From:Edward Lincoln Senior Fellow The Council on Foreign Relations
As this discussion has proceeded, I have the impression that Mr. Tsugami actually has views on many issues that are not all that different from mine or others. But there does seem to be some mis-communication. In his latest posting, he suggests that "sounding the alarm of the danger of FTA moves today in 2003 may risk sounding like another double standard to East Asians." Who is "sounding the alarm? Certainly no one I know in Washignton. In my postings to this forum, I have noted that there is less to the FTA activity in East Asia than one might think given the enthusiasm with which Japanese government officials have pushed the idea. But that's not alarm. The only sense of alarm I have is that the world in general--the U.S. included--is drifting away from a WTO-centered approach to trade and investment liberalization and increasingly embracing FTAs. But that's a general problem, not one specific to
East Asia. And it's fair to say that few policy makers in Washington seem to share my view (though I am pleased to see Bernard Gordon sharing the same views and I look forward to reading his Foreign Affairs article).
Rather than alarm, in fact, from an analytical standpoint, the interesting development in Washington is the absolute absence of alarm over either East Asian FTAs or broader economic discussions within ASEAN+3. My own quick explanation for this development is:
1. Rather than a double standard as Mr. Tsugami argues, the U.S. government is so enamored of FTAs as a means of moving the world toward more open trade, that both the Clinton and Bush administrations have welcomed moves by other countries like Singapore or Japan to proceed with their own FTA strategies. I think officials and people outside government are well aware that NAFTA is a geographical bloc (and, as is the case with all FTAs, is leading to trade distortion with a rising percentage of American trade over the past decade with Canada and Mexico). Therefore, they are not about to criticize Japan or others for proposing similar regional groupings.
2. The Clinton administration was well aware that it had created some ill-will in both Japan and around the region by its open opposition to the EAEC (even though I think it was justified at that time for the reasons others have brought up about a "line in the Pacific"). Therefore, the Clinton administration was disposed to take a neutral stance on ASEAN+3. I see no change in this posture in the Bush administration.
3. Opposition to the 1997 AMF proposal was driven by the particular nature of the issue. MOF had a very imprecise proposal that certainly had the potential for undermining a well-established global (i.e. IMF-led) approach to financial crises, and like the EAEC, this proposal had heavy overtones of East versus West that was not useful in resolving the crisis. (And I do not understand why Mr. Tsugami sees this episode as a double standard, with the U.S. drawing the "line in the Pacific"; I see it as very consistent with the earlier EAEC opposition, driven by trying to prevent a divisive Asia versus IMF approach to the crisis.) Certainly, the IMF approach to the '97 crisis was flawed in its initial stage, but the solution to that is to fix the IMF, not create competing institutions. More recent proposals from Japan and elsewhere for some modified version of the original idea appear to have gotten no negative response from Washington because they clearly put an AMF in a subordinate position to the IMF. As a result, the sense of opposition in Washington has dissipated. Indeed, the IMF and the U.S. government have welcomed moves such as the ASEAN+3 central bank swap agreements.
4. Overall, what Japan chooses to do no longer gets much attention in Washington, at least on the economic side of policy. Specialists on Japan have watched the change in Japanese trade policy, embracing FTAs, with considerable interest, but the broader policy community in Washington is not paying much attention. In contrast to the late 1980s and 1990s, no one talks much about how an East Asian economic bloc might be detrimental to American economic interests.
