Role of Regional Trade Agreements with Specific Focus on the Asia-Pacific Trade Agreement

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Role of Regional Trade Agreements with Specific
Focus on the Asia-Pacific Trade Agreement
International Workshop on Central Asia and
China Economic Relations, Current Situation and
Prospects 11-12 July 2006, Siam City Hotel,
Bangkok
Tiziana Bonapace Chief, Trade Policy
Section Trade and Investment Division, UNESCAP
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RTAs in Asia and the Pacific
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Evolution of Asia-Pacific Regionalism

• Broadly 3 waves
• First wave (50s/60s/70s)
• 1950 Conference on Asian/African cooperation in
  Bandung, Indonesia, the precursor of the
  non-aligned movement.
• Import-substitution industrialization strategy
  becomes development model. South-South
  cooperation based on strategic selection of
  tariff liberalization among members to promote
  industrialization. Inward looking with high
  tariff walls to keep out imports competing with
  infant industries.
• First RTA signed in 1975 Bangkok Agreement
• Second wave (80s/90s)
• unsustainability of import-substitution model,
  globalization accelerates and results in
  north/south interdependence. Outward-oriented,
  open regionalism i.e. faster liberalization
  among RTA friends while at the same time
  lowering barriers to third parties

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Evolution of Asia-Pacific Regionalism

• Second wave
• Establishment of APEC based on non-discriminatory
  principles in its strictest interpretation,
  conclusion of UR
• Rapid increase in membership to GATT/WTO.
• Regionalism and multilateralism enter golden age
  of mutually supportive liberalization
• Third wave (Late 1990s-present)
• financial crisis
• stalling of APEC process of liberalization
• stalwarts of MFN (Japan and Rok) turn regional,
  as well as China who completes most difficult
  part of internal transformation.
• New era of deep and wide economic partnership
  agreements, with FTA as core, but much wider
  economic cooperation as well
• Bilateralism is key feature

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Where Does Asia-Pacific Stand? New Age
Regionalism

• Despite density of agreements, concluded
  agreements are generally lite, particularly
  those among developing countries
• liberalization shifted to future (10 years or
  more)
• significant exceptions in goods
• rules of origin restrictive
• services not covered
• investments covered, but focus more on investor
  protection than locking in investment
  liberalization
• dispute resolution mechanisms not well defined
• However, agreements involving developing and
  developed countries much more comprehensive.
• services, TRIPs, investments and other WTO
  features are prominent
• increasing public concern regarding asymmetric