ASEAN-China Relations: Realities and Prospects

7. Ways towards East Asian FTA: The Significant Roles of ASEAN and China

68 Zhang Xiaoji 7 Ways Towards East Asian FTA: The Significant Roles of ASEAN and China Zhang Xiaoji INTRODUCTION East Asia is an area where new emerging market economies are very dynamic, intra-regional economic links are closely knitted and highly reliant on external markets. Faced with the rapid growth of regional trade arrangements around the globe and especially the expansion of the two trade blocs of EU and NAFTA, the various countries in this region are reformulating their strategies of foreign economic relationship, and actively carrying out intra-regional and cross-regional free trade negotiations. Under the established “ASEAN+3 (Japan, China and Korea)” framework for cooperation, the Framework Agreement on Comprehensive Economic Cooperation between ASEAN-China was signed at the ASEAN-China summit held in Phnom Penh, and currently the Free Trade Area negotiations have entered an intensive period. Japan has signed a Japanese-Singapore Economic Partnership Agreement (JSEPA), and has issued a joint statement with ASEAN concerning the establishment of the Comprehensive Economic Partnership and the conducting of bilateral FTA negotiations with some members. FTA negotiations between Korea and 07 ASEAN-China Relations Ch 7 5/8/05, 9:02 AM 68 Ways Towards East Asian FTA: The Significant Roles of ASEAN and China 69 Singapore are also underway. China, Korea and Japan have issued a joint statement to set up a three-party committee to promote cooperation between the three countries. The final report submitted by the “East Asian Study Group” to the “ASEAN+3” Summit laid out proposals on how to boost the prosperity and stability of the East Asian region. Against such a backdrop, how to maintain the cooperative tendency of the East Asian region and bridge the ideal and reality has become a common challenge to the “Ten+3” leaders. Through a multi-scheme comparison of East Asian regional cooperation, this chapter attempts to analyse the possibilities for EAFTA to be realized as a mid-term objective for ASEAN, Japan, China and Korea to promote regional economic integration. NEW TENDENCIES OF FREE TRADE RELATIONSHIP IN EAST ASIA In the 1990s, a wave of regional economic integration swept through the whole world. By the end of 2002, the World Trade Organization had received formal notifications of 250 Regional Trade Arrangements (RTAs). Most WTO members have participated in one or more RTAs, and the trade volume between RTA members accounted for forty-three per cent of the global trade in 2001. With various forms of RTA, institutional arrangements with Free Trade Area (FTA) at the core are winning over more and more acceptance by various countries. The establishment of trade blocs via trade agreements between countries is more often driven by political motives. For instance, countries can depend on free trade agreements to prevent possible military conflicts or to keep peace in the region. However, along with economic globalization, the expansion of internal markets via free trade areas to attract foreign investment and enhance international competitiveness has become a new driving force for regionalism. All countries in East Asia are members of APEC, where its trade liberalization scheme applies the Principle of Unilateral Willingness, which is not binding upon its members. Therefore, prior to the Asian financial crisis, East Asian countries mostly abided by the unilateral liberalization policy based on the Most Favoured Nation (MFN) status as an important force supporting the multilateral trade system. The economic ties between the East Asian countries were mainly based on market forces rather than intergovernmental institutional arrangements. The Asian financial crisis in 1997 changed the policy orientation of the East Asian countries, after which regional economic integration was driven onto the fast track of institutional arrangements.The strengthening of regional 07 ASEAN-China Relations Ch 7 5/8/05, 9:02 AM 69 70 Zhang Xiaoji economic cooperation to jointly safeguard against the impacts of economic globalization has become a consensus of the East Asian countries. The ten ASEAN countries established a regular summit meeting arrangement with Japan, China and Korea (Ten+3), thus forming the regional cooperative framework in East Asia. On the global scale, new regional trade arrangements kept increasing, driven not only by the interests of the members themselves, but by external pressure as well. Since multilateral trade systems cannot ensure all countries will share the benefits of economic globalization, intra-regional trade within the EU and the NAFTA, the two largest trade blocs, now accounts for one third of the global trade...