Asia searches for security in
trade By David Fullbrook
BANGKOK - Southeast Asia lies at the heart
of a growing web of free-trade agreements being
spun for Asia by leaders afraid of being left out.
This is a grand mess in the making, threatening to
tie trade in a massive knot rather than cut costs
and red tape. That matters less than might be
expected, because trade deals are often crafted to
build confidence on a continent still lacking
robust security institutions.
The
Asia-Pacific Economic Cooperation (APEC) summit in
Hanoi [1] will be no exception. On the table will
be a US proposal for
APEC, which is neither an
association nor community but a forum aimed at
forming the world's largest free-trade area in the
medium to long term.
The APEC free-trade
dream would conceivably join more than 100
proposals or agreements to manage trade in Asia.
Rahul Sen, a trade economist with the Institute
for Southeast Asian Studies in Singapore,
estimates that more than 80 focus on East Asia,
with at least 50 involving the Association of
Southeast Asian Nations (ASEAN).
That
means many developing states - for Asia is mostly
developing - are studying, weighing and
negotiating more than a handful of bilateral or
multilateral trade free trade agreements (FTAs)
simultaneously. This is more than enough to tax
trade officials in developing countries,
constrained by thin budgets and shortages of able
negotiators.
"The sheer number of
agreements and the rate of proliferation is
definitely a concern. There are concerns about the
specificity - the more agreements that are
negotiated and concluded, the more likely there
will be contradictions," said Tiziana Bonapace,
chief of trade policy at the United Nations
Economic and Social Commission for the
Asia-Pacific in Bangkok.
It's a situation
made worse when strong and weak states sit down to
thrash out a deal. Thailand's 2003 FTA with China
was heavily criticized by Thai business people and
fair-trade campaigners who said China would reap
far more from the deal. And indeed, Thailand's
trade deficit with China has been steadily
increasing since the deal went into action.
Problems with that deal began almost immediately.
As Beijing was lowering national taxes and trade
barriers for Thai products, Yunnan province was
putting them up, flummoxing Thai exporters sending
goods up the Mekong River.
It is an
example of freer trade's complexity and often
unforeseen ramifications beyond the actual act of
business. "Many countries are not preparing
themselves well enough before embarking on these
negotiations, so they aren't quite aware of the
specific benefits they want to gain from each
bilateral agreement. Implementation integrity, as
I term it, is the key to success," said Sen.
And that, as the China-Thailand case
shows, is where the real problems start. Plans for
resolving disputes are often sketchy at best. "We
need to give it some time to see, but the lack of
clear provision in some of these agreements is a
concern," said Bonapace.
Where
dispute-resolution mechanisms are in place,
judgments may reflect the integrity of local
judiciaries as much as the merits of the case.
Where corruption is high, it stretches credulity
to expect fair and just resolution. "If
enforcement is weak, exporters or businesses will
not be bothered about using them," said Sen.
Moreover, official enthusiasm for
enforcing the letter and spirit of trade
agreements is often lackluster, because of
pressure by powerful domestic interests. "Many
countries try to weasel out of trade deals, being
less committed than they at first appeared. Most
countries hold their own interests uppermost and
many governments still have a mercantilist
mindset," said Daniel Gay, a trade consultant in
Geneva.
The 10-member ASEAN, which
commemorates its 40th anniversary next year, still
cannot bring its largest member, Indonesia, to
abide by a voluntary agreement to stanch forest
burning, which produces a sickening haze that
often blankets nearby Singapore and Malaysia.
In practice, exporters often find
so-called free-trade regimes costly and confusing
to deal with. Agreements such as the ASEAN Free
Trade Area, and others currently under discussion,
often fall short of their free-trade promise
because the costs of following complex rules to
qualify for lower tariffs outweighs the potential
savings, some say. Complexity is also a breeding
ground for customs corruption, hoisting another
barrier for trade to scramble over.
Still,
as Bonapace points out, falling tariffs agreed to
by World Trade Organization members are steadily
eroding the preferential tariff margins that
bilateral and regional trade deals made attractive
in the first place. Redundancy beckons sooner
rather than later for some trade deals, if not for
many now being hammered out. Further world trade
deals, many drifting now but not yet sunk, will
only hasten that process.
That might be a
blessing. As everywhere, negotiating positions and
the final deals will to a greater or lesser extent
reflect powerful domestic constituencies.
In Asia, where state concession-holders
still carve out large chunks of economic activity,
trade deals are as likely to be warped against
increasing competition instead of opening up
markets. That might sometimes protect jobs, but
often stiffs consumers with higher prices, while
letting inefficient but well-connected firms live
another day.
"Real economic benefits will
only be possible if these agreements are designed
in a way that encourages deeper domestic reforms
and liberalization that enhances competitiveness
of these economies," said Sen.
In reality,
Asia's trade agreements are as much business as
they are everything else, a reality reflected in a
term now gaining currency, "economic partnership
agreement".
"If these agreements are not
being utilized, what is their ultimate purpose,
then? The answer probably lies in non-economic
benefits in terms of FTAs being a political signal
towards regional strategic and security
cooperation," said Sen.
That should be
welcomed, because Asia shows no sign of building
strong security institutions like the North
Atlantic Treaty Organization or the Organization
for Security and Cooperation in Europe. This gives
trade talks more value than might be readily
apparent, though not necessarily for freeing up
trade flows.
Note 1. The
Asia-Pacific Economic Cooperation forum is a group
of Pacific Rim countries that meet with the
purpose of improving economic and political ties.
It has standing committees on a wide range of
issues, from communications to fisheries. The
heads of government of APEC members meet annually
in a summit called the APEC Economic Leaders'
Meeting rotating in location among APEC's member
economies. Its members are: Australia, Brunei,
Canada, Chile, China, Hong Kong, Indonesia, Japan,
South Korea, Malaysia, Mexico, New Zealand, Papua
New Guinea, Peru, the Philippines, Russia,
Singapore, Chinese Taipei (Taiwan), Thailand, the
United States and Vietnam.
(Copyright 2006
Asia Times Online Ltd. All rights reserved. Please
contact us about sales, syndication and republishing
.)
