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A 3 bloc dance: East Asian regionalism and the North Atlantic trade giants

A 3 bloc dance: East Asian regionalism and the North Atlantic trade giants. Richard Baldwin and Theresa Carpenter Graduate Institute, Geneva Presented by Theresa Carpenter University of Sussex 14th September 2009. Outline. Background facts Current state of trade agreements in Asia

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A 3 bloc dance: East Asian regionalism and the North Atlantic trade giants

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  1. A 3 bloc dance:East Asian regionalism and the North Atlantic trade giants Richard Baldwin and Theresa Carpenter Graduate Institute, Geneva Presented by Theresa Carpenter University of Sussex 14th September 2009

  2. Outline • Background facts • Current state of trade agreements in Asia • Asia talks with Europe and with the US • Some conjectures and scenarios

  3. Outline point 1. Background factsTwo facts and three unusual features • Fact #1: Rising economic importance of Asia: • Current and future world share of GDP • Fact #2: Intra-regional integration appears to be working

  4. Outline point 1. Background factsTwo facts and three unusual features • Feature #1:Factory Asia • Parts and components sourced from all over Asia • Intra-regional trade is a result of Asia cooperating with itself to produce goods with world-beating price-quality ratios • Final destination of product – primarily EU and US

  5. Outline point 1. Background factsTwo facts and three unusual features • Feature #2: Preferential trade liberalisation not a major feature in the region

  6. Outline point 1. Background factsTwo facts and three unusual features • Feature #3: No regional leader

  7. Outline point 2. Current Regional Trade Agreements in AsiaRegionalism in Asia • How we got here • An Asian verion of the Domino Theory of regionalism (Baldwin) • The “Noodle Bowl” simplified • Asia beyond East Asia

  8. Outline point 2. Current Regional Trade Agreements in AsiaHow we got here – the Domino Theory • Phase I: Mid 1980’s • Setting up “Factory Asia”, ie, fragmentation, offshoring, cross-national production chains • Phase II: 1990-2000 • Opening of China • Deepening of “Factory Asia” • Phase III: Invitation from China to ASEAN • Negotiate a China-ASEAN FTA • Triggered a domino effect throughout East Asia and beyond

  9. Trade agreements in AsiaActual and prospective

  10. Trade agreements in AsiaOperative as of 2006

  11. Outline point 2. Current Regional Trade Agreements in AsiaThe Noodle Bowl simplified • East-Asian agreements are complex • Over 100 either in force, signed or being negotiated • Stand back to see a clearer picture • Agreements involving Singapore • China-Hong Kong and China-Macao • Agreements where bilateral flows are small complicate the picture • Focus on important flows where there is discrimination against third parties, to reveal the bicycle picture

  12. Outline point 2. Current Regional Trade Agreements in Asia“Noodle bowl” simplified – East Asian Bicycle picture

  13. Outline point 2. Current Regional Trade Agreements in AsiaFour pillars of East Asian regionalism • Japan-ASEAN bilaterals • China-ASEAN FTA • Korea-ASEAN FTA • AFTA

  14. Outline point 2. Current Regional Trade Agreements in AsiaFour pillars, four insights into PE forces • China-ASEAN FTA • complex • Japan-ASEAN bilaterals • Japan-Malaysia precedent: the rice exclusion • Korea-ASEAN FTA • Playing catch-up • Japan-Korea talks deadlocked

  15. Outline point 3: Asian talks with Europe and with the USUnderstanding the talks • EFTA-ASIA talks • Proceeding rapidly (EFTA-Korea, EFTA-singapore) • EU-ASIA talks • Talking with ASEAN as a whole, but complicated due to Myanmar. Dual-track solution • Negotiate with ASEAN as a whole (slowly) • Negotiate with some individual ASEAN fasttrack • Exclude agriculture? • The US and Asia • Talks

  16. Outline point 3: Asian talks with Europe and with the USAsia-US talks • Bush Administration – ambitions FTA agenda • Talks concluded with Singapore Australia and Korea, first two in place, but US-Korea in trouble • US-ASEAN talks • US is talking with some ASEAN countries, but difficult due to US template approach • Trade in agriculture, government procurement, conditions on labour and the evnironment • Observers think that progress is unlikely • US-Asia and EU-Asia talks are characterised by quite different political economy forces • Different outcomes are possible

  17. Outline point 4. Scenarios and conjecturePossible scenarios • All planned FTAs work • EU-Asia works, but US-Asia does not • Neither EU-Asia or US-Asia works

  18. Outline point 4. Scenarios and conjecturePossible scenarios • All planned FTAs work • EU-Asia works, but US-Asia does not • Neither EU-Asia or US-Asia works

  19. Closing remarks • 3 blocs, “dancing” • If some of the initiatives succeed: • Discrimination • Domino effect • US an outsider? • Push for global trade in industrial goods?

