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Regional Trade Liberalisation in East Asia and the Asia-Pacific: the Role of China

Regional Trade Liberalisation in East Asia and the Asia-Pacific: the Role of China. Robert Scollay PECC Trade Forum and NZ APEC Study Centre University of Auckland. Background: Contrasting Periods 1994-1999 v. 1999-2004 (1). 1994-99

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Regional Trade Liberalisation in East Asia and the Asia-Pacific: the Role of China

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  1. Regional Trade Liberalisation in East Asia and the Asia-Pacific: the Role of China Robert Scollay PECC Trade Forum and NZ APEC Study Centre University of Auckland

  2. 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

  3. 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

  4. 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”

  5. 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)

  6. Key Role of NE Asia % of world GDP Northeast Asia 20 Japan 13.5 China 4.0 Korea 1.5 Southeast Asia 2 Australasia 1.5 North America 36 USA 32 APEC 61

  7. 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

  8. 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

  9. 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

  10. 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”

  11. 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?

  12. Responses to the Proliferation of PTAs (4)

  13. Responses to the Proliferation of PTAs (5)

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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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