FTAs IN ASIA Razeen Sally European Centre for International Political Economy/ London School of Economics

FTAs IN ASIA Papers: -- FTAs and the prospects for regional integration in Asia, ECIPE Working Paper, Trade policy in Asia, ECIPE Policy Brief, 2007 Available at

FTAs IN ASIA New wave of global economic integration, but … Asian trade policies: from non-discrimination (unilateralism and GATT/WTO) to discrimination (FTAs) Focus: east and south Asia (“globalising Asia”)

FTAs IN ASIA Trade and FDI trends: -- China; India; ASEAN; Japan; Korea; Taiwan -- Implications for comparative advantage and the emerging Asian/global division of labour

CountriesGDP Growth PopulationPer capita GDP PPP GDP Merchandise Exports Service Exports Total Merchandise Trade Services Trade Trade/ GDP FDI Inflow FDI/ GDP (US$ bn) (%)(mn)(US$)(US$ bn) (%)(US$ bn)(%) China Indonesia Malaysia Philippines Singapore Thailand Vietnam ASEAN India Japan >0.1 Korea Taipei *0.5 HongKong TOTAL World Asian countries: economic and trade indicators 2005 *Whole of Taiwan. Source: World Bank. WTO statistical database. UNCTAD WIR 2006 and ADB

FTAs IN ASIA Global/Asian policy trends Slowdown of liberalisation in developing countries; no new liberalisation in OECD China the major exception: unilateral opening and WTO accession; ASEAN slowdown; India behind Sceptics and the Washington Consensus: arguments against liberalisation; worse climate for future liberalisation Case for further market reforms and global integration?

FTAs IN ASIA Trade policy in Asia -- Trends in countries and regions -- WTO -- FTAs -- China and unilateral liberalisation -- From non-discriminatory liberalisation (unilateral and GATT/WTO) to discrimination

Japan Korea Taiwan Hong Kong00 Singapore0.40 Malaysia8.4*7.5 Indonesia146.5 Philippines Thailand219.9 Vietnam13*13.1 China22.49 India4116 Applied Tariff rates in Asia *Malaysia 1996 *Vietnam All tariff rates are based on unweighted averages for all goods in ad valorem rates, or applied rates, or MFN rates whichever data is available in a longer period. Source: World Bank

Bound and applied MFN tariffs in Asia The figures are simple unweighted averages of the tariff rates in percent from the year of 2003 and Source: World Bank Binding Coverage Bound Tariff Rate (All goods) Applied Tariff Rate (Manufactures) Applied Tariff Rate (Agriculture) Overall applied Tariff Japan Korea China Hong Kong Malaysia Thailand Indonesia Philippines Vietnam Taiwan Singapore India Pakistan Bangladesh Sri Lanka

Table x: Coverage Ratio of Non-tariff Barriers in Import Trade* (Unweighted, percent) China Indonesia Korea, Rep Malaysia Philippines Thailand Notes: …Not available *Calculated as percentage of import value of HS6 tariff lines affected by NTBs in total imports. NTBs include quantitative restrictions in the form of all types of licenses and import authorization, quotas, import prohibitions, advanced import deposits, foreign exchange restrictions, fixed customs valuations, and state trading monopolies. Figures reported under a given sub-period relates a single year within that sub-period. Source: Hoekman et al (2002, Table A-4 and WTO, Trade Policy Review – Country Report (various)

FTAs IN ASIA FTAs -- Proliferation in Asia; catch up with other regions -- Motives: foreign policy; WTO stalled -- Building blocks? WTO-plus FTAs dependent on economic strategy -- But exceptions, not the rule -- Trade-lite FTAs (except with USA and EU?) -- Future of Asian FTAs?

