Transcript Dr Chia Siow Yue - singapore economic review conference 2015

The Future of Regional Cooperation
Architecture in Asia ---Overcoming
Alphabet Soup, Variable Geometry and
Noodle Bowl
Chia Siow Yue
Singapore Institute of International Affairs
Asia After the Global Financial and Economic Crisis
SER 2009 Conference, Singapore
6-8 August 2009
Rise in Regionalism in Asia
 Asian regionalism is on the rise:
 Growing interdependence in trade and investment flows. Rapid
growth of production networks
 Integrating financial markets. Growing financial and monetary
cooperation
 Integrating physical and communications infrastructure
 Integrating movement of tourists, manpower and students
 Surge in regional and bilateral FTAs/EPAs/CECs
 Cooperation in delivering regional public goods and mitigating
global and regional public bads ---environment, natural disasters,
pandemics, food-energy-water security, terrorism, security
 Notwithstanding the outcome of the Doha Round, regional
and bilateral FTAs will continue to grow in the region.
Plurilateral and Bilateral FTAs in East Asia
(January 2009)
Country
Plurilateral
Bilateral
Proposed
Total FTAs
Brunei
8
1
4
13
Indonesia
8
2
6
16
Malaysia
9
7
3
19
Philippines
7
1
4
12
Singapore
10
18
4
32
Thailand
9
9
6
24
Cambodia
7
0
2
9
Laos
8
1
2
11
Myanmar
8
0
2
10
Vietnam
7
2
2
11
China
4
9
10
23
Japan
2
13
4
19
South Korea
4
9
10
23
Factors in the “FTA” Surge…1
 Factors are both political and economic, intra-regional and
extra-regional dynamics.
 Political: Thawing political relations after the Cold War.
Asian Financial Crisis led to cooperation in the face of a
common threat.
 Extra-regional challenges and developments
Doha Round and APEC liberalization
Regionalism in North America and Europe
Current global crisis
Factors in the “FTA” Surge…2
 Intra-regional dynamics
Rapid growth of intra-regional trade and investment
flows
Development of regional production networks and
supply chains.
Asian financial crisis led to regional financial and
monetary cooperation --- Chiang Mai Initiative, Asian
Bond Market Initiative and Regional Surveillance
Mechanism.
National policies not adequate. Regional cooperation
needed to deliver regional public goods and mitigate
global and regional public bads
The Present Regional Architecture…1
 Numerous regional institutions, forums and economic
cooperation and integration agenda. Gives rise to dense
network of overlapping and multiple initiatives. Motivated
by political and economic considerations
 . Most are ASEAN-centric
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ASEAN10 –political-strategic, economic, social
ASEAN+1-- economic
ASEAN+3 (EAFTA, CMI) –economic, financial
ASEAN+6 (CEPEA) – economic
East Asia Summit (EAS) – political-strategic, economic
 SAARC and South Asia FTA (SAFTA) and APEC Forum
 Numerous bilateral FTAs
ASEAN Economic Cooperation and
Integration
 ASEAN formed in 1967. Since then, dense network of
meetings and work agenda
 First phase of ASEAN economic cooperation and
integration started in 1992 with AFTA, then AFAS in
1995, AIA in 1998. Spurred by external challenges.
 Second phase began in 2003 with the ASEAN Economic
Community (AEC). Again spurred by external challenges.
Goal of an integrated single market and production base by
2015, with equitable development, narrowed development
gap, and open to the global economy.
 ASEAN+1 agreements with China, Japan, South Korea,
Australia-New Zealand and India. Also with EU and GCC.
No ASEAN-US
Case for a Region-wide “FTA”…1
 Case for region-wide economic cooperation and
integration architecture
 Geopolitical:
 Usefulness of regional cooperation and integration in reducing
geopolitical tensions and conflicts. Example of ASEAN.
 A more cohesive and stronger voice in international
organizations and fora
 Economic:
 Larger benefits and lower costs of region-wide versus subregional and bilateral FTAs
 Facilitate regional production networks and supply chains by
resolving the noodle bowl problem
 Likely strong resistance from countries and groups that
oppose economic liberalization and regional integration
Case for a Region-wide “FTA”…2
 Defining the “region” and membership
 East Asia, Asia, Pan-Asia, Asia Pacific ---geographical,
geopolitical, or economic criteria?
 Narrow definition of East Asia has excluded Hong Kong and
Taiwan (EAFTA). Broad definition of East Asia has included
Australia, New Zealand and India (CEPEA)
 Indian Prime Minister called for a Pan-Asia grouping. Would that
include the whole of South Asia (SAARC and SAFTA)?
 Choice of wider membership versus deeper integration:
too large a grouping lacks “like-mindedness” and results in
shallow integration with large exclusion lists.
Challenges of Multiple, Overlapping
Regional Architecture…1
 Multiple and overlapping FTAs with different provisions,
rules and schedules result in complexities and noodle bowl
effect. There is no common template even for FTAs with
the same partner.
 WTO inconsistency ---commitments to GATT Article XXIV or
Enabling Clause
 Different tariff phase-out schedules and end-dates
 Different product exclusions
 Different service exclusions (sectors and modes of supply);
positive versus negative lists
 Different provisions and restrictions for foreign investors
 Different coverage of WTO-plus issues ---facilitation, investment,
IPR, competition policy, government procurement, labor mobility
Challenges of Multiple, Overlapping
Regional Architecture…2
 Multiple and divergent rules of origin and documentation
requirements
 ROOs reflect degree of liberalization for trade in goods
 Inconsistent ROOs across FTAs lead to fragmentation of regional
markets. Adoption of common ROO crucial to promote
convergence but difficulty on best type of ROO ---RVC, CTC,
product specific rules?
