Regional Trade Agreements in Asia

Cover Template.ai

Author(s): Tran Van Hoa, Charles Harvie (eds.)

ISBN:          978-1847200617

Publisher: Edward Elgar Publishing, Cheltenham (UK) and Northampton (USA)

Year:          2008

Price:      $125.00

Reviewed by Aysun Uyar, PhD – Afrasian Centre for Peace and Development Studies,
Ryukoku University, Japan

Regional Trade Agreements in Asia is a book edited by Tran Van Hoa and Charles Harvie as compilation of papers written by academic experts from Australia, India, China, Thailand, and Vietnam. The main purpose of the book is introduced in the first chapter as the inquiry to examine challenges and opportunities of the regional trade agreements (RTAs) in Asia (p.3). Nevertheless, it is very difficult to find satisfactory analysis for the RTAs in Asia at large. Rather, the volume talks about an “enlarged ASEAN” with ASEAN plus Japan, China, and South Korea (ASEAN+3), later including India, Australia and New Zealand (ASEAN+6). Recent developments in East Asia with ASEAN Free Trade Agreement (AFTA), its aspiration of ASEAN+6 platform, and the First East Asian Summit are important steps leading to further regional integration in East Asia. But other regional integration mechanisms in other parts of Asia are left out. The chapters focus on the issues of this “enlarged ASEAN”, albeit the title of the book inclines to cover all Asia.

There are four parts in the book. Part I gives general understanding of RTAs by introducing AFTA at large in Asia-Pacific. Chapter 1 introduces the book obscurely that one has to find out him (/her)self that Part II mainly deals with the issues of an “enlarged ASEAN” members with glances of certain country cases while Part III delves more into concerns of an “enlarged ASEAN” at regional level. Chapter 2 gives an introductory explanation to RTAs with a special focus on East Asia. By comparing WTO as a multilateral trade-fostering mechanism to AFTA as an enlarged RTA, the author argues that regional trade arrangements are at the forefront of the multilateral one. As we just witnessed the stumbling face of the Doha Round of WTO trade liberalization talks in July 2008, the author appropriately focuses on the failure of WTO Doha Round in mid-2006 in order to explore strategic reasoning behind RTAs.

Chapter 3 is another informative part, which gives theoretical and technical definition of RTAs by defining them upon their scope and modality (p. 19). The author further deliberates different styles of economic integration by comparing EU, NAFTA and a minor economic integration of CER (Closer Economic Relations; an act between Australia and New Zealand) due to its unique stand of free trade commitment. He mainly argues that the degree of integration in each of these RTAs is different in each market of goods, services, labor and capital and there is little correlation examined between the two main regional integration styles (EU and NAFTA) and that of AFTA. In can be argued that there are similarities between NAFTA, EU and AFTA, nonetheless the degree of trade liberalization and commitment among the signatory countries is one crucial aspect that makes any comparison rather difficult. Chapter 4 discusses competitiveness of China in global terms by introducing rough data on economic growth, government efficiency, business efficiency, financial services, and infrastructural capacity of China for further trade and investment opportunities. Although the data is collected from professional statistical institutions and World Economic Forum, the content of the chapter does not mention RTAs, nor any other FTA opportunity for China. It rather posits a mere introduction to the economic performance of China even without questioning the rising income disparities at regional development level in the country.

Part II elaborates various issues for the members of an “enlarged ASEAN” by pointing out benefits to be enjoyed from trade for the poor of India (chapter 5), potentials of regional integration for the members states like Thailand (chapter 6), agricultural difficulties of an “enlarged ASEAN” with specific references to Vietnam (chapter 7), and inter-regional prospects of the AFTA-CER arrangement (chapter 8).

Chapter 5 explores trade potentials between India and ASEAN in the format of a feasibility study. This chapter is worthy of note as it emphasizes social aspect of free trade arrangements by focusing on the eradication of poverty policies in India. Indeed, increasing trade capacity with further demand for agricultural products lead to job opportunities and better living conditions for the poor. Hence, the chapter uniquely focuses on humanitarian aspect of regional trade agreements in the book albeit most of the chapters of the book deal with classical cost-benefit analyses of any preferential trade arrangement in an “enlarged ASEAN”. Increasing degree of poverty with rising economic disparity between the rich and the poor and between big and small businesses are also problems to be tackled with in Thailand as well as other ASEAN member countries according to chapter 6. This chapter mainly discusses investment and economic growth facilities of ASEAN by referring to chronological transformation of regional integration at institutional level in Southeast Asia. Then, positive-ongoing outcomes of regional integration and future AFTA, AFTA-China and other platforms are examined on issue-based sub-sections according the Thai experiences. Political security issues, increasing income disparity, environmental degradation and unequal repercussions of the so-called business politics are estimated problems of the recent level of ASEAN economic integration. Chapter 7 especially focuses on agriculture among these issues in order to show how agriculture, as an ample sector of the late-ASEAN members like Vietnam in this chapter, is to be included to trade and investment benefits of a larger RTA at ASEAN level. Indeed, Chapters from 5 to 7 thoroughly focuses on economic and social concerns of growing RTAs within the limits of regional integration premises. Namely, the authors are well aware of the internal issues of regional integration.

