PTAs in PRACTICE

1. PTAs in PRACTICE ASIA/PACIFIC Note : some material in tehse slides is from Scollay (2002)

3. East Asia/ Western Pacific • East Asia/Western Pacific countries trade intensely with each other • FTAs established in Southeast Asia (AFTA, the ASEAN Free Trade Area) and Australasia (CER) • proposals to link CER and AFTA have so far not been taken up (some attention paid to trade facilitation but no consensus on removing tariffs • No RTAs established yet in Northeast Asia (China, Japan, Korea) • Japan and Korea traditionally avoided involvement in RTAs • Serious political obstacles to a Northeast Asian RTA • Malaysian proposals for an East Asian Economic Group failed due to lack of Japanese and Korean support • Northeast Asia: 20% of world GDP • SE Asia: 2% of world GDP • CER: 1.5% of world GDP

4. following a recent policy shift Japan and Korea are actively considering RTAs (including with each other) • Singapore has concluded agreements with New Zealand and Japan • formation and development of “ASEAN plus 3” (ASEAN plus Japan, Korea, China) • discussions initially focused on possibilities of monetary coordination • study of possible free trade arrangement commissioned 2000 • more recently proposals have emerged for separate ASEAN-China and ASEAN-Japan FTAs • Complex political factors affect potential for an “East Asian trade bloc”

5. APEC – Asia Pacific Economic Cooperation • embraces both sides of the Pacific • 21 members – almost 60% of world GDP • goal is free trade and investment by 2010 (developed countries) and 2020 (developing countries) • three part agenda • trade and investment liberalisation • trade and investment facilitation • economic and technical cooperation • not a preferential trade agreement

6. based on non-discriminatory “open regionalism” • regional integration without discrimination against outsiders • key features: • promotion of open (non-discriminatory) policies in relation to formal barriers to trade (liberalisation) • regional cooperation in the reduction of non-official barriers to trade (facilitation) • market-led integration • reinforcement of positive-sum game nature of trade liberalisation

7. Strong trade rationale for trans-Pacific link • in broad terms East Asian/Western Pacific countries on the average conduct about 50% of their trade with each other and 20-25% of their trade with the Western Hemisphere (mainly with the US) • share of Japan’s trade conducted with the Western Hemisphere is somewhat higher (about 30%) • US conducts 34% of its trade with East Asia/Western Pacific compared to 30% with its NAFTA partners and 5% with South America

8. ambitious liberalisation initiatives in late 1990s • has recently lost some credibility as a vehicle for regional trade liberalisation • recent proliferation of PTA proposals in Asia-Pacific region cast doubt on members’ intentions • trade and investment facilitation remain an important focus

9. ASEAN- Association of Southeast Asian Nations

10. ASEAN Free Trade Area (AFTA) • covers the ten members of ASEAN (South east Asian countries) • follows earlier unsuccessful attempts at economic integration • motivated by desires to keep a step ahead of APEC and to maintain competitiveness as a destination for foreign investment • divides products into inclusion and exclusion lists (later subdivided further into sensitive and highly sensitive products) • timetable for removal of tariffs and for transfer of products from temporary exclusion list to inclusion list

11. timetable accelerated several times during 1990s • following Asian economic crisis of 1997/98, target was changed from 0-5% tariffs to zero tariffs • serious resistance to liberalisation in some members in some sectors e.g. autos

12. Association of Southeast Asian Nations 8-31

13. Net Flows of Private Capital to Indonesia, Malaysia, Philippines, South Korea and Thailand Thru April 30. 8-32

14. Asian Trade Flows Destination of Exports Source of Imports % 8-33

15. Australia-NZ Closer Economic Relations Trade Agreement (ANZCERTA or CER) • inaugurated 1983 – negative list agreement replacing earlier positive list agreement • initially substantial exclusions under “negative list” and lengthy timetable for phasing out trade restrictions, but eventually all exclusions were removed and complete free trade in goods achieved by 1992 • extended to trade in services 1989, also on a negative list basis – only a few sectors remain on the negative list today

16. Elements of common market: • free movement of labour provided under separate Trans Tasman Travel Arrangements • investment not included due to Australian reservations but in practice investment permitted to flow relatively freely between the two countries • tax issues the major impediment to trans-Tasman investment (problems with separate dividend imputation systems – now beginning to be addressed).

17. extensive trade facilitation provisions have augmented the original agreement, covering • customs procedures • quarantine • mutual recognition of product standards and occupational qualifications • government purchasing • joint system for quality accreditation • joint food standards • harmonisation of some aspects of business law • replacement of anti-dumping by harmonised competition law provisions • some discussion of a possible common currency

18. Other PTAs in the region • SAARC • Bangkok agreement (Mekong) • See more on http://www.iie.com/publications/files/chapters_preview/72/1iie2024.pdf http://www.iie.com/publications/files/chapters_preview/72/appaiie2024.pdf