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, 2006

-- Trade policy in Asia, ECIPE Policy Brief, 2007

Available at www.ecipe.org

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

Countries GDP GDP Growth

Population Per capita GDP

PPP GDP

MerchandiseExports

Service Exports

Total Merchandise Trade

Services Trade

Trade/GDP

FDI Inflow

FDI/GDP

  (US$ bn)

(%) (mn) (US$) (US$ bn) (US$ bn) (US$ bn) (US$ bn) (US$ bn) (%) (US$ bn) (%)

China 2228.9 9.9 1304.5 1708.6 8572.7 761.9 73.9 1422.0 157.1 63.8 72.4 3.2

Indonesia 287.2 5.6 220.6 1302.2 847.4 86.2 5.1 155.7 22.3 54.2 5.3 1.8

Malaysia 130.1 5.3 25.3 5134.4 274.8 140.9 18.95 255.6 40.5 196.5 4.0 3.1

Philippines 98.3 5.1 83.1 1182.9 408.6 41.3 4.5 88.7 10.3 99.2 1.1 1.2

Singapore 116.8 6.4 4.4 26836.1 130.2 229.6 45.1 429.7 89.1 367.9 20.1 17.2

Thailand 176.6 4.5 64.2 2749.4 549.3 110.1 20.5 228.3 48.0 129.3 3.7 2.1

Vietnam 52.4 8.4 83.0 631.3 254.0 31.6 3.9 68.1 8.6 130.0 2.0 3.8

ASEAN-6 861.4 5.9 480.6 1792.3 2464.3 639.7 98.05 1226.1 218.8 142.3 36.2 4.2

India 785.5 8.5 1094.6 717.6 3815.5 95.1 56.1 229.9 108.3 29.3 6.6 0.8

Japan 4505.9 2.7 128.0 35214.5 3943.7 595.0 107.9 1109.8 240.5 24.6 2.8 >0.1

Korea 787.6 4.0 48.3 16309.0 1056.1 284.4 43.9 545.7 101.7 69.3 7.2 0.9

Taipei 346.4 4.1 22.7 15291.8 - 197.8 25.6 380.3 57.1 109.8 1.6* 0.5

HongKong 177.7 7.3 6.9 25593.6 214.5 292.1 62.2 592.3 94.6 333.3 35.9 20.2

TOTAL 9693.4 - 3085.6 3139.4 20066.8 2866.0 467.65 5506.1 978.1 - 162.7 -

World 44384.8 3.6 6400.0 6835.1 61027.5 10431.0 2415 21214.0 4760 47.8 916.3 2.1

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

1995 2005

Japan 3.1 2.7

Korea 8.3 8.6

Taiwan 11.2 5.3

Hong Kong 0 0

Singapore 0.4 0

Malaysia 8.4* 7.5

Indonesia 14 6.5

Philippines 19.8 5.4

Thailand 21 9.9

Vietnam 13* 13.1

China 22.4 9

India 41 16

Applied Tariff rates in Asia

*Malaysia 1996 *Vietnam 1997. 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 2004. Source: World Bank

BindingCoverage

Bound TariffRate(All goods)

Applied TariffRate(Manufactures)

Applied TariffRate(Agriculture)

Overall appliedTariff

Japan 99.6 5.0 3.3 10.4 4.7

Korea 94.4 16.1 6.6 42.5 11.9

China 100 10.0 9.5 15.0 10.3

Hong Kong 45.7 0.0 0.0 0.0 0.0

Malaysia 83.7 14.5 8.1 2.1 7.3

Thailand 74.7 25.7 14.6 16.2 14.7

Indonesia 96.6 37.1 6.1 8.0 6.4

Philippines 66.8 25.6 6.9 11.8 7.5

Vietnam - - 12.9 18.1 13.7

Taiwan 100.0 6.1 5.5 16.3 6.9

Singapore 69.2 6.9 0.0 0.0 0.0

India 73.8 49.8 25.3 30.0 28.3

Pakistan 44.3 52.4 16.1 13.9 15.9

Bangladesh 15.8 163.8 19.2 21.7 19.5

Sri Lanka 37.8 29.8 9.6 15.4 10.2

Table x: Coverage Ratio of Non-tariff Barriers in Import Trade*

(Unweighted, percent)

