Conference on Asia-Pacific Regional
Economic Integration & Architecture
Auckland, 25 March 2010
Trade Cooperation & Regional Architecture:
Economic, Political & Strategic
Considerations
Ann Capling
Overview
1. Trends in Regional Trade Integration:
Unilateral & Bilateral PTAs
2. Regional Trade Initiatives: ASEAN
Plus deals, APEC-sponsored
initiatives
3. Proposals for Regional Architecture:
APc and EAC: what comes next?
4. The TPP: potential & challenges
Regional Economic Integration: Key trends
1. Significant unilateral liberalisation:
Australia & NZ (bound), ASEAN &
India (unbound)
2. Proliferation of PTAs despite APEC
commitment to ‘open regionalism’
3. PTA activity driven by foreign policy,
geo-political, strategic &
commercial/defensive positions
4. Significant variation in PTAs
Consequences
Broad ‘types’ of PTAs in Asia-Pacific:
1. US (Aust and NZ): deeply liberalising,
comprehensive, WTO-plus
2. Japan (South Korea): less coverage
(agriculture) but also WTO-plus with
development assistance
3. China (ASEAN): weakly liberalising, less
comprehensive in scope & coverage
So considerable diversity (esp ROOs), which
APEC is addressing (model measures etc)
Consequences, cont’d
But little evidence that the ‘noodle bowl’ is a
problem
• Existing low tariffs mean limited take-up by
business of preferential access in PTAs
• A lot of East Asia’s total trade is intra-regional
trade (55 per cent), mostly ICT goods (for
export to western countries)
• High tariffs and NTBs in some manufacturing
sectors, services and agriculture remain
Re-balancing?
• Financial crisis is said to have
accelerated the decline of US & rise of
China
• Argument that Asian economies should
‘re-balance’ to exploit regional sources
of growth as exports to west decline
• But this would demand stronger &
deeper regional trade agreements
• Seems unlikely in mid term due to
strong political/nationalist rivalries
Regional trade initiatives
‘ASEAN plus’ initiatives
1.
2.
3.
•
•
•
•
Little progress on ASEAN+3 & +6
ASEAN+1 deals
AANZFTA most noteworthy of these
ASEAN’s most comprehensive PTA
WTO Plus on services and IP
Permissive & innovative ROOs
Built-in work programs
Regional trade initiatives, cont’d
1.
2.
3.
4.
APEC initiatives
Free Trade Area of the Asia-Pacific,
RIP
‘Soft law’ approaches: model
measures, transparency & analytical
work
P4 agreement (2006)
Trans-Pacific Partnership Agreement,
P4 plus Australia, US, Peru,
Vietnam(?)
Asia Pacific – A split down the middle?
• Fears about ‘split down the middle’ go
back to the 1980s
• APEC aimed in large part at keeping US
constructively engaged, and yet….
• ‘…The US has been absent from the
Asia Pacific region…’ (R. Gates,
Whitehouse spokesman, March 2010)
• Mixed views in region about importance
of US engagement in regional
institutions…
Current Proposals for Regional Architecture
• Need to distinguish between tradefocused agreements and those with a
broader mandate and agenda
• Existing institutions are seen as
inadequate (ie. APEC and various
ASEAN-centred institutions)
• Has given rise to competing proposals
from Australia (APc) and Japan (EAC)
Asia Pacific community (Australia)
Rudd’s initiative for a new process to:
• Manage regional economic, political and
security dialogues
• Manage changing relations between Asia and
the US
• Manage changing relations among the major
powers
• Develop and project an ‘Asian’ position in
G20 and other global forums
• Include India
Issues arising (December 2009)
• Must be ASEAN-centred (but leadership
problem there)
• Exclusion of APEC countries in Americas
(apart from US)
• No appetite for new architecture or meetings
• Russia?
• Concert of powers?
• Overtaken by G20…?
• Competition from Japanese proposal for EAC
East Asia Community (Japan)
• ASEAN + 6 (NE Asia, Australia, NZ and
India)
• Japanese prefer this to ASEAN + 3
which China would dominate
• PM Hatoyama claims desire to trump
agricultural protectionism, in favour of
stronger econ integration in East Asia
• But no US and ASEANs split on
desirability of US participation
• Competes with Rudd proposal
A compromise will have to emerge
• Option 1: group that consists of the
East Asia members of the G20 plus
Australia, India and US
• Option 2: EAC (16) plus US & Russia
• In the meantime, TPP is the easiest way
of keeping the US engaged in the
region
Trans-Pacific Partnership Agreement
TPP could build on the P4 which is a high
quality, WTO-plus PTA except in a
couple of key respects….
1. No chapters on investment, financial
services
2. Restrictive ROOs – AANZFTA is a
better model of liberal ROOs
3. P4 currently involves small liberal
economies with little trade between
them
Questions about the TPP
It might be easy to negotiate:
• 6 of the 8 already have PTAs with USA
• Of 28 dyads, only 8 are not covered by
existing PTAs
• Obama administration is making this a
high priority in light of expressed desire
to double exports over next five years
But……
TPP: difficult questions
1. Will it be a genuine FTA where all
parties have a common schedule for
the others?
2. Will the ROOs be highly restrictive
(like NAFTA’s) and therefore inhibit
greater regional economic integration
3. Agric subsidies etc remain untouched
4. Investor-state DSM?
5. Would US Congress ratify it?
And finally a plea…
Potentially bigger trade issues looming in
the Asia-Pacific region including:
• Tensions in trade in natural resourcebased products, especially food and
energy
• Interface between climate change
mitigation policies and trade policy
Which can only be dealt with effectively at
the WTO….
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