Region sees waning economic interdependence<\/p>\n
Hadi Soesastro<\/p>\n
The Asia-Pacific region enters the year 2004 with a great deal
\nof confusion about the direction of regional economic
\ncooperation. Economic interdependence was one of the main
\nrationales for organizing the region. It was the basis upon which
\nan Asia-Pacific community was to be developed. The idea of
\nregional community building based on economic cooperation led to
\nthe creation of APEC (Asia Pacific Economic Cooperation) in 1989.<\/p>\n
East Asia recognized the importance of having the US in APEC.
\nThe U.S. was still the most important economic power. It was an
\nimportant engine for the Asia-Pacific economy. But, equally
\nimportant was the realization on the part of East Asians that
\nthey remained strategically dependent on the U.S. East Asia too,
\nwas very serious about Asia-Pacific community building.<\/p>\n
There was the belief that the kind of economic interdependence
\nthat has emerged within East Asia and between East Asia and North
\nAmerica, the US in particular, was beneficial to the regional
\neconomies. However, economic interdependence needed to be
\nmanaged. Economic interdependence created new economic
\nopportunities, but it also could become a source of friction.
\nThe developing countries saw that they could benefit from
\neconomic interdependence if they could fully participate in a
\n"catching-up" process and a dynamic development in regional and
\nglobal division of labor.<\/p>\n
The ASEAN economies opted for a strategy of economic
\ninterdependence, which was logically extended to a strategy of
\nglobalization. Together, with other Asia-Pacific economies, they
\nembarked on efforts to achieve "free and open trade and
\ninvestment in the region" by 2010 for the developed economies and
\n2020 for the developing economies. In addition, they made it
\nclear that their fundamental interest in their trade agenda was
\nto strengthen the WTO and the integrity of the multilateral
\ntrading system. These were the essence of "open regionalism" that
\nthe region was promoting.<\/p>\n
The breakdown of the WTO ministerial conferences in Seattle in
\n1999 and again in Cancun in 2003 highlighted the strained
\nrelations among WTO members. Trade tensions between China and the
\nUS have reached a dangerous level and need careful management by
\nboth sides. The multilateral trading system is also in great
\ndanger. The APEC economies were not in the position to rescue the
\nCancun meeting, and in their Summit in Thailand last October they
\nfailed to craft a strong determination to restart the Doha
\nDevelopment Agenda (DDA).<\/p>\n
Geo-economics would have predicted that the Asia-Pacific
\nregion would have seized the opportunity to lead in the efforts
\nto uphold the integrity of the WTO and the multilateral trading
\nsystem, because the region's economic well-being rests on an open
\nglobal trading system. It appears that economic interdependence
\nno longer provides a strong rationale for the region to organize
\nitself and to pursue global objectives. In the final analysis,
\neconomic interdependence is as much as matter of perception as it
\nis a fact of life.<\/p>\n
The changed environment<\/p>\n
The world trade situation today is characterized by trade
\npolicy initiatives that are being pursued at the global, regional
\nand bilateral levels at the same time. Many governments have
\nadopted a policy of moving on multiple fronts. This is best
\nexemplified by the U.S. strategy of "competitive liberalization",
\nin which global, regional and bilateral trade negotiations are
\nseen as complementing and reinforcing each other. U.S. Trade
\nRepresentative Robert Zoellick called this the era of "free trade
\non the offensive". A recent assessment by The Economist concluded
\nthat this US policy has not been successful. Cancun ended in
\nfailure. The FTAA (Free Trade Area of the Americas) is being
\nwatered down. U.S. bilateral FTAs have no economic significance
\nfor the U.S.<\/p>\n
Economist Fred Bergsten is of the view that the U.S. remains
\n"the pivotal operator" in the global trading arena. Through its
\nregional and bilateral trade deals the US intends to put pressure
\non non-members of individual trade agreements either to join the
\ngroup itself or to conclude broader agreements. This policy is
\nmainly, but not exclusively, directed towards the European Union.
\nIt is the view of the U.S. that Europe badly needs outside
\npressure to implement internal reforms, especially in
\nagriculture, and that such outside pressure can come primarily
\nfrom the US. The US could use its bilateral trade deals to reward
\nmembers of the Coalition-of-the-willing and penalize, or even
\npunish, members of the "coalition of the unwilling". A suggestion
\nhas been made that the U.S. was ready to sign the U.S.-Singapore
\nbilateral FTA but delayed the signing of the U.S.-Chile bilateral
\nFTA to demonstrate the use of such trade deals as an instrument
\nof its foreign policy. The use of bilateral FTAs as an instrument
\nto promote global free trade can have political implications due
\nto the selectivity in which such instruments can be used.<\/p>\n
There are developing countries that can readily take part in
\nbilateral, regional and global trade liberalization efforts, but
\na larger number do not have the capacity to do so. This was
\nperhaps recognized in designing the Doha Development Agenda (DDA)
\nas reflected in the inclusion of technical cooperation and
\ncapacity building as well as the reaffirmation of the special and
\ndifferential (S&D) treatment for developing countries in the WTO.
