From: Edward J. Lincoln dated July 1st
Mr. Tsugami and others have added interesting elements to the discussion of Japan's policy on free trade agreements.Here's a couple of additional comments.
Mr. Tsugami has an interesting interpretation of China's decision to propose an FTA to ASEAN (that China could see Japan's new favorable attitude toward FTAs and did not want to be left behind).I am not an expert on the internal politics of the Chinese government, but I still find this explanation unlikely.It is far more likely that the Chinese government a) could readily see the trend toward FTAs around the world, and b) was looking for an easy way to improve relations with Southeast Asian countries.The economics were easy, since China and ASEAN have relatively little trade (so that not very many domestic industries on either side would be badly hurt by opening the market).Meanwhile, ASEAN was worried about a "giant sucking sound" if foreign firms invested in ASEAN would move their factories to China now that it had joined the WTO.This latter fear is overblown (FDI into ASEAN has fallen since 1997 while that to China has remained high, but this had much to do with political instability in Indonesia and other temporary developments in the wake of the 1997 financial crisis and little to do with China's WTO accession).Therefore, Japan's newly announced FTA policy was not really a necessary ingredient in the Chinese government's decision to move forward with ASEAN.
Mr. Tsugami also wondered why I "spoke ill" of the slow movement toward FTAs in East Asia.Sorry, but I wasn't speaking ill of anything, only pointing out the interesting fact that the shift toward FTAs is not all that striking in the context of what is happening elsewhere in the world. It does seem to me that this raises questions as to why these countries did not jump on the FTA bandwagon earlier and why some of them have proceeded so cautiously.
I agree with both Stonehill and Tsugami that the ASEAN countries would like Japan to be involved with them in an FTA to help counter the weight of China.They were certainly willing to begin negotiations with China, but the press around the region has expressed some reservations about the process.In that context, the disappointment in ASEAN when Prime Minister Koizumi made his major policy speech in Singapore in January 2002 and failed to announce an offer to begin similar negotiations with ASEAN was palpable.Here we are more than a year later and the Japanese government has [not?] yet made a firm offer of an FTA to either ASEAN as a whole or any individual members other than Singapore.Perhaps this will happen in the next year or two, but the slowness in getting started--despite the obvious competitive pressure on Japan represented by the ASEAN-China negotiations is interesting.Mr. Tsugami, others at METI, and officials at MOFA have been working hard in the past 3-4 years to get a policy of active negotiation of free trade areas underway, but they have had great opposition from MAFF.
Meanwhile there is a new element in the mixture.Despite the notion of insulating the region from Washington and the IMF, it's not at all clear that FTAs serve this purpose (as Mr. Tsugami points out in his most recent post).Last October, the U.S. government announced a new initiative with ASEAN, in which it has offered to negotiate FTAs with individual ASEAN members (presumably because an ASEAN-wide agreement that would include Myanmar would be impossible).The Philippines and Thailand are the most likely candidates for a first round of FTA negotiations.It would be somewhat ironic if these countries began negotiations with the U.S. before they begin with Japan.
inally, I would ask Mr. Tsugami not to read into my comments things that are not there. He suggests that my listing of the U.S. government's recent activity on FTAs is inconsistent with my dismissal of FTAs in general as a good policy choice ("It doesn't appear that he does so in order to show how foolish U.S. policy makers are"). I listed the activity of the U.S. government on its own FTA policy to provide readers of this list with some facts about what is going on.Listing those agreements and negotiations is absolutely not an endorsement on my part for this policy.I consider FTAs an unfortunate fact of current global trade policy making, but stick to the position that we are all better off putting more energy into the WTO rather than these regional and bilateral deals.
