[Vnbiz] East Asia exposes the limits of the regional

[Romi]

Dear CACC,

This is not a spam. Accidentally, it was wrongly identified by our spam
protection programme. Please enjoy reading this piece of article that
brother Truong shared with our group.

Also, please accept my apologies if you find the gmail invitations from
cyperhunt at gmail.com sent through VNBIZ as spams. By some reasons, this
person could sneak into our mailing system with a disguised entry (same Re
subject line), and I made mistake by approving it without checking the
content.

I'm sorry!

Romi

On 11/14/06, Tran Huu Hong Truong <tranhht-vcci at hn.vnn.vn> wrote:
>
>
> *East Asia** exposes the limits of the regional*
>
> By Alan Beattie
>
> Published: November 12 2006 18:41 | Last updated: November 12 2006 18:41
>
> The trade diplomacy of east Asia has become so blindingly complex that
> even the metaphors are getting muddled.
>
> The subtitle of one academic paper on free trade agreements (FTAs)
> suggests using "spaghetti bowls as building
>
> blocs". Another describes a "a patchwork of bilateral hub-and-spoke FTAs
> in a noodle bowl."
>
> These curious attempts to express the new world of Asian trade reflect the
> confusion surrounding rapidly
>
> proliferating regional trade deals and bilateral agreements. Attempts to
> illustrate this new trade architecture
>
> graphically are just as clumsy as the verbal analogies, variously
> resembling modern art, an electrical circuit board or,
>
> yes, a noodle bowl.
>
> This complexity is accentuated by the suspension of the so-called Doha
> round of global trade talks, since July, with
>
> its slim chances of swift resuscitation reduced further by the Democrats'
> clean sweep of Congress last week. With
>
> multilateral negotiations at a standstill, attention has shifted to
> bilateral and regional trade agreements.
>
> Though such deals claim to lower import tariffs and other barriers to
> trade, orthodox trade economists such as
>
> Jagdish Bhagwati, the Columbia academic who coined the spaghetti metaphor
> (adapted to noodles for use in Asia),
>
> say they often do more to complicate trade than ease it. Certainly, he
> says, they do not deserve the name of freetrade
>
> agreements.
>
> But his is a minority view. One particularly tangled bowl of noodles will
> assemble in Vietnam this week: the oddlynamed
>
> Asia-Pacific Economic Co-operation (Apec). Rumours are swirling that the
> US might revive an old idea of
>
> turning the 21-member Apec into a regional trade agreement (RTA) to secure
> a collective lowering of trade
>
> protection in the region. But like its rivals, the Association of
> South-East Asian Nations (Asean) and the newer "east
>
> Asia summit", Apec continues to resemble a motley collection of
> governments in search of a common project.
>
> The intrinsic problem with all these forums is that the region contains
> such a variety of economies and political
>
> systems. This means that in the short to medium term, any pact to cut
> tariff or regulatory protection tends to sink to
>
> the lowest common denominator.
>
> No association like Asean, which contains both rich, globalised Singapore
> and the desperately poor and repressive
>
> Burma , is likely to serve as the basis for a serious trade deal. No
> agreement including South Korea and Japan can
>
> include radical agricultural liberalisation for fear of alarming their
> heavily protected rice farmers. Korean insistence
>
> on excluding rice in talks over a Korea-Asean FTA, for example, prompted
> Thailand – one of the most efficient rice
>
> producers – to refuse to participate in the agreement.
>
> No agreement that excludes the US makes much sense. Despite the rapid
> growth in intra-east Asian trade in the
>
> past few years, many countries retain strong trading links to the US. Such
> links are a strong deterrent to the creation
>
> of an Asian-only "customs union" – a regional trading area that imposes
> the same tariff on imports from any nonmember
>
> – because some countries within it will want to lock in low tariffs with
> their biggest customer. Precisely this
>
> problem has occurred within the Latin American "Mercosur" customs union,
> which Uruguay has threatened to quit
>
> because it wants a deeper bilateral deal with the US.
>
> While no east Asian trading area would mean much without the US, neither
> would it without China, whose trade with
>
> south-east Asia has been growing rapidly and whose FTA with Asean is one
> of the few that may prove to have some
>
> substance. But the protectionist sinophobia flourishing in Washington,
> likely to be given even freer rein given the
>
> new Democratic dominance on Capitol Hill, precludes any substantive
> regional trade pact including both China and
>
> the US.
>
> It seems very likely that actual trade will carry on growing regardless of
> bureaucratic wrangling. Rarely has there
>
> been such a contrast between the dynamism of a regional economy and
> faltering official attempts to build a free
>
> trade area therein. Years of rapid growth have turned much of east Asia
> into one big assembly line, with Japan,
>
> Korea or Taiwan specialising in design and high-skill engineering while
> labour-intensive assembly takes place in
>
> Thailand or China. The average ratio of exports plus imports to gross
> domestic product is more than 130 per cent in
>
> south-east Asia, far higher than in Latin America, Africa or Europe.
>
> This dynamism, however, has little to do with formal trade pacts.
> "Surprising as it may seem, all this regional trade
>
> creation happened outside the aegis of regional trade agreements," says
> Richard Baldwin, professor of international
>
> economics at the Graduate Institute of International Economics in Geneva.
