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Japan a step closer to Southeast
Asia
By Suvendrini Kakuchi
TOKYO - A landmark agreement that Japan will
sign with Southeast Asian countries next week paves the
way for wider free trade and cooperation, marking what
analysts say is a significant step toward East Asian
unity.
The Association of Southeast Asian
Nations (ASEAN)-Japan Commemorative Summit, to be held
on December 11-12, is expected to lead to a "Tokyo
Declaration" that will focus on the idea of an East
Asian community and an East Asia Free Trade Area. The
agreement would mark the culmination of years of
discussion toward a multilateral free trade agreement
(FTA) that would extend a legal framework to the already
deep economic ties between Japan and Southeast Asia.
"The upcoming agreement is definitely a plus for
Japan, the leading investor in Asia," says Mamoru
Kobayashi, an expert on Southeast Asia at the
prestigious Mitsubishi Research Institute. While the
broad-based action plan to be discussed during the
summit includes key sectors such as financial market
integration, economic stability, education, technical
training and security, much of the focus has been on an
ASEAN plan to forge a free trade pact with Japan by
2012.
ASEAN, Southeast Asia's key diplomatic
grouping, comprises Brunei, Myanmar, Cambodia,
Indonesia, Laos, Malaysia, Singapore, the Philippines,
Thailand and Vietnam.
Kobayashi says that an
ASEAN-Japan free trade area reflects Japan's steps to
keep abreast of other bilateral and regional agreements
- such as the European Union, and more recently, the
upcoming FTA between ASEAN and China in 2010. Japan
itself signed a landmark free trade accord with
Singapore in December last year.
In many ways,
this month's accord on a free trade area shows the depth
of economic integration between Japan and Southeast Asia
over recent decades, a process that saw Japan using the
region as a manufacturing base and production network.
In 2001, nearly 40 percent of exports by East Asian
economies were destined for the same region, up from 23
percent in 1980. Likewise, their dependency on
intra-regional trade in terms of imports reached 43.7
percent in 2001, nearly double the figure of 22.2
percent in 1980.
The World Bank has forecast
that East Asia will achieve a record 5.7 percent growth
rate in 2004, painting an even rosier picture for
economic activity in the region. Analysts explain that
these impressive figures emerged without a formal
binding framework, which means that there is room for
even more optimism when the formal agreement on a free
trade area falls into place.
"Japan's relations
with ASEAN are moving from the base of economic aid to
brisk trading based on a global supply chain from
Southeast Asia. The new agreement assures Japan a legal
basis for the current trading pattern," explains
Kobayashi.
But a major sticking point in the
upcoming agreement - and the completion of a real East
Asian club - is the fact that regional rival China is
currently left out of the draft on a new East Asian
community. Despite calls on Japan to conclude such an
agreement with China, Japanese officials say that Tokyo
remains reluctant given the huge economic disparity
between the two countries - not to mention the rivalry
between the two Asian giants.
"The [existing]
ASEAN Free Trade Area is based on [members having]
similar economic backdrops, which is not the case when
comparing Japan and China, where the latter is still a
long way behind in terms of international financial
legality and investor protection conditions," points out
C K Kang, a business consultant in Tokyo.
The
ASEAN-China FTA, once established, will be the biggest
free trade area encompassing 1.7 billion people, a
collective GDP of almost US$2 trillion and
intra-regional trade of $1.2 trillion. Experts estimate
that an FTA would increase ASEAN's exports to China by
48 percent and China's exports by 55 percent.
Kang contends that Japan is acutely aware of
these developments and envisages a FTA with China in the
future when it has progressed on those fronts. At the
same time, however, China's economic value to Japan is
clear - China's imports of Japanese products have in no
small way helped the country's lackluster economy.
But Yoshiaki Shikano, an economics professor at
Doshisha University, points out that the success of
regional trade agreements is based not only on
encouraging trade by eliminating tariffs as well. "In an
FTA the larger economy, such as Japan, is expected to
take the leadership by absorbing exports by smaller
countries. I just don't see Japan playing this role," he
explains.
He cites Japan's agricultural sector
as a continued thorn in economic integration. Japanese
politicians, dependent on the farm vote, have delayed
liberalizing the domestic agricultural market, a major
reason for the failure to conclude a free trade
agreement between Japan and Thailand, which is a major
agricultural exporting country and among the largest
rice exporters in the world.
After much
arm-twisting, Japan agreed to accept limited imports of
Thai rice, but also slapped a high tariff of 522 percent
to discourage its entry into the local market. In other
words, Kang points out, progress toward a unified East
Asia will take time, despite strong economic relations,
given the disparities within the region.
"The
European Union took steps one at a time to become as big
as it is now," he says. "In Asia, the situation is more
diverse and thus progress will be slow." Indeed, the
Tokyo Declaration calls for the further promotion of the
Mekong region to help ASEAN bridge the gap between its
newer members - Laos, Vietnam, Myanmar and Cambodia that
joined the organization in the 1990s - and the original
six member countries.
(Inter Press
Service)
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