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NBR'S JAPAN FORUM (ECON) Free trade agreements
2003/06/27
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From: Toshiya Tsugami

I thank Dr. William H. Overholt for his comment on my posting, and on most parts agree with it.

I agree with his comment, "What ASEAN prefers is a multilateral deal that includes both China and Japan. It wants Japan to drop its agricultural protectionism and join the China-ASEAN deal, although ASEAN politicians are too polite to phrase it in those terms".

One and a half years ago ASEAN announced that it was going to strike an FTA deal with China while leaving Japan alone. ASEAN did so hopefully because it wanted to warn Japan of the consequence of continuously denying ASEAN requests. That was a somewhat polite but was actually an effective threat --"gaiatsu" pressure Aseanese.

That said, I should have argued in my posting that, "Some ASEAN members, while pursuing an FTA with Japan as ASEAN as a whole on one hand, are also pursuing bilateral FTAs with Japan with a hope to rebalance the already completed Japan-Singapore EPA vis-à-vis the expeditious progress of FTA negotiation with China." It may also be the intension of (at least FTA supporters in) the Japanese government to pursue a Japan-ASEAN FTA through pursuing bilateral FTAs with individual ASEAN members, and to eventually incorporate the latter into the former.

Dr. Overholt also comments, "They (ASEAN) also agree, along with China and Japan, on excluding the U.S. from such a deal so that Asia can build a counterweight to Washington and the IMF and hopefully avert a recurrence of policy pressures they faced in 1997-'98."

I agree in the sense that there are certainly such sentiments across East Asia after '97-'98. In my view, it was a huge mistake for the U.S. to have once strongly opposed to Premier Mahathir's EAEC idea in '90 on one hand, and have given Asians an inerasable impression of its lack of understanding of the Asia as well as of sympathy in the course of Asian economic crisis on the other hand.

But whether East Asia will and can really exclude the U.S. from a regional FTA is a different matter. In my view, as opposed to the currency cooperation in which involving the U.S. dollar is an inherent contradiction, there is no reason but a tactic for the East Asian FTA to eventually exclude the U.S. The nature of East Asia as "factory" and that of the U.S. as "customer" will not last for decades. The fact that Singapore –a leading proponent of East Asian economic integration, while boldly advocating the evolution of ASEAN+3 to a "East Asian Summit" in the 2000 ASEAN+3 summit, simultaneously accelerated the FTA negotiation with the U.S. might have reflected this. That is why I think the U.S. government attitude toward an East Asian FTA is realistic and constructive. Thus, (if it really works,) the whole process can also be a good hedge against a possible failure of the WTO new round -- the original Singapore intension to advocate an "East Asian Summit."

Lastly, one correction to Dr. Overholt's comment: I do not hold a Ph.D., unfortunately.


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(NBR'S JAPAN FORUM (ECON) 2003年6月27日)