures to move East Asian cooperation forward. The leaders then endorsed in
2003 the implementation strategy of the short-term measures--to be realized by
2007--and in 2004 encouraged a speedy implementation of the short- and long-term
measures. Some key long-term measures relating to economic, trade, and
investment integration, with the economic community in mind, include:
* formation of an East Asian Free Trade Area (EAFTA);
* establishment of an East Asia Investment Area by expanding the AIA; and
* promotion of investment by small- and medium-sized enterprises (SMEs).
42
 ASEAN + 6
-
ASEAN 6 (13 ASEAN 3 members and Australia, India, and New Zealand)
has met three times since December 2005, focusing on wider issues
including avian flu, education, energy, finance, and natural disasters. Japan
regards ASEAN 6 as an appropriate group for East Asia's trade and
investment cooperation and has proposed a CEPEA
-
Future economic cooperation in East Asia, leading to an East Asian
economic community, is likely to evolve around the multiple groupings under
ASEAN, ASEAN 1's, ASEAN 3, and EAS (or ASEAN 6). It is likely that the
ASEAN Economic Community, to be created by 2015, will be the hub of
East Asian economic integration, thereby securing ASEAN as the driving
force, ASEAN 3 as the main vehicle for an eventual East Asian economic
community, and the EAS as an integral part of the overall evolving regional
architecture
43
 APEC
- APEC has encouraged trade and investment liberalization in a voluntary
and unilateral fashion within an Asia-Pacific context. Australia played a
major role in promoting APEC as a trans regional forum with the basic
principle of "open regionalism". One of its most important achievements
was to induce unilateral, voluntary trade liberalization of the then non-WTO
members, such as China and Taipei, China. But APEC's prominence
appears to have declined since the Asian financial crisis because of its
inability to effectively respond to the crisis, and as its members have
pursued bilateral and sub regional FTAs. Open regionalism can remain
important, nonetheless, if APEC members take APEC--and WTO-principles as a liberalization infrastructure for their FTAs and attempt to go
beyond them.
44
Economic Position of NEA
(2010, Bil.US$)
Korea
GDP
Export
Import
China
Japan
Sum
1,014
5,878
5,459
12,351
(1.6%)
(9.3%)
(8.7%)
(19.6%)
442
1,580
772
2,794
(2.9%)
(10.5%)
(5.1%)
(18.6%)
415
1,394
694
2,503
(2.7%)
(9.0%)
(4.5%)
(16.1%)
 The three countries share 20% of the world total GDP.
 Exports share 19%, imports share 16%.
45
Intra-Regional Trade Trends
 Shares
of Intra-regional Trade
%
 Shares
of Intra-regional Trade
between CJK
%
Source: IMF (2011), Direction of Trade Statistics.
46/15
 FTAs involving China, Japan and Korea
 FTAs concluded by CJK
 Japan: Singapore, Mexico, Brunei, Indonesia, Malaysia, the Philippines,
Thailand, Vietnam, ASEAN, Chile, Switzerland, Peru and India
 Korea: Chile, Singapore, the EFTA, ASEAN, the United States,
the European Union, India and Peru
 China: Hong Kong, Macao, Chile, Pakistan, ASEAN, New Zealand,
Singapore, Peru and Costa Rica
 Ongoing FTA negotiations by CJK
 Korea: Canada, Mexico, the GCC (Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia, the UAE), Australia, New Zealand, Colombia and
Turkey
 Japan: Australia and the GCC
 China: Australia, the GCC, Iceland, Norway and SACU (Southern
African Customs Union)
 Many FTAs under study or preparation involving CJK
47
 NO FTA between China, Japan and Korea
 Japan-Korea FTA
 Korea-Japan FTA negotiations started in December 2002 and have
been stalled since November 2004
 Currently only Director-General-Level Consultations on a KoreaJapan FTA are under way
 China-Korea FTA
 Official tripartite joint study on a Korea-China FTA, which started
in March 2007, was concluded in May 2010
48
 China-Japan-Korea FTA
 Joint Study Committee on a CJK FTA
 Agreed at the Trilateral Summit Meeting in Beijing, in October 2009
 Five meetings since May 2010, and two more meetings to be held
by the end of 2011
 At the Trilateral Summit Meeting, which was held in Tokyo in May
2011, the leaders agreed to conclude the Joint Study within the year.