\nThere has been a concern all along that the DDA would not deliver
\non its development promise because of its over-ambitious and far-
\nreaching agenda. This was partly proven right by the failure of
\nthe Cancun meeting. Some have argued that many of the concerns of
\nthe developing members cannot simply be addressed through S&D
\ntreatment. It has also been argued that the WTO may not have a
\ncomparative advantage in technical cooperation and capacity
\nbuilding.<\/p>\n
A role for the region?<\/p>\n
At the Summit in Los Cabos in 2002, APEC leaders did reaffirm
\ntheir strong support for the multilateral trading system. To
\nrestart the DDA, APEC's agenda must be restructured. APEC also
\nneeds to address the issue of creeping protectionism that is
\nevident in many regional economies. It should also monitor the
\nformation of FTAs and RTAs (regional trading arrangements) in the
\nregion as these could undermine APEC's trade agenda.<\/p>\n
WTO members had experienced great difficulty in negotiating
\nthe DDA. A key issue remains agriculture. The U.S. and the Cairns
\nGroup are, on one side, demanding deeper cuts in agricultural
\nsupport and tariffs, which are opposed by Europe and Japan. For
\ntheir part, Europe and Japan have been pressing on with what have
\nbeen termed multi-functionality and non-trade measures. APEC
\nmembers have diverse interests with regard to agricultural
\nliberalization. It should be noted, however, that while
\nagriculture is a sensitive issue in several East Asian economies,
\nnone have relied on export subsidies to protect the sector. This
\nprovides a common ground for APEC to form an effective coalition
\nto work towards the elimination of export subsidies, which is a
\nmajor source of disruption to international trade in agricultural
\nproducts.<\/p>\n
Another set of problems are the so-called "Singapore issues",
\nnamely trade and investment, trade and competition policy,
\ntransparency in government procurement and trade facilitation.
\nThe U.S., and in particular the EU, have been pressing for an
\noutcome on these new issues, but most developing countries are
\nopposed to their inclusion in the negotiations.<\/p>\n
The region might have been too preoccupied with initiatives to
\nform bilateral and sub-regional FTAs. Bilateral and sub-regional
\nFTAs are being promoted on the assumption that they will produce
\na kind of "competitive liberalization". It is also proposed that
\nthese separate agreements could become "building blocks" towards
\nregional and ultimately global free and open trade.<\/p>\n
FTAs in East Asia are essentially politically driven. The
\nJapan-Korea FTA proposal was meant to cement a political
\nrelationship with significant improvements in the late 1990s. The
\nJapan-Singapore agreement, signed in January 2002, can be
\nregarded as politically driven as well. In the context of
\nSoutheast Asia's development post-crisis, Singapore sees the need
\nto differentiate itself from the rest and to remain firmly on the
\nradar screen of its major trading partners by forming bilateral
\nFTAs. The deal with New Zealand, which was a first for Singapore,
\nprovided a training ground for Singapore. Japan was next, and the
\nnegotiations with Singapore provided a suitable training ground
\nfor Japan as Singapore has virtually no agricultural sector. One
\nmain purpose for Japan is to gradually erode the domestic
\nresistance to agricultural liberalization through a series of FTA
\ncommitments. However, this erosion appears as if it will be
\nextremely slow.<\/p>\n
Singapore's FTAs with Australia and the U.S. are mainly about
\nservices. The FTAs will accord substantial market access across
\neach other's entire services sectors, subject to a "negative
\nlist". The U.S. side does not expect any significant economic
\neffects from the agreement with Singapore because of the relative
\nsmall size of Singapore. This agreement has been advertised as a
\n"high quality" agreement. In terms of U.S. security interests,
\nthe FTA would add a formal economic link to the security
\nrelationship with Singapore, and to engage the U.S. with the
\nregion as a whole.<\/p>\n
ASEAN needs to formulate a strategy to involve FTAs as a
\ngroup, like in the ASEAN-China agreement, signed in November
\n2002. The agreement explicitly aimed at the establishment of an
\nASEAN-China FTA within 10 years. It is the first agreement for
\nASEAN as a group as it is for China. This agreement is
\nessentially politically motivated.<\/p>\n
Implementing the agreement will be a major challenge for ASEAN
\nand China. The negotiations to finalize the FTA component, to be
\nconcluded in July 2004, may turn out to be more difficult and
\ntime consuming than anticipated.<\/p>\n
Japan has signed a broad agreement with ASEAN. In addition to
\nthe framework agreement, Japan wants to negotiate bilateral FTAs
\nwith selective ASEAN members. This is seen by many in ASEAN as
\nthreatening ASEAN's cohesion and credibility. Korea has finally
\nstated an interest as well in developing a Korea-ASEAN bilateral
\nagreement as it feels that it should not be left out. However,
\nKorea's original interest, promoted by former President Kim Dae-
\njung, was to advance the vision of an East Asian Community, which
\nwill be pursued through the development of a region-wide East
\nAsian FTA rather than a set of bilateral FTAs. However, this may
\nbe premature.<\/p>\n
In the emerging regional trade structures in East Asia, ASEAN
\nhas practically been driven to become a hub. It needs to
\nstrengthen itself to be able to play that role effectively. It is
\nin this light that the recent decision by ASEAN leaders to form
\nan ASEAN Community should be seen.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/region-sees-waning-economic-interdependence-1447893297",
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