1984-87 1988-90 1991-93 1997-2000

China 10.6 23.2 11.3 5.7

Indonesia 94.7 9.4 2.7 3.1

Korea, Rep 8.8 4.0 2.6 1.5

Malaysia 3.7 2.8 2.1 2.3

Philippines 44.9 --- --- 1.8

Thailand 12.4 8.5 5.5 2.1

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

Partners Nature of Agreement

Status of Agreement 2007

China PakistanASEAN

Singapore Thailand India

AustraliaNew Zealand Macao Hong Hong Chile SACUGCCIceland Korea Japan Peru Norway

FTAEPAFTAFTAPTABIPAFTAFTAFTAFTAFTAFTAFTAFTAFTAFTAFTAFTAFTA

-Agreement signed-EHP in force-Under negotiation -Under negotiation-Agreement in force-Proposed-Proposed -Under negotiation -Under negotiation-Agreement in force -Agreement in force -Agreement in force-Proposed -Under negotiation-Proposed -Under study -Proposed-Proposed-Proposed

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (cont’d)

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

China ASEAN 8.5

Thailand 1.5

Australia 1.6

India 0.9

Hong Kong 10.3

Macau 0.2

New Zealand 0.2

Chile 0.4

SACU 0.5

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

Partners Nature of Agreement

Status of Agreement 2007

ASEAN China

India

Japan KoreaUSACEREU

EPAFTAEPAFTAEPAFTATIFAEPAFTA

-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, 2000-2007 (cont’d)

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003

Country/ Grouping

Partners Share in total trade, 2003 (%)

ASEAN-6 China 7.4

India 1.5

Japan 14.4

Korea 4.2

USA 15.0

CER 2.8

EU 12.4

Country / Group of countries

Partners Nature of Agreement

Status of Agreement 2007

Malaysia JapanUSA

AustraliaNew Zealand EUKoreaIndia Pakistan

ChileCanadaGCC

FTATIFAFTAFTAFTAFTAEPAFTAFTA

FTAFTAFTA

-Agreement in force-Agreement signed -Under negotiation-Under negotiation-Under negotiation-Under study -Proposed-Under Study -Under negotiation-EHP in force-Under negotiation -Proposed-Proposed

Philippines JapanUSA

EPAFTA

Agreement signed Proposed

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (cont’d)

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

Malaysia Japan 13.6

USA 17.8

Australia 2.1

New Zealand 0.4

EU 12.0

Korea 4.1

India 1.7

Pakistan 0.4

Country / Group of countries

Partners Nature of Agreement

Status of Agreement 2007

Singapore Australia CanadaEgypt EFTAEUIndia JapanJordanKoreaMexicoNew Zealand Sri LankaUSAQatarPeruPanamaGCC Brunei, Chile, NZChinaPakistanMorocco

FTAFTACECAFTAEPAFTAFTAFTAFTAFTAFTAEPAFTAFTAFTAFTAFTAFTAFTAFTAFTA

-Agreement in force-Under negotiation-Under study-Agreement in force-Proposed (rejected by EU)-Agreement in force-Agreement in force-Agreement in force-Agreement in force-Under negotiation-Agreement in force-Under negotiation-Agreement in force-Under negotiation-Under negotiation-Agreement in force-Negotiation planed-Agreement in force-Under negotiation-Under negotiation-Under study

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (cont’d)

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

Singapore New Zealand 0.3

Sri Lanka 0.2

USA 14.2

Qatar 0.5

Peru 0.01

Panama 0.4

Kuwait 0.8

Bahrain 0.03

Brunei 0.2

Chile 0.03

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

Singapore Australia 2.5

Canada 0.4

Egypt 0.1

EFTA 1.1

EU 12.9

India 1.7

Japan 9.2

Jordan 0.01

Korea 4.0

Mexico 0.4

Country / Group of countries

Partners Nature of Agreement

Status of Agreement 2007

Vietnam USA

Japan

Sri LankaKoreaChile

BTATIFABITFTAEPAFTAFTA

-Agreement signed-Under negotiation -Agreement in force-Under negotiation-Agreement in force-Proposed-Proposed