> He cites a study by Jetro, a Japanese
>
> government-backed organisation that promotes trade and investment, finding
> that less than 10 per cent of the
>
> capacity of a trade pact signed by Asean in 1991 was actually used. The
> "information technology agreement", an
>
> open global association whose member countries commit to eliminating
> tariffs on IT products, has outflanked it in
>
> that sector. Unilateral liberalisation, most recently practised by China,
> has done more to open up markets in east
>
> Asia than have bilateral or plurilateral agreements.
>
> But this has not stopped the trade diplomacy caravan proceeding, if only
> in circles. Apec, whose members include
>
> the US, Chile, Canada and Mexico, was launched in 1994 with the aim of
> achieving "free and open trade and
>
> investment in the Asia-Pacific" by 2010 for industrialised countries. It
> has since done little to achieve that end
>
> except, in its early years, acting as a discussion forum for governments
> who were unilaterally cutting tariffs.
>
> The rival Association of South East Asian Nations (Asean), which holds its
> annual meeting next month in the
>
> Philippines , was founded in 1967 and emerged as a political bloc of five
> anti-communist countries in a region that
>
> was often a theatre of cold war combat. That purpose redundant after 1989,
> it signed a trade deal in 1991 and its
>
> membership has expanded to 10. It has since agreed separate bilateral
> trade deals with China and Korea, and there
>
> is intermittent talk of adding Japan into a supersized "Asean plus three".
>
> The newest knot in the regional cat's-cradle is the "east Asia summit",
> comprising the "Asean plus three" 13 and
>
> India , Australia and New Zealand, with some other countries, including
> Russia, as observers. They will gather again
>
> this year just after December's Asean meeting, the definition of east Asia
> stretched to breaking point by a proposal
>
> from Malaysia that Pakistan be admitted.
>
> Few businesses are planning business strategies based on faith that a
> regional trading pact will take off. Michael
>
> Gadbaw, head of government relations for General Electric, says that any
> form of trade liberalisation is beneficial –
>
> "We should use every avenue we can" – though multilateralism is the best.
> But as for Apec, Asean or the east Asia
>
> grouping, he says, "hopes are high but expectations are more realistic".
>
> The US government's preferred vehicle for integration is, unsurprisingly,
> the one it helped set up: Apec. A senior US
>
> trade official says: "The entity that, notwithstanding all of its
> weaknesses, has done the most and has the most legs
>
> is Apec . . . what the various Asean and 'Asean plus' deals have achieved
> is pretty thin gruel."
>
> But by US officials' own admissions, it will take a lot of work to turn
> Apec even into a useful policy forum like the
>
> Organisation for Economic Co-operation and Development, the Paris-based
> club of rich country governments. "The
>
> Apec architecture is very unwieldy and there is no secretariat, which
> places a lot of strain on the host country," the
>
> senior US trade official says. "Even building the kind of rudimentary
> architecture that other groups like the OECD
>
> have would be enormously helpful in turning this organisation into the
> kind of thing that can achieve the lofty goals it
>
> was set up for."
>
> In the absence of effective regional co-operation, bilateral deals have
> rushed in to fill the hole. There are now
>
> dozens in east Asia with more to come. Peter Mandelson, European Union
> trade commissioner, has departed from
>
> traditional EU practice and launched a full-throated campaign of bilateral
> deal-seeking.
>
> Some bilaterals, notably the ones signed by the US with Singapore and
> Australia, have real bite, with extensive
>
> rules protecting intellectual property rights and opening up agricultural
> markets. Most, particularly those signed
>
> between two developing countries, are more to do with foreign policy
> posturing than increasing trade. Razeen Sally,
>
> a London School of Economics academic, says: "The predictable results of
> foreign policy-driven FTA negotiations
>
> light on economic strategy are bitty, quick-fix sectoral deals."
>
> The US trade official concurs: "Bilateral FTAs being pursued by China and
> Japan, and Korea to some extent, risk
>
> falling to the lowest common denominator. As someone once quipped: they
> are neither F nor T nor A."
>
> Is there any way to knit these partial deals into a regional tapestry of
> free trade? Such an outcome would require
>
> heavily simplifying the vastly complex "rules of origin" – the regulations
> determining the minimum level of an export
>
> product's value that has to be added in-country to benefit from a nation's
> special market access. Without rules of
>
> origin, trade pacts are close to meaningless. Chinese-made goods could be
> touched down on the quay in Penang,
>
> relabelled "Made in Malaysia" and then be re-exported to any country with
> which Malaysia had a trade deal.
>
> But with the fragmented supply chains of east Asia, aggregating multiple
> rules of origin for different products from
>
> different countries under different trade deals is immensely complex. Prof
> Sally says that the interaction of bilateral
>
> and regional rules of origin will get so complicated that exporters will
> find it easier and cheaper to pay the standard
>
> tariff available to all WTO members than to try to get the lowest tariff
> possible. "Little trade will be created," he says.
>
> "But there will be more work for customs officials."
>
> Copyright The Financial Times Limited 2006
>
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