  20. Thank you for listening

  21. Outline point 1. “Why the WTO should act”Three facts & an implication • Fact #1: The world trade system is marked by a motley assortment of discriminatory trade agreements; ‘spaghetti bowl’.

  22. Outline point 1. “Why the WTO should act”Three facts & an implication • Implication: • Spaghetti bowl’s inefficiencies and unfairness are increasing: • Production unbundling: **Key novelty** • Rapid growth of FTAs • World must find a solution. • Regionalism is here to stay, so solution must work with existing regionalism, not against it. • The solution must multilateralise regionalism.

  23. Outline point 2. “Ideas for a WTO Action Plan on Regionalism” Taming rules-of-origin tangle: Background PECS, or ‘Single List’ rules Mongolia Malaysia Afghanistan Ecuador Indonesia Cambodia Peru Vietnam Nepal Colombia Greenland Bhutan Iran Moldova Yemen China Panama Laos Kyrgyzstan Guatemala Tokelau Myanmar Honduras India Uzbekistan El Salvador Bermuda Gibraltar Nicaragua Anguilla Belarus Costa Rica Russia Bosnia & Herzegovina Bolivia Libya Chile Armenia Saudi Arabia Sri Lanka Pakistan Aruba Philippines Paraguay Kazakhstan Argentina Bahrain Azerbaijan Georgia U.A.E Turkmenistan Ukraine Qatar Bangladesh Brazil Thailand Cuba Uruguay Kuwait Maldives Macao Venezuela Tajikistan Oman Iraq ‘Families’ of rules-of-origin ACP Nations (ex. Africa) Caribbean: Antigua & Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Rep., Grenada, Guyana, Haiti, Jamaica, St Lucia, St Vincent, St. Ch. & Nevis, Surinam, Trinidad & Tobago Pacific: Cook Is., Fed. Micron., Fiji, Kiribati, Marshall Is., Nauru, Niue, Palau, Papua N. G., Samoa, Solomon Is., Tonga, Tuvalu, Vanuatu NAFTA & NAFTA-like rules CACM rules ASEAN rules African ACP Nations + EU bilaterals SADC’s PECS-like rules LAIA & LAIA-like rules in Mercosur EU’s GSP recipients

  24. Outline point 2. “Ideas for a WTO Action Plan on Regionalism”More development-friendly regionalism • Make regionalism more development friendly: • Establish WTO advisory services and/or a Centre on RTAs for developing nations. • Create scope for development-friendly rules of origin by encouraging nations to expand the cumulation zone of their RTAs to include as many developing country partners as possible.

  25. Outline point 3. “Implications for Asia”Facts & trends in Asia • ‘Noodle bowl’ in Asia • AFTA, ASEAN+1’s, Japan’s bilaterals • Korea, Thailand, Singapore extra-regional RTAs • More EFTA & new EU agreements • More US bilaterals? • ASEAN+3, ASEAN+6 • Overlapping rules of origin a problem. • ASEAN ROOs are not used much, yet. • NAFTA-like ROOs coming to Asia via extra-regional FTAs (Chile, Mexico, Peru, US) • PECS ROOs coming to Asia via EU deals?

  26. Outline point 3. “Implications for Asia”Ongoing multilateralisation • Completion and deepening of AFTA & its spread to the ASEAN+1’s is turning noodles into lasagna plates. • Consider expanding cumulation zone at least most goods. • Rules of origin: • Danger that NAFTA-like rules becomes the de facto standard in East Asia. • most complex and protectionist in the world.

  27. Outline point 3. “Implications for Asia”Ideas for Asian multilateralisation • Problem: Lack of regional coordination. • Strengthen ASEAN’s Secretariat’s capacity. • Problem: overlapping ROOs. • Idea: follow CACM/CAFTA example = • Either/Or rules-of-origin, ASEAN or NAFTA. • Form an East Asian coalition to participate talks on regional harmonisation of ROOs. • Form an East Asian coalition to make the system of Asian ROOs more development friendly.

  28. Outline point 3. “Implications for Asia”Ideas for Asian multilateralisation • Well functioning WTO system is critical to all East Asian economies. • Much free riding to date. • East Asia’s positive experience with taming the tangle gives it a natural position in negotiating the WTO Action Plan on Regionalism. • Participation of ADB, ASEAN Secretariat & National governments • Support for WTO is a topic that should overcome regional differences.

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