Country / Group of countries

Partners Nature of Agreement

Status of Agreement 2007

Brunei Singapore, Chile, NZJapan

FTAFTA

-Agreement in force-Under negotiation

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (cont’d)

Country / Group of countries

Partners Nature of Agreement

Status of Agreement 2007

Thailand AustraliaBahrain ChinaIndiaJapanKoreaNew Zealand Peru South AfricaUSABIMSTEC

FTAFTAPTAEPAFTAEPAFTAPTAPTAFTAFTA

-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, 2000-2007 (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

Partners Nature of Agreement

Status of Agreement 2007

India ASEANChina

KoreaSingaporeSri LankaThailandBIMSTECSACUCOMESAMERCOSURCEFTAMauritius JapanMalaysia Brazil/South AfricaGCCChileEgyptEURussia EFTAUSATrinidad & Tobago

FTABIPAFTAFTAFTAFTAEPAFTAFTAFTAFTAFTACEPAEPAFTAFTAFTAPTAPTAFTACEPAFTAFTABIPA

-Framework Agreement signed-Proposed-Proposed-Under negotiation-Agreement in force-Agreement in force-PTA in force-Framework Agreement signed-Framework Agreement signed-Framework Agreement signed-Framework Agreement signed-Agreement signed -Under negotiation-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, 2000-2007 (cont’d)

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

India ASEAN 8.7

China 5.0

Korea 2.5

Singapore 3.0

Sri Lanka 1.1

Thailand 1.0

BIMSTEC 4.5

SACU 1.7

COMESA 1.2

MERCOSUR 0.9

Table 15Trade among recently established or Proposed RTAs/CEPAs partners involving ASEAN, China and India, 2003 (cont’d)

Country/ Grouping

Partners Share in total trade, 2003 (%)

India Mauritius 0.1

Japan 3.1

Malaysia 2.1

South Africa 1.7

GCC 7.2

Chile 0.2

Egypt 0.3

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

Partners Nature of Agreement

Status of Agreement 2007

Japan ASEANMalaysia SingaporePhilippines Vietnam

Thailand IndiaChina Korea Mexico CambodiaLaosIndonesia Chile SwitzerlandGCC Brunei

EPAFTAFTAEPABITFTAFTAEPAFTAFTAFTAFTAFTAEPAFTAFTAFTAFTA

-Framework agreement signed -Agreement in force-Agreement in force -Agreement signed -Agreement in force-Under negotiation-Negotiations completed-Under negotiation-Proposed -Under negotiation-Agreement in force -Proposed -Proposed-Under negotiation-Under negotiation-Proposed -Under negotiation-Under negotiation

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (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

Partners Nature of Agreement

Status of Agreement 2007

Korea ASEANMalaysia SingaporeVietnam ThailandIndiaChinaChile EFTAUSAEUCanada Australia New ZealandGCC

FTAEPAFTAFTAEPAFTAFTAFTAFTAFTAFTAFTAFTAFTAFTA

-Agreement in force (except Thailand)-Proposed-Agreement in force-Proposed-Under study-Under negotiation -Proposed -Agreement in force-Agreement in force-Under negotiation-Negotiation planed -Under negotiation-Under study -Proposed -Proposed

Table 14: Recently Established or Proposed RTAs/CEPAs in ASEAN, China and India, 2000-2007 (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 2006. 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

Share of total tariff reduction, by type of liberalization, 1983–2003

Autonomous Liberalization

66%

Regional Agreements

10%

Multilateral Agreements

25%

Source: World Bankhttp://siteresources.worldbank.org/INTGEP2005/Resources/GEP107053_Ch02.pdf

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