From:Toshiya Tsugami dated July 6th
Please allow me to make a rather out dated response.
Edward Lincoln says in his posting dated June 30th:
> ...that China could see Japan's new
> favorable attitude toward FTAs and did not want to be left behind
> ...
> 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).
It seems to me that there is not much contradiction between what he thinks is unlikely and what he thinks is far more likely. Logically speaking, his interpretation of my arguments, the above a) and b) can go together.
However, regarding his comment,"(China) was looking for an easy way to improve relations with Southeast Asian countries", I have two views: On one hand, I agree in the sense that a China-ASEAN FTA may result in "an easy way," but I also think one should not view it as "an easy way" so quickly, because there are rather ambitious goals in their FTA draft, such as service sector opening, and a dispute settlement mechanism. Dr. Lincoln may again oppose this wishful thinking. Indeed, there is certainly ambiguity as to whether China will really live up to its WTO commitments. ASEAN has also not had a good record in abiding by what they have mutually committed to in the AFTA--a good reason to believe that it is no use to wonder if China and ASEAN can establish this ambitious FTA. But I still hope that he does not laugh at them, and hope he continues watching with a cool head and warm heart. Since they are all rookies.
> 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.
The relocation of Japanese factories or production to China is real. Not a small number of Japanese factory managers said farewell to their counterparts or government officials in ASEAN, as they were dispatched to China, which naturally makes Southeast Asians uneasy. China's WTO accession or more precisely, a rapid development of Chinese domestic market was certainly one of the causes of this development. Recent SARS problem certainly warned multinational companies around the world the risk of putting all eggs you have into a basket.From now on, there will be some portfolio adjustment in their FDI strategy. But as far as Japanese companies are concerned, the magnitude of such adjustment may not be quite big.
> the (East Asian) 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.
There are many reasons why the East Asia failed in jumping on the FTA bandwagon. They include the following: diversities in the region, complicated historical problems that are yet solved, rivalry between Japan and China, export oriented economic policies that other East Asian countries learned from Japan and so forth.
> 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.
It would have been better if Prime Minister Koizumi could put it more decisively.But nonetheless both ASEAN counties as well as Japan are trying to negotiate FTAs. Dr. Lincoln's understanding about the situation inside the Japanese government is not wrong, but is slightly caught by a stereotype. MAFF's position is also changing. The root problem is that Japan needs a fundamental change in its agricultural policy (for example a "de-coupling" policy)--not a mission impossible, but also not the one that can be realized in a short period of time.
> 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.
True, this is something that I am afraid of (laughter). But if this were the case, then it will resume gaiatsu pressure on Japanese government to move quickly. We would then need to thank the new U.S. initiative. That is why I think it is constructive.
> Finally, 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.
Maybe I went too far in reading his posting. But its tone seemed bitter against Japan, China or East Asia as a whole.
Best regards,