 Low utilization of FTA tariff preferences
 Troublesome customs forms and certification requirements
 Consensus on common ROO across FTAs difficult, since the more
restrictive provisions reflect deeply entrenched industry interests
ASEAN+3 and/or ASEAN+6? …1
 Contest between ASEAN+3 (EAFTA) and ASEAN+6
(CEPEA)
 EAFTA proposed by East Asia Vision Group in 2001. CEPEA
proposed by Japan in 2006
 Both are comprehensive economic partnerships with trade and
investment liberalization and facilitation, “Singapore issues”, and
regional cooperation and functional cooperation in wide areas
 ASEAN+3 membership of ASEAN10, China, Japan and
South Korea
 Started with financial and monetary cooperation during Asian
Crisis. EAFTA feasibility study launched in 2005
 Process towards EAFTA ---negotiation among 13 economies, or
ASEAN10 and China+Japan+South Korea? However, no FTA
agreement yet among China-Japan-South Korea
Integrating Asia Indicators (2007)
Economy
Brunei
Population (mill)
GDP (US bill)
GDP p.c..(US$)
Trade/GDP (%)
0.4
12
30750
90
Indonesia
225.4
433
1922
50
Malaysia
27.2
187
6868
196
Philippines
88.7
145
1634
85
Singapore
4.6
161
35076
386
Thailand
65.7
246
3737
126
Cambodia
14.2
8
579
121
5.8
4
696
61
Myanmar
57.0
11
193
57
Vietnam
86.4
71
824
138
China
1321.5
3241
2452
66
Japan
127.9
4380
34246
28
South Korea
48.5
970
20246
72
Hong Kong
6.9
207
29846
347
23.0
383
16680
130
India
1138.0
1166
1025
33
Total above
3241.4
11626
3587
63
Laos
Taiwan
ASEAN+3 and/or ASEAN+6? …2
 ASEAN+6 membership: Identical to East Asia Summit,
that is ASEAN+3+3 (Australia, New Zealand and India).
 Merit of including both a rising China and a rising India, resulting
in the largest economic bloc of over 3 billion population in the
world.
 Economic modelling results show a larger FTA confers more
economic benefits than the smaller ASEAN+3 FTA
 However, perceived problem of India being more protectionist and
slowing down the pace of trade and investment liberalization
 So EAFTA or CEPEA? Both under serious consideration
by ASEAN. Feasibility studies undertaken. Some proposed
that both can exist sequentially, with EAFTA first and then
expand into CEPEA.
APEC Forum…1
 APEC formed in 1989 to promote trans-Pacific economic
cooperation. Current membership of 21 economies that
includes Hong Kong and Taiwan, Australia and New
Zealand and US.
 Annual meeting of APEC leaders seen as a great diplomatic event
 APEC founders opted for open regionalism and voluntary and
unilateral trade and investment liberalization to achieve Bogor
goals of free trade for the developed economies by 2010 and for
the developing economies by 2020.
 Bogor goals so far illusory, although there is an IAP peer review of
APEC economies. Action focus in recent years has been on trade
and investment facilitation rather than meeting liberalization goals.
APEC Forum…2
 ABAC proposal for a Free Trade Area of the Pacific
(FTAAP) has so far met with lukewarm response.
 Would fundamentally change the nature of APEC into a
negotiating forum
 Reaching consensus on a high quality FTA near impossible among
the diverse 21 economies of APEC. Rising US protectionist
pressures
 Would divert scarce negotiating resources from Doha Round
 Proposal that APEC adopts a “coalition of the willing”
approach by expanding the existing Trans-Pacific Strategic
Partnership (TPSP or P4). It is a high quality FTA among
Brunei, Chile, New Zealand and Singapore but lacks the
clout of big economy participation.
Roadmap to Region-wide “FTA”…1
 Goal, region and membership
 Need a common political vision of the region
 Goal of economic integration or community building?
 ASEAN10+3, ASEAN10+6, APEC21, P4 expanded?
 How to handle the wide development gaps? ---flexible
arrangement with S&D treatment for the poorer countries
 Different time frames and schedules for liberalization
 Different sensitive and exclusion lists
 Economic and technical cooperation and capacity building
 How to negotiate a common template and resolve the noodle
bowl?
Roadmap to Region-Wide FTA…2
 Possible steps to reach a region-wide “FTA” in East Asia
 EAFTA through ASEAN10+China+Japan+Korea negotiations
 EAFTA through ASEAN FTA and CJK FTA
 CEPEA through consolidating the ASEAN+1 FTAs with China,
Japan, Korea, Australia-New Zealand and India
 Progression from EAFTA to CEPEA
 Inclusion of Hong Kong and Taiwan economies
 Possible steps to reach a Asia Pacific “FTA”
 Difficult to negotiate the FTAAP among 21 APEC economies
 Expand the P4 through “coalition of the willing” ---positive
demonstration effect if large economies such as US, China and
Japan express interest
 Linking EAFTA/CEPEA with NAFTA
Roadmap to Region-wide “FTA”…3
 Sherry Stephenson’s (2007) possible lessons from the
failure of the Free Trade Area of the Americas (FTAA)
 Common vision is necessary among the major economies
 Time frame of the negotiating process must not be too long
 Objectives must be realistic and achievable
 Minimal interference from other FTA negotiations
 Chairmanship of the process should not be given to the major
players
 Prior understanding on how to treat labor and environment
 Willingness and identified capacity to finance and support the
negotiating process
END OF PRESENTATION
THANK YOU