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6. Towards the Free Trade Area of the Asia-Pacific (FTAAP)
- ISEAS–Yusof Ishak Institute
- Chapter
- Additional Information
Towards the Free Trade Area of the Asia-Pacific 85 6 Towards the Free Trade Area of the Asia-Pacific (FTAAP) We have seen APEC’s progress in its main activity, trade investment liberalization and facilitation in Chapters 2, 4, and 5. APEC met its midterm Bogor Goals in 2010 and has started to tackle the post-Bogor agenda, that is, to pursue deeper liberalization and facilitation in the form of FTAAP and the Trans-Pacific Strategic Partnership (TPP), as well as broader cooperation in pursuit of greater economic growth. In 2006 the APEC Business Advisory Council (ABAC) proposed a greater free trade area (FTA) covering all of the APEC economies (ABAC 2006). It aimed to promote the integration of all the FTAs that had mushroomed in the region over the past decade, thus creating a greater single market to achieve the maximum scale economy. The joint ABAC/ Pacific Economic Cooperation Council (PECC) report of the same year (ABAC/PECC 2006) included both pros and cons of the FTAAP. Fred Bergsten, Director of the Peterson Institute of International Economics, Washington D.C., expressed his concern about the hobbled negotiations of the World Trade Organization (WTO)/Doha Development Agenda (DDA), and recommended FTAAP as a “Plan B” in preparation for the failure of the DDA and resulting vacuum of liberalization momentum in the region (Bergsten 2006). On the other hand, Charles Morrison, the 86 APEC: New Agenda in its Third Decade American Chair of PECC, represented a majority view of PECC academics, indicating practical difficulty in conducting liberalization negotiations within APEC and insisting on the pragmatic strategy of the Busan Roadmap (Morrison 2006). Bergsten served as the chair of APEC/EPG (Eminent Persons Group) from 1993 to 1995 and actively led the liberalization momentum within APEC then. The momentum heightened to the Bogor Declaration in 1994 and he planned to achieve it by negotiating an FTA (see Chapter 2 for details). However, in the following year the Japanese host invented the concept of “concerted unilateral liberalization” (CUL) within the Osaka Action Agenda, which disappointed many Americans, including Bergsten. I conjecture that after ten years he has resumed his original proposal together with American ABAC members. Of course FTAAP implies that APEC should quit its CUL modality and convert it to a legally binding FTA. FTAAP continued to be discussed in theAPEC Study Center conference in Melbourne in May 2007. I was invited to discuss its possibility together with Bergsten in the same session. I supported his suggestion of promoting FTAAP as a Plan B in case of the failure of DDA. I also attracted the participants’ attention to the increased momentum for the East Asian Community and suggested that both the EastAsia Free TradeArea (EAFTA) and FTAAP could be promoted in parallel (Yamazawa 2008). After all, APEC Leaders agreed to continue to study “a possible Free Trade Area of the Asia-Pacific in the long term”, as stated in the subtitle of its report The APEC Initiative for Strengthening Regional Integration (APEC 2007). Nevertheless, the current studies of FTAAP have not developed concrete procedures for achieving it. Academic studies focused on the computable general equilibrium (CGE) model calculations under specific assumptions, which result in greater welfare gains of FTA of a greater geographical coverage. Sangkyom Kim (2009) reported that under the assumption of all tariffs abolished, a 10 per cent reduction of services barriers, a 5 per cent reduction of transaction cost through trade facilitation, and simplified rules of origin, all APEC economies would gain and APEC’s real GDP would increase by 1.13 per cent, while the real GDP of the European Union would decrease by 0.08 per cent and that of the rest of the world decrease by 0.06 per cent. Since welfare gains are in the order of 0.1 per cent or less for smaller FTAs, FTAAP would lead to greater trade creation but less trade diversion effects. [3.231.146.172] Project MUSE (2024-03-28 11:57 GMT) Towards the Free Trade Area of the Asia-Pacific 87 For the past few years FTAAP has been “translated from an aspiration to a more concrete vision”. The DDA negotiations have been halted for the past five years, so the Plan B is still relevant. The 2010 APEC Leaders’ Declaration included an appendix entitled “Pathway to FTAAP” (APEC/ LM 2010c) clarifying its vision: FTAAP should do more than achieve liberalization in its narrow sense; it should be comprehensive, high quality and incorporate and address...