PTAs in PRACTICE

ASIA/PACIFICNote : some material in tehse slides is from

Scollay (2002)

East Asia/ Western Pacific• East Asia/Western Pacific countries trade intensely

with each other• FTAs established in Southeast Asia (AFTA, the ASEAN

Free Trade Area) and Australasia (CER)• proposals to link CER and AFTA have so far not been

taken up (some attention paid to trade facilitation but no consensus on removing tariffs

• No RTAs established yet in Northeast Asia (China, Japan, Korea)– Japan and Korea traditionally avoided involvement in RTAs – Serious political obstacles to a Northeast Asian RTA– Malaysian proposals for an East Asian Economic Group failed

due to lack of Japanese and Korean support

• Northeast Asia: 20% of world GDP• SE Asia: 2% of world GDP• CER: 1.5% of world GDP

• following a recent policy shift Japan and Korea are actively considering RTAs (including with each other)

• Singapore has concluded agreements with New Zealand and Japan

• formation and development of “ASEAN plus 3” (ASEAN plus Japan, Korea, China)– discussions initially focused on possibilities of

monetary coordination – study of possible free trade arrangement

commissioned 2000– more recently proposals have emerged for separate

ASEAN-China and ASEAN-Japan FTAs

• Complex political factors affect potential for an “East Asian trade bloc”

APEC – Asia Pacific Economic Cooperation

• embraces both sides of the Pacific

• 21 members – almost 60% of world GDP

• goal is free trade and investment by 2010 (developed countries) and 2020 (developing countries)

• three part agenda– trade and investment liberalisation– trade and investment facilitation– economic and technical cooperation

• not a preferential trade agreement

• based on non-discriminatory “open regionalism”– regional integration without discrimination

against outsiders– key features:

• promotion of open (non-discriminatory) policies in relation to formal barriers to trade (liberalisation)

• regional cooperation in the reduction of non-official barriers to trade (facilitation)

• market-led integration

• reinforcement of positive-sum game nature of trade liberalisation

Strong trade rationale for trans-Pacific link

• in broad terms East Asian/Western Pacific countries on the average conduct about 50% of their trade with each other and 20-25% of their trade with the Western Hemisphere (mainly with the US)

• share of Japan’s trade conducted with the Western Hemisphere is somewhat higher (about 30%)

• US conducts 34% of its trade with East Asia/Western Pacific compared to 30% with its NAFTA partners and 5% with South America

• ambitious liberalisation initiatives in late 1990s

• has recently lost some credibility as a vehicle for regional trade liberalisation

• recent proliferation of PTA proposals in Asia-Pacific region cast doubt on members’ intentions

• trade and investment facilitation remain an important focus

ASEAN- Association of Southeast Asian Nations

ASEAN Free Trade Area (AFTA)

• covers the ten members of ASEAN (South east Asian countries)

• follows earlier unsuccessful attempts at economic integration

• motivated by desires to keep a step ahead of APEC and to maintain competitiveness as a destination for foreign investment

• divides products into inclusion and exclusion lists (later subdivided further into sensitive and highly sensitive products)

• timetable for removal of tariffs and for transfer of products from temporary exclusion list to inclusion list

• timetable accelerated several times during 1990s

• following Asian economic crisis of 1997/98, target was changed from 0-5% tariffs to zero tariffs

• serious resistance to liberalisation in some members in some sectors e.g. autos

Association of Southeast Asian Nations

05

1015

2025

3035

4045

GDP Growth (%)

US Export to ASEAN($billion)

8-31

Net Flows of Private Capital to Indonesia, Malaysia, Philippines, South Korea and

Thailand

-20

0

20

40

60

80

100

1991 92 93 94 95 96 97 98

$ Billions

Thru April 30.

8-32

0 5 10 15 20 25

Rest of World

South Korea

Japan

NAFTA

%

Destination of Exports

Source of Imports

Asian Trade Flows

8-33

Australia-NZ Closer Economic Relations Trade Agreement

(ANZCERTA or CER)

• inaugurated 1983 – negative list agreement replacing earlier positive list agreement

• initially substantial exclusions under “negative list” and lengthy timetable for phasing out trade restrictions, but eventually all exclusions were removed and complete free trade in goods achieved by 1992

• extended to trade in services 1989, also on a negative list basis – only a few sectors remain on the negative list today

Elements of common market:• free movement of labour provided under

separate Trans Tasman Travel Arrangements

• investment not included due to Australian reservations but in practice investment permitted to flow relatively freely between the two countries– tax issues the major impediment to trans-

Tasman investment (problems with separate dividend imputation systems – now beginning to be addressed).

• extensive trade facilitation provisions have augmented the original agreement, covering– customs procedures

– quarantine

– mutual recognition of product standards and occupational qualifications

– government purchasing

– joint system for quality accreditation

– joint food standards

– harmonisation of some aspects of business law

– replacement of anti-dumping by harmonised competition law provisions

• some discussion of a possible common currency

Other PTAs in the region

• SAARC

• Bangkok agreement (Mekong)

• See more on

http://www.iie.com/publications/files/chapters_preview/72/1iie2024.pdf http://www.iie.com/publications/files/chapters_preview/72/appaiie2024.pdf