Chapter 8 focuses on the external dimension of regional integration. A prospect for new inter-regional trade agreements is elaborated with analysis of an AFTA-CER agreement between the ten ASEAN members and the CER members of Australia and New Zealand. Detailed data on merchandise trade capacity of the two regions are deliberately analyzed along with chronological introduction to conclude that the agreement has trade creation impacts for both parts even with a possibility of welcoming new members to the block. Although the idea of an AFTA-CER free trade agreement has been initiated in 1995 and negotiations still continue with progress, the question remains that there is a big gap between economic performances and FTA commitments not only among the ASEAN members but between the members of ASEAN and CER as well. Nevertheless, this concluding chapter of Part II is one of the strongest chapters with its informative background and empirical analysis.

Issues of an “enlarged ASEAN” at regional level are detailed in Part III as SMEs (small and medium-sized enterprises), financial reserves of the region, health-related concerns on regional intellectual property rights and micro-finance and corporate culture of China. Potentials of SMEs with trade and economic growth implications of AFTA are discussed in chapter 9. The chapter resourcefully examines economic, social as well as local and regional benefits of SMEs in East Asia. It further compares capabilities of SMEs in the region with those of other regions. Barriers to further specialization and improvements of SMEs in order to cope with globalization and regionalization are outlined within the context of governmental responsibilities. Indeed, SMEs could both benefit from betterment of free trade agreements and contribute to further regional integration in return. The chapter is well supported with enhanced references, which is not usual for the other chapters of the book.

Of course it is indispensable to cover financial as well as political impacts of the Asian financial crisis for future regional economic integration. Chapter 10 provides a thorough analysis on the aftermath currency reforms of the ASEAN countries as well as those of China in order to create financial stability in response to rising financial interdependency between the regional currencies, the Chinese renminbi and the US dollar. Chapter 11, as well, delves into another sensitive aspect of regional trade agreements; i.e. TRIPS (Trade Related Intellectual Property Rights) and TRIPS-plus items of trade agreements. Legal and practical background of TRIPS-plus are effectually detailed by focusing on the US and EU formulations of TRIPS. Although the chapter correctly analyzes the position of the US pharmaceutical industry in TRIPS negotiations with other developing nations, there is a little mention about the changing aspects of TRIPS and TRIPS-plus within East Asian regional integration and ongoing RTA mechanisms. Hence, one keeps wondering the direct linkage of the chapter to the main theme of the book as it is the case for some other chapters as well.

Chapters 12 and 13 turn the focus of the book towards China again. On the one hand, the earlier chapter focuses on micro-financial movements in rural China. According to the chapter, although micro-finance institutions have started operating in rural China since the mid-1990s, there are legal, political and operational obstacles yet to be covered on the surge of regional trade and economic cooperation with Southeast Asia. One the other hand, the latter chapter clarifies corporate culture of China by focusing on traditional state-owned, modernized state-owned and private corporations and their trade and investment linkages with the rest of Asia. While chapter 12 rounds up its argument connected to the main theme of the book by giving suggestions for betterment of micro-finance movements in the ASEAN countries, chapter 13 only briefly covers the nature of Chinese trade and investment in Asia.

Both chapters through 6 to 10 partially and chapters 4, 12 and 13 thoroughly mention China as one of the most important trade, investment and development partners of ASEAN. Of course, China’s integration to Southeast Asia is more crucial with initiation of China-ASEAN FTA agenda to be partially completed by 2015 for ASEAN-6 member countries and Early Harvest Program of 2004 to meet various commitment levels of ASEAN members. Nevertheless, integration of China to the region is critical at institutional level about how to define both bilateral and multilateral, ASEAN-level, trade agreements China has been pursuing. But this institutional aspect of regional integration is not discussed; yet the argument that China’s position in ASEAN, or to put it correctly, in an “enlarged ASEAN” is essential repeats itself with plain presentation.

The last part has one chapter that leaves the floor for further questions and analysis. Although it is expected form the last chapter to give overall emphasis of the volume, this time it is only formed as a concluding remark than a full chapter. Most of the discussions in the book cover issues of an “enlarged ASEAN” instead of Asia despite the title of the book incorrectly inspires us. Nor there are arguments focusing on the recent FTAs, be it bilateral or inter-regional, or other preferential trade arrangements rather than an “enlarged ASEAN” in East Asia. Although, it is admitted in the concluding chapter that not all aspects of the FTAs are covered, it is too late to give the general idea of the book. Hence, the main title of the book, in a way, misleads the reader to expect more discussions on the context of the current FTAs in Asia at large. The data in each chapter are professionally analyzed however there are chapters that only include analysis of data rather than giving theoretical or practical linkage to the main idea of the volume. The organization of the book and contextual linkage between the chapters are also not easy to follow for the reader. Literature references at the end of each chapter is limited for the same reason that it is difficult to find new dimensions of the discussions related to the main theme. Eventually, the work is useful for the readers of East Asian regional integration and who would like to examine technical background of regional integration at large but the work can not be suggested for the readers who are looking for theoretical discussions of any aspect of Asian regional integration


