How to Realize EAFTA Views from Joint Expert Group

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How to Realize EAFTA-Views from Joint Expert
Group

• Zhang Yunling
• Director, Institute of Asia-Pacific Studies, CASS
• Chairman of Joint Expert Group

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The Rationale for an EAFTA(1)

• East Asian cooperation under ASEAN 3 needs the
  higher level institutional building. An East
  Asian FTA (EAFTA) would be a core part of this
  development.
• The rationale for EAFTA lies firmly in both
  economic and political interests of all East
  Asian members.

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The Rationale for an EAFTA(2)

• The economic benefits from EAFTA exceed AFTA, any
  ASEAN1 FTA, or other bilateral and sub-regional
  arrangements.
• An EAFTA would increase awareness of a common
  destiny, institutionalize dialogues and contacts
  and increase mutual understanding and
  cooperation.

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The Rationale for an EAFTA(3)

• The removal of various trade and investment
  impediments will facilitate the full realization
  of the East Asia production network and the
  potentials of intra-regional trade as well as
  make East Asian production more internationally
  competitive.
• An EAFTA would increase awareness of a common
  destiny, institutionalize dialogues and contacts
  and increase mutual understanding and
  cooperation. A

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The Benefits of EAFTA (1)

• The benefits of trade expansion can be
  categorized into two types, static and dynamic
  benefits. Static benefits in the form of economic
  growth and welfare arise from an improvement in
  resource allocation with the removal of trade
  distortions. Dynamic benefits include mainly
  scale effect and competition enhancing effect,
  both of which would increase production and
  economic welfare of the EAFTA members.

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The Benefits of EAFTA (2)

• The benefits of EAFTA are significantly larger if
  it includes not only liberalization in trade in
  goods and services, but also liberalization in
  foreign direct investment (FDI), facilitation in
  trade and FDI, and economic cooperation.
• The results of the simulation analysis show that
  in a static term, EAFTA would increase overall
  GDP of East Asian countries by 1.2 percent (104.6
  billion US dollars) .

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Effects of EAFTA
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Modality for an EAFTA (1)

• Striving for a comprehensive agreement that will
  lead to further deepening of economic
  integration, sustain the competitiveness of
  production networks, and progressively reduce
  gaps amongst East Asian economies.
• EAFTA should be comprehensive in scope and
  substantial in liberalization covering all
  sectors. Liberalization measures are complemented
  by facilitation and development cooperation
  efforts.

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Modality for an EAFTA (2)

• A comprehensive free-trade agreement is
  understood to contain (but not limited to) the
  following elements
• Trade in goods
• Customs procedures
• Technical barriers to trade
• Rules of origin
• Trade in services
• Labor mobility
• Investment
• Competition policy
• Intellectual property
• Government procurement
• Facilitation schemes
• Consultations and dispute settlement
• Economic cooperation
• Institutional framework for policy dialogues

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Modality for an EAFTA (3)

• EAFTA should be negotiated and implemented as a
  single undertaking. Rather than introducing an
  early harvest package, that is signed off prior
  to the conclusion of the overall agreement.
• EAFTA should be WTO-plus in the areas of trade in
  goods and trade in services, and cover investment
  liberalization, and it should adopt rules of
  origin that are simple and efficient.

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Road Map to an EAFTA(1)

• Considering recent developments in bilateral FTAs
  in East Asia, the most probable scenario for an
  EAFTA seems to be based on a series of ASEAN1
  FTAs.
• An independent process to form an EAFTA should be
  launched. In this independent process, an EAFTA
  could be devised, taking into account all
  existing and ongoing East Asian FTAs including
  the ASEAN1 FTAs, while not necessarily being
  restricted by them.

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Road Map to an EAFTA(2)

• Considering factors
• Bogor goals set by APEC.
• AEC single market and production base by 2015
• ASEAN1 FTAs are likely to be concluded by 2007
  or 2008

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Road Map to an EAFTA(3)

• Steps
• -Declaration of the launch of the independent
  process to prepare for EAFTA within the ASEAN3
  framework during the 10th ASEAN 3 Summit in
  2006.
• -Creation of working groups to do preparatory
  work for EAFTA negotiations in 20072008
• -Begin EAFTA negotiations in 2009
• -Conclude EAFTA negotiations by 2011
• -Complete EAFTA by 2016 (CLMV by 2020)

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Road Map to an EAFTA(4)

• EAFTA to be firstly discussed among the ASEAN3
  countries because of the existing ASEAN3
  framework. Therefore, an EAFTA is likely to be
  formed among ASEAN3 countries first before
  opening up to other countries.
• In view of the recent expansion of the ASEAN1
  initiatives, it will be open to participation by
  other East Asian economies, as well as other
  members of East Asian Summit (Australia, New
  Zealand and India) in an appropriate time.

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Road Map to an EAFTA(5)

• In the process of forming an EAFTA, all FTAs
  involving East Asian countries, existing or under
  negotiation, can serve as references. Among them,
  ASEAN1 FTAs will be of particular importance.
• It is necessary to pursue a high quality EAFTA
  that would go beyond the other FTAs among East
  Asian countries.

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Approach and Related Issues

• Within the framework of a single undertaking, a
  gradual and easy first approach should be adopted
  .
• --Start with trade in goods, and then investment
  and services.
• --Certain flexibility could be accorded to the
  implementation schedule
• --Giving less developed economies more time for
  implementation and readjustment.
• --A clearly defined timetable for liberalization
  and a list of minimum number of exclusion items
  need to be provided.