Despite wobbles, Asian states stick to path of free-trade
Despite wobbles, Asian states stick to path of free-trade
TOKYO (Reuters): Asia's appetite for the tough task of opening up protected markets will be tested if economic growth flags, but for now experts see scant evidence that the region's commitment to free trade is crumbling.
Ten Asian leaders will join their 15 counterparts from the European Union in Seoul later this week for a biennial summit at which they are expected to make a ritual call for a new round of world trade talks to be launched as soon as possible.
To some diplomats, this professed eagerness to tear down global barriers is hard to square with recent signs of regional slippage on free trade.
First Malaysia asked other ASEAN Free Trade Area (AFTA) members for more time to lower auto tariffs a move that particularly angered neighboring Thailand, which has grand ambitions for its own car industry.
Then earlier this month, at a meeting in the northern Thai resort of Chiang Mai, members of the Association of Southeast Asian Nations (ASEAN) said they needed more time to study a proposed free trade area with Australia and New Zealand.
"I get the impression that the resistance to liberalization is growing," a European trade diplomat said. "If they're not prepared to open up to their neighbors, who are they prepared to open up to?"
Steve Parker, a trade economist with the Asian Development Bank Institute (ADBI) in Tokyo, said there was perhaps more rhetoric about the need to help vulnerable industries adjust to increased foreign competition.
"But in the broader picture, there's a tremendous amount of regional liberalization that's occurring because of the broad application of the AFTA," Parker said.
Under AFTA, the six founding members of ASEAN have pledged to reduce tariffs on 95 percent of their trade to five percent by 2002. The International Monetary Fund has also been instrumental in pushing for more open markets as part of the recovery programs it has overseen since Asia's 1997 financial crisis.
"I'm hard-pressed to find any backsliding," Parker said, noting that Malaysia was asking for more time but was not proposing beefed-up protection for the Proton, its national car.
Diplomats fear that other countries will emulate Malaysia and seek exemptions for uncompetitive industries.
But Frances Perkins, head of the East Asia Analytical Unit in Australia's department of foreign affairs and trade, was confident that Asia would not slide into tit-for-tat protection.
"Our reading of the region is that free trade is still moving ahead. A lot of tariffs have come down dramatically since the crisis," she said. "Pretty much all of these governments have finally accepted the lesson that unilateral reductions in trade barriers are to their advantage."
Nor was ASEAN's decision to study a free trade deal with Australia and New Zealand, rather than open negotiations right away, a setback. "We interpreted that as reasonably positive. We hadn't expected anything more at this stage," Perkins said.
Ultimately, analysts said, ASEAN has little choice but to keep opening up if it wants to attract foreign capital.
"If ASEAN hesitates now at this critical point, significant investment opportunities will be missed, as investment dollars look for a new home in other promising and growing markets," Stephen Collins, president of the Automotive Trade Policy Council in Washington, an industry lobby group, wrote recently in the Asian Wall Street Journal.
Governments are particularly aware that the magnetic appeal to investors of China, especially in labor-intensive industries and electronics, can only grow once Beijing joins the World Trade Organization.
A report prepared for the ASEAN Chiang Mai meeting showed that the 10-nation grouping had attracted just 17 percent of foreign direct investment flows into emerging Asian economies this year, compared with 61 percent for China -- an exact reversal of the proportions in the early 1990s.
Parker at the ADBI said ASEAN states increasingly recognized that they could not aspire to be technology leaders for the foreseeable future. As such, their economic fortunes would depend on how well they fit in with multi-national production networks.
"They're in a catch-up game that becomes a lot easier if they can do it in partnership with multinationals. But in order to do that, of course, they've got to have open environments," he said.