Japan, China, India Look East for Free Trade

Reviewed By Hitoshi URABE

Article:
"Japan, China, India Look East for Free Trade"
http://www.washingtonpost.com/wp-dyn/articles/A6463-2002Nov5.html
(by Ed Cropley, Reuters ) Washington Post

Comments:

It was the FTA, the Free Trade Agreement, between U.S. and Canada a little more than a decade ago. It was a controversial proposal especially for Canada, having a tenth the size of GDP compared to the Southern neighbor, with a fear that their economy might be sucked down by them. The country was split in fierce arguments, and the lower house was dissolved for a general election, in order to effectively poll the people. It was by close margin that the proponents won, and the FTA was given life. Then after a short while, somewhat to Canada's surprise, U.S. led them into negotiations with Mexico for NAFTA, North American Free Trade Agreement. Critics and satirists questioned if Mexico was a part of North America, and Mexican officials were often seen carrying a map to show their land was in fact located on the North American continent.

NAFTA also drew interests from scholars who were curious about whether an FTA containing both developed and developing economies would work, as until then the majority view was that for such an arrangement to be effective, it would need to be formed by participants whose economic development stages were similar.

Nowadays, the topic is FTAA, Free Trade Area of the Americas, encompassing virtually every country in the Americas, including the Caribbean. During the while, Mexico had concluded its own agreement with EU to establish free trade.

In Europe, of course, the European Union is making progress toward a unified nation, or at least a unified economy. It has just about reached completion upon the introduction of the single currency, euro, and is now set to expand to include Eastern European countries, where it was recently announced that ten of them would be joining EU in the next couple of years.

ASEAN, Association for South East Asian Nations, established in 1967 with 5 relatively developed economies, has now grown to a membership of 10 countries, and it began to seek possibilities of a free trade area in that region. Dubbed as AFTA, the ASEAN Free Trade Area, preparations are well under way, and plan calls to lower tariffs among member countries to below 5% by the end of the year, with an outlook to abolish them completely by 2015.

Who would be missing the bandwagon, then? In this part of the world, notably Japan, China, and South Korea, none of which could be ignored as a player in terms of World economy.

In order to catch up, the three countries, each in its own way, began to approach ASEAN, and came up with "ASEAN+3", not in the form of an organization but a forum to meet and discuss economic themes from time to time.

The article introduced above is a story formed from this meeting held over the last weekend in Phnom Penh. It reports that China and Japan, and India to an extent, are eager to begin FTA negotiations with ASEAN, and China taking the lead.

Japan has a free trade arrangement only with Singapore so far, and Mexico is said to be next in line to conclude an agreement. It was used to be Japan's position that while believing in free trade, relative discussions should be carried out under the auspices of WTO, as that is the organization recognized to be global and unbiased. It was in mid-90's when Japan suddenly awakened to recognize the web of trade agreements surrounding the naive nation, and began to seek arrangements for its own with certain countries.

It was not easy. Most of the countries already had their ties with other economies and there was not much room for Japan to cut into. And the vested interests in Japan, as always, opposed strongly to have protective measures that so much benefited them peeled off.

It could be likely this time as well, where the protectionists in Japan would drag the talks with ASEAN. In that context, China may take a lead in coming negotiations.

It might worth noting, though, that Japan's GDP, even during present difficulties, is still 4 times that of China. Japan provides 1 billion dollars annually to China in the form of ODA, apparently with which they have developed nuclear weapons, which Japan does not possess and have no intentions to do so.