FTAs IN ASIA China and FTAs -- 9 FTAs; 30 under discussion/negotiation -- China-ASEAN: increasing complementary trade but competing sectors -- Encouraging results on tariffs and rules of origin; WTO-compatible but not WTO-plus; services and investment? -- WTO-plus FTAs with HK and Macau -- Negotiations with Aus and NZ -- PTAs with SACU, India and others? -- Overall: pragmatic, eclectic approach -- Danger of politics-driven trade-light FTAs (unlike China in WTO); but stronger FTAs in east Asia

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 China Pakistan ASEAN Singapore Thailand India Australia New Zealand Macao Hong Chile SACU GCC Iceland Korea Japan Peru Norway FTA EPA FTA PTA BIPA FTA -Agreement signed -EHP in force -Under negotiation -Agreement in force -Proposed -Under negotiation -Agreement in force -Proposed -Under negotiation -Proposed -Under study -Proposed Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) ChinaASEAN8.5 Thailand1.5 Australia1.6 India0.9 Hong Kong10.3 Macau0.2 New Zealand0.2 Chile0.4 SACU0.5

FTAs IN ASIA Southeast Asia and FTAs -- Singapore’s FTAs: misleading indicator for region -- Thailand a better indicator: all politics, no economic strategy; trade-light -- Bilateral FTAs take priority over ASEAN-plus FTAs (ROO complications) -- ASEAN FTAs: weak and partial?

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 ASEANChina India Japan Korea USA CER EU EPA FTA EPA FTA EPA FTA TIFA EPA FTA -EHP in force -Under negotiation -EHP in force -Under negotiation -Framework Agreement signed -Agreement in force -Agreement signed -Under negotiation -Negotiation planned Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 Country/ Grouping PartnersShare in total trade, 2003 (%) ASEAN-6China7.4 India1.5 Japan14.4 Korea4.2 USA15.0 CER2.8 EU12.4

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 MalaysiaJapan USA Australia New Zealand EU Korea India Pakistan Chile Canada GCC FTA TIFA FTA EPA FTA -Agreement in force -Agreement signed -Under negotiation -Under study -Proposed -Under Study -Under negotiation -EHP in force -Under negotiation -Proposed PhilippinesJapan USA EPA FTA Agreement signed Proposed Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) MalaysiaJapan13.6 USA17.8 Australia2.1 New Zealand0.4 EU12.0 Korea4.1 India1.7 Pakistan0.4

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 SingaporeAustralia Canada Egypt EFTA EU India Japan Jordan Korea Mexico New Zealand Sri Lanka USA Qatar Peru Panama GCC Brunei, Chile, NZ China Pakistan Morocco FTA CECA FTA EPA FTA EPA FTA -Agreement in force -Under negotiation -Under study -Agreement in force -Proposed (rejected by EU) -Agreement in force -Under negotiation -Agreement in force -Under negotiation -Agreement in force -Under negotiation -Agreement in force -Negotiation planed -Agreement in force -Under negotiation -Under study Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) SingaporeNew Zealand0.3 Sri Lanka0.2 USA14.2 Qatar0.5 Peru0.01 Panama0.4 Kuwait0.8 Bahrain0.03 Brunei0.2 Chile0.03

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) SingaporeAustralia2.5 Canada0.4 Egypt0.1 EFTA1.1 EU12.9 India1.7 Japan9.2 Jordan0.01 Korea4.0 Mexico0.4

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 VietnamUSA Japan Sri Lanka Korea Chile BTA TIFA BIT FTA EPA FTA -Agreement signed -Under negotiation -Agreement in force -Under negotiation -Agreement in force -Proposed Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 BruneiSingapore, Chile, NZ Japan FTA -Agreement in force -Under negotiation Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 ThailandAustralia Bahrain China India Japan Korea New Zealand Peru South Africa USA BIMSTEC FTA PTA EPA FTA EPA FTA PTA FTA -Agreement in force -Agreement signed -Agreement in force -PTA in force -Negotiations completed -Under study -Agreement in force -Agreement signed -Under study -Negotiation postponed -Framework Agreement signed Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

FTAs IN ASIA India and FTAs -- Problems with SAFTA -- Outside south Asia: trade light; foreign policy not economic policy -- Part of overall trade-policy profile (fitful unilateral liberalisation and WTO defensiveness)