 The outcome of the Joint Study Committee was submitted at the
next year’s Trilateral Summit Meeting, 2012.
49
Korea’s FTA Partners
50
Global FTA Network of Korea
51
Korea’s Trade Volume Under FTAs
- With completion of the FTA network within 5 years, Korea’s
trade ratio with FTA partners will increase up to 76%.
52
 Korea’s Motivation of FTAs
- Korea: heavily dependent upon foreign markets in its development process
- Trade openness in 2005: Korea(65.7%) vs. NAFTA(25.8%), Japan (24.3%),
EU(32.2%), China(59.3%), ASEAN-7(154%)
- Strongly supported multilateral trade negotiations as Korea has been one
of the greatest beneficiaries of the GATT/WTO, but just ignored FTAs
- Regionalism revived and making fortress in foreign markets, so urgent
need to change its trade policy to take new markets and not to lose
existing ones.
53
Characteristics of FTAs of Japan
•
Focus on East Asia (East Asia-wide FTA)
=> shifting toward broader coverage (India, Chile, Gulf State etc)
•
Comprehensive framework: WTO-plus
+Economic Partnership Agreement
(FTA, FDI, Economic Cooperation )
+Free movements of goods, funds, people,
and information (FTA-plus)
+System harmonization (e.g. Intellectual property
right (IPR) , competition policy)
•
Recent changes:
+Increasing importance of speed
+Bilateral FTAs with ASEAN members to regional FTA with ASEAN
54
 Japan’s FTA Strategy
- Focus on East Asia
- Comprehensive framework: WTO-plus Economic Partnership Agreement
(FTA, Economic Cooperation: Policy coherence)
- System harmonization (technical standard, etc)
 Japan-Singapore EPA
- Liberalization: goods trade, service trade, FDI, government procure’t, etc.
- Facilitation: trade, FDI, mobility of natural persons, etc.
- Cooperation: science and technology, information technology, human
resource development, tourism, etc.
* Obstacles to FTAs for Japan
- Liberalization in agricultural imports
- Labor mobility
55
Economic Partnership Agreement
EPA: Japan’s FTA Strategy
56
Observatory Characteristics
 Recent and Interrelated Developments:
- First, Asia’s advanced production networks, which underlie its
spectacular global export success over the past several decades, have
deepened regionally. Production processes have been broken down
into smaller processes, with each process located in the most cost
effective economy, thereby further improving efficiency.
- Falling regional trade barriers and logistics costs, along with
technological progress, underlie this trend. Intraregional trade in Asia
has increased significantly, particularly in the production of parts and
components, and this trend may continue with further regional
liberalization via FTAs.
57
- Asia—a relative latecomer to using FTAs as a trade policy instrument—
is now at the forefront of global FTA activity with 61 concluded FTAs.
The Association of Southeast Asian Nations (ASEAN) is emerging as
the hub for Asia’s FTAs, with other major Asian economies joining the
FTA bandwagon. Policy support for the deeper integration of production
networks, regional integration efforts in other major markets, and the
1997–1998 Asian financial crisis have spurred the growth of Asian
FTAs.
 Potential Problems
- Issues and concerns highlighted include low FTA preference utilization,
a “noodle bowl” problem of criss-crossing agreements that potentially
distort trade toward bilateral channels, excessive exclusions and
special treatment in FTAs, and the possibility that the multilateral
trading system may be progressively eroded. FTAs are a relatively new
phenomenon in Asia and a dearth of empirical evidence, particularly
with respect to patterns of Asian FTAs and business impacts, has
made it difficult to verify the validity of these concerns.
58
The map shows FTAs signed or under negotiation in January 2006.
East Asia is defined here as the 10 ASEANs, China, Japan and Korea. Source Richard Baldwin 2006
59
References
ADB. 2012. “Asian Economic Integration Monitor” (PDF).
Kawai, Masahiro, and Ganeshan Wignaraja. 2010. Asian FTAs: Trends, Prospects,
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