FTA becomes new buzzword ( 2004-01-20 00:04) (China Daily By Xu Binglan)
When India and Pakistan decided to seek a peaceful resolution to their
problems last month, the next thing they did was to announce that they were
pushing for the establishment of a free trade area (FTA) in South Asia.
Indeed, in 2003, FTA seemed to be one of the most frequently used buzzwords
in international relations, maybe next only to terrorism.
In the western hemisphere, the North America Free Trade Area (NAFTA) will
expand. In the eastern hemisphere, new bilateral plans for FTAs are appearing in
many areas. Every nation seems to be eager to jump on the regional trade
arrangement invented by Europeans, especially after a ministerial meeting of the
World Trade Organization (WTO) in Cancun, Mexico, failed to produce a
breakthrough on the new round of global talks.
East Asia, where some of the world's most vibrant economies are seen, has
also joined the trend.
Various trade talks are underway. The latest development was the start of
free trade negotiations between Japan and South Korea last month.
Government officials and experts in the region said a common market in East
Asia is very desirable and has a good chance of becoming a reality.
An important indicator for the emergence of the East Asia FTA is a trade
arrangement between Japan, China and South Korea, the three biggest economies in
the region.
"Without co-operation between the three, especially Sino-Japanese
co-operation, the East Asia FTA will not be one in real sense," said Xu
Changwen, head of Asia research at the China Academy of International Trade and
Economic Co-operation (CAITEC). The academy is under the Ministry of Commerce.
Think tanks set up by the three governments have been conducting research on
closer economic partnership between the three nations for several years. Leaders
of the three nations also declared the three would move in that direction.
"In the long run, we will certainly see an FTA between China, Japan and South
Korea, sooner or later," Xu said.
But there are still no signs that such an FTA could emerge in the near
future.
On the bilateral front, the prospects for a China-South Korea and China-Japan
FTA remain unclear. The prospect of an FTA between the three is even more
unlikely.
"Japan's attitude is the key. Japan does not have any intent of holding talks
with China soon," said Jiang Ruiping, a professor at the China Foreign Affairs
University.
"They (Japan) put lot of emphasis on the fact that China is a new member of
the WTO. They want to see how well China can do in making the adjustments
required as a WTO member."
Japanese officials have also openly disclosed their plan for a free trade
area with regional trading partners.
Last year, they finished their talks with Singapore, and are currently in
talks with South Korea, separately with several Association of Southeast Asian
Nations (ASEAN) members, and with ASEAN as a whole.
China seems to be at the very end of Japan's list, which makes the chance of
establishing an East Asia FTA even more remote.
The benefits of an East Asia FTA or an FTA of China, Japan and South Korea
are obvious. Tariffs will be further reduced. The flow of technology, capital
and information will be sped up. All this would lead to increasing intra-region
trade investment growth and spur economic growth.
With an expanding European Union and NATFA, the East Asia area is apparently
lagging behind in terms of regional trade arrangements, which puts it at
disadvantage in global trade relations.
In addition, Asian countries' experiences in negotiations in the World Trade
Organization (WTO) also offers lessons about the difficulties in achieving a
real global free trade system in the short term and lessons about the advantage
to be in a bloc instead of going it alone in trade talks.
Chinese, Japanese and South Korean firms have realized this.
Government think tanks in the three countries conducted a survey of listed
companies last year, 200 in China, 200 in South Korea and 300 in Japan, on the
desirability of an FTA between the three countries.
The majority of those surveyed -- 85 per cent on the Chinese side, 76 per
cent in Japan and 71 per cent in South Korea -- responded positively, according
to Zhao Jinping, a senior foreign trade researcher at the State Council
Development Research Centre (DRC), which organized the Chinese part of the
survey.
Most of those surveyed who supported the idea of the three-country FTA
believed that the talks for it should be started in three years, according to
Zhao.
The governments of China and South Korea have been active in pushing for the
integration of regional economies at different levels.
China has been playing a positive role in the Greater Mekong Subregion
economic co-operation programme with Cambodia, Laos, Myanmar, Thailand and Viet
Nam. China has initiated FTA talks with ASEAN.
It is also a strong advocate of close economic co-operation between China,
South Korea and Japan.
There used to be worries that historical and political obstacles could make
China and South Korea reluctant to build closer economic ties with Japan.
But experts said this is no longer a problem.
"China and South Korea have adopted the pragmatic approach of separating
political and economic affairs," said China Foreign Affairs University's Jiang.
But Japan was not moved. It still seems firm on putting any talks involving
China at the bottom on its Asian free trade plan.
Apart from uncertainties in the formation of an FTA between China, Japan and
South Korea, Asian nations have to face other difficulties in their free trade
talks.
Agriculture could be a particularly thorny issue.
"That is because grain is regarded by nations as goods that is crucial for
security and farmers have very loud voice in politics of many countries," said
Jiang.
But none of the experts doubt a broad Asia FTA will eventually emerge.
"I believe a free trade zone (FTA) in East Asia will emerge in, at most, 20
years," said DRC's Zhao Jinping.
Zhao said the FTA could be even be bigger by linking itself to other
economies, including Australia, New Zealand and South Asian countries to the
South and Central Asia and Persian Gulf countries to the west.
For China, Zhao said although it should be active pushing for progress in FTA
talks in Asia, it should also seek FTA opportunities outside of the region.