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 IndiaASEAN China Korea Singapore Sri Lanka Thailand BIMSTEC SACU COMESA MERCOSUR CEFTA Mauritius Japan Malaysia Brazil/South Africa GCC Chile Egypt EU Russia EFTA USA Trinidad & Tobago FTA BIPA FTA EPA FTA CEPA EPA FTA PTA FTA CEPA FTA BIPA -Framework Agreement signed -Proposed -Under negotiation -Agreement in force -PTA in force -Framework Agreement signed -Agreement signed -Under negotiation -Under study -Proposed -Framework Agreement signed -PTA signed -Under negotiation -Negotiation planned -Proposed -Under study -Proposed -Signed Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) IndiaASEAN8.7 China5.0 Korea2.5 Singapore3.0 Sri Lanka1.1 Thailand1.0 BIMSTEC4.5 SACU1.7 COMESA1.2 MERCOSUR0.9

Table 15 Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d) Country/ Grouping PartnersShare in total trade, 2003 (%) IndiaMauritius0.1 Japan3.1 Malaysia2.1 South Africa1.7 GCC7.2 Chile0.2 Egypt0.3

FTAs IN ASIA Japan and FTAs -- Japan-ASEAN: bilaterals take priority; agriculture carve outs; unambitious on other market access; ROO restrictiveness -- Trade light and reactive compared with China

Country / Group of countries PartnersNature of Agree ment Status of Agreement 2007 JapanASEAN Malaysia Singapore Philippines Vietnam Thailand India China Korea Mexico Cambodia Laos Indonesia Chile Switzerland GCC Brunei EPA FTA EPA BIT FTA EPA FTA EPA FTA -Framework agreement signed -Agreement in force -Agreement signed -Agreement in force -Under negotiation -Negotiations completed -Under negotiation -Proposed -Under negotiation -Agreement in force -Proposed -Under negotiation -Proposed -Under negotiation Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

FTAs IN ASIA South Korea and FTAs -- Defensive on agriculture, but more serious than other Asian players -- US-Korean FTA negotiations

Country / Group of countries PartnersNature of Agreement Status of Agreement 2007 KoreaASEAN Malaysia Singapore Vietnam Thailand India China Chile EFTA USA EU Canada Australia New Zealand GCC FTA EPA FTA EPA FTA -Agreement in force (except Thailand) -Proposed -Agreement in force -Proposed -Under study -Under negotiation -Proposed -Agreement in force -Under negotiation -Negotiation planed -Under negotiation -Under study -Proposed Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, (cont’d)

FTAs IN ASIA USA, EU and FTAs in Asia -- US negotiations in Asia: Thailand, Malaysia, Korea -- Changes in US trade policy: greater defensiveness; more difficult to negotiate agreements -- EU’s new Asian FTA policy -- EU negotiations: India, Korea, ASEAN -- EU-China

FTAs IN ASIA Regional economic integration -- APEC: a better yesterday -- ASEAN: Visions galore, but where’s the beef? CEPT progress but little else -- APT, EAEC, AEC etc.: Any common denominators? Empty talk? -- FTAs unlikely to contribute much to regional economic integration; disintegration dangers (ROO etc)

The map shows FTAs signed or under negotiation in January East Asia is defined here as the 10 ASEANs, China, Japan and Korea. Source Richard Baldwin 2006

Noodle bowl syndrome in Africa Source: World Bank

Noodle bowl syndrome in America Source: Inter-American Development Bank.

FTAs IN ASIA Asia in the WTO -- India: defensive, but slightly more flexible than before -- China: pragmatic, flexible but low key -- ASEAN: mixed; distracted with FTAs -- Japan/Korea: defensive, passive, punching below weight -- Asia needs effective WTO; but distracted with FTAs

ASIA, GLOBALISATION, TRADE POLICY Unilateral liberalisation – role of China WTO, FTAs and diminishing returns to trade negotiations Rely more on unilateral reforms and competitive emulation; the Chinese engine But leaves gaps, e.g. agriculture and rules

Source: World Bank

Unilateral tariff cutting in Phase II. The diagram shows tariff revenue divided by total imports. Source: Richard Baldwin 2006; Ando and Kimura (2005).

Formal unilateralism; reductions in applied MFN tariffs on Source: Richard Baldwin 2006: Kimura, Takahashi, and Hayakawa (2005)

ASIA, GLOBALISATION, TRADE POLICY Three Post-Doha priorities -- WTO --FTAs -- China-led unilateral liberalisation