2nd Review by Benoit Rousseau Leduc, PhD, trade analyst, lecturer at the School of Political Studies of the University of Ottawa. (Published: 07/16/09)

‘Regional Trade Agreements in Asia’ aims at making sense of the proliferation of discussions on regional trade agreements (RTAs) in Asia, with a focus on the ASEAN (Association of the South East Asian Nations) Free Trade Agreement (AFTA) and the potential enlargement of ASEAN to include Northeast and South Asian countries and Oceania. The book reflects current discussions for a potential enlargement of ASEAN to other countries, in addition to China (and Korea/Japan that have pending agreements). The chapters are organized around a variety of country-specific themes (particularly China, Thailand, India and Vietnam) and cross-countries issues that would impact on the prospect of RTAs, including issues relevant to small and medium firms and issues associated to intellectual property rights.

The book is divided in three main parts: Part I discusses regional economic integration; Part II looks at economic and social issues that characterize ASEAN members; and, Part III primarily investigates cross-country and sectoral issues.

In part I, “The WTO, Regional Trade Agreements and an Enlarged ASEAN” (Chapter 2) highlights the fact that a potential enlargement of the ASEAN free trade area to China and India would encompass half of the world’s population, well beyond its current 500 million individuals. This and the cultural and religious diversity that characterize Asia explain why social considerations and policies to deepen development are likely to remain central to any discussion for the creation of regional governance arrangements for the enlargement of ASEAN.

“Deep Integration in Regional Trade Agreements” (Chapter 3) offers a useful typology of existing trade arrangements, based on their ‘width’ (referring to the number of sectors they cover, or whether they include trade in goods, or services, capital markets and labour markets) and their ‘depth’ (whether they focus on tariff elimination or include ‘Beyond- and Across-the border measures’ encouraging national treatment and the mutual recognition of national standards).  One end of this typological spectrum represents the European solution to establish a political and economic union.  At the other end of the spectrum, the North American Free Trade Agreement (NAFTA) primarily focused on the integration of its market for goods to improve supply chain integration, with non-legally binding side agreements covering labour and the environment.  A middle ground approach to economic integration is the original arrangement between Australia and New Zealand (the Closer Economic Relations, or CER group) typified by common safety standards, customs procedures and labour markets, with joint agencies managing cross-border issues such as food safety.

Part II highlights issues for an enlarged ASEAN, with chapters on India, Thailand and Vietnam (a case-study on China is included in Part I, as China completed negotiation of its trade agreement with ASEAN in 2003).  The chapters consider the challenges posed by regional diversity and the need to ensure that the benefits of trade integration trickle down to the diverse populations of the region.  The authors particularly emphasize the need to re-enforce domestic financial systems, to reduce poverty and to ensure social integration.

One of the important considerations suggested in “Aspects of an Enlarged ASEAN” (Chapter 6) is the fact that ASEAN-member states trade significantly more with partners outside of the region: Extra-ASEAN trade accounts for more than 75 percent of trade by member countries (pp. 82-86).  In part, the integration of China with the ASEAN region means that ASEAN members increasingly become trade competitors in a fairly small number of commodities, particularly in the textile sector.  As such, the race to negotiate bilateral arrangements and capture a greater share of foreign investments may act as centrifugal force on ASEAN members, and potentially questions the ability of ASEAN to negotiate trade agreements as a group, given that tariffs are already negotiated bilaterally with each member then framed under a common agreement with multiple separate tariff components.

Taken together, the chapters emphasize how domestic considerations may impact on the potential for further economic integration.  Bilateral or regional trade arrangements with countries possessing similar social and economic characteristics are easier to negotiate than WTO-level agreements, because they offer a greater promise that they will meet domestic social and political goals, including considerations for vulnerable workers and the characteristics of the agricultural sector that employs a large segment of the population across ASEAN.  In “Prospects for an AFTA-CER Free Trade Agreement” (Chapter 8), the author emphasizes the complementary suggestion that trade agreements with countries at different stages of economic development are likely to offer greater compatibilities and a greater potential to acquire technological know-how, albeit at the cost of certain structural adjustments.

The book provides a useful contribution on a region likely to attract increasing attention in future.  Research on economic integration in Asia would benefit from greater emphasis on the emerging manufacturing sectors and the role of China and India in emerging regional supply chains, as exports of components from countries such as the Philippines and Thailand appear increasingly linked to re-exports by large corporations located in the region, particularly from firms in the IT or auto sectors located in either China, Taiwan, Korea and Japan.