Conference on Asia-Pacific Regional Economic Integration and Architecture (Auckland, New Zealand) The Assessment of Asian Economic Integration and Perspectives for Greater Economic Integration

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Conference on Asia-Pacific Regional Economic
Integration and Architecture (Auckland, New
Zealand)The Assessment of Asian Economic
Integration and Perspectives for Greater Economic
Integration

• Fukunari Kimura
• Professor, Faculty of Economics, Keio University
• Chief Economist, Economic Research Institute for
  ASEAN and East Asia (ERIA)

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1. Introduction

• The completion of (ASEAN1)x6 hub-and-spoke FTA
  networking in extended East Asia
• Overlapping bilateral FTAs pros and cons,
  possible connection with multilateralizing
  regionalism
• FTAs in East Asia practical and pragmatic
• The following tries to assess the accomplishment
  of FTA networking and discuss perspectives for
  greater economic integration.

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2. Current Status of FTA networking

• Extended East Asia The completion of (ASEAN1)x6
  (Table 1).
• Given a delay in FTA connection among Japan,
  Korea, and China, ASEAN becomes a virtual hub
  of FTA networking in East Asia.
• Asia-Pacific from networking to consolidation
  (Figure 1)
• 9 advanced APEC countries have 20 FTAs
  signed/being effective, 9 FTAs under
  negotiations.
• FTAAP (APEC-wide FTA), Trans-Pacific Partnership
  (TPP) initiative (P4, US, Australia, Peru,
  Vietnam)
• Japan 11 FTAs concluded (Table 2)
• Agricultural protection reduces the degree of
  freedom.

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Participants in TPP talks.
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3. The evaluation of FTA networking

• Interactions between de facto and de jure
  economic integration
• The formation of international production
  networks
• The mission of FTAs after the Asian currency
  crisis
• Restructuring import-substituting industries
• Further activating production networks
• Liberalization of trade in goods
• Liberalization coverage
• AFTA is now completing a clean FTA in terms of
  the liberalization coverage for trade in goods,
  but other FTAs in East Asia still include dirty
  aspects.
• FTA utilization (Tables 3, 4)
• Considering other policy arrangements to avoid
  being taxed such as zero MFN tariffs,
  duty-drawback system, and others, the utilization
  of FTAs seems to be fairly high in ASEAN.
  However, further facilitation ion utilizing FTAs
  may be required, particularly for small and
  medium enterprises.
• Rules of origin (Roo) (Table 5)
• RoO is certainly important in order to capture
  the benefit of liberalization effort in FTAs, and
  there still exists room for further facilitation.
  However, negative consequences of the
  complication of RoO seem to be limited in East
  Asia.
• Co-equal system works well.
• Regionalism promoting multilateral
  liberalization?
• Liberalization in other policy modes
• AEM (Table 6), ASEAN-Japan FTAs (cf. ACFTA,
  AKFTA)
• WTO works strongly.
• However, the context is not for pursuing the
  legal comprehensiveness of economic integration.
  Rather, the motivation of introducing WTO is
  pragmatic for serving diplomatic purposes or
  responding to requests of private sector
  extending international production networks.

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4. Further evaluation in a wider scope

• Toward assessing economic effects of FTA
  networking
• Static and dynamic, direct and indirect
• Explosive increases in exports by East Asian
  countries in 2001-2007
• Both intra-East Asia exports and exports to ROW
• Trade openness enhanced in East Asia (Figures
  2, 3, Table 7)
• Direct effects of the removal of trade barriers
  (esp. AFTA)
• The reshuffling of production sites responding to
  trade liberalization (Table 8)
• More than proportional growth of demand for
  traded goods
• Non-homothetic tastes, growth of middle class
  (Figures 4-6)
• Assessment of FTA networking in a wider scope is
  required.

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Figure 4 Population by income groups China (US
dollars 2005 PPP adjusted annual total income
of a family with four members)
gt 12,000
Total population 1,204,850,000
Total population 1,304,500,000
6,000 12,000
62.82 million (5)
98.16 million (8)
gt 12,000
248.46 million (21)
3,000 6,000
290.90 million (22)
6,000 12,000
Middle class
235.76 million (20)
1,800 3,000
451.08 million (35)
651.54 million (54)
3,000 6,000
256.68 million (20)
lt 1,800
1,800 3,000
Below poverty line
207.68 million (16)
lt 1,800
1995
2005
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Figure 5 Population by income groups ASEAN
(excl. Singapore, Brunei, and Myanmar) (US
dollars 2005 PPP adjusted annual total income
of a family with four members)
Total pupulation 429,140,000
Total population 501,110,000
22.24 million (5)
35.15 million (7)
gt 12,000
gt 12,000
43.25 million (10)
6,000 12,000
79.97 million (16)
6,000 12,000
96.80 million (23)
3,000 6,000
167.83 million (34)
Middle class
3,000 6,000
113.32 million (26)
1,800 3,000
124.47 million (25)
153.53 million (36)
1,800 3,000
lt 1,800
93.68 million (19)
Below Poverty line
lt 1,800
1994-1996
2004-2006
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Figure 6 Population by income groups India (US
dollars 2005 PPP adjusted annual total income
of a family with four members)
gt 12,000
Total population 888,320,000
Total population 1,079,700,000
gt 12,000
6,000 12,000
21.93 nillion (2)
6,000 12,000
41.10 million (4)
143.94 million (16)
220.30 million (20)
3,000 6,000
Middle class
3,000 6,000
284.82 million (32)
358.68 million (33)
1,800 3,000
1,800 3,000
444.28 million (49)
449.63 million (42)
lt 1,800
Below Poverty line
lt 1,800
1993
2004
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5. Perspectives for greater economic integration

• The current system of overlapping FTAs seems to
  gain a certain level of appreciation
  economic/political momentum toward plurilateral
  framework may not be very strong in East Asia.
• ASEAN3 vs. ASEAN6
• Consolidated FTA not worthwhile discussing
  seriously without CJK FTA
• Forum competition depending on attractiveness of
  topics, willingness for dialogue partners to
  participate in, and the feeling of ownership by
  ASEAN
• East Asia vs. Asia-Pacific
• Approach and agenda are different (pragmatism vs.
  rule-oriented, advanced-country-oriented vs.
  development) can go both at the same time.
• Effective interactions of the two would provide
  an alternative framework for G2.
• Asia-Pacific is likely to lead further
  development of FTA networking/consolidation in
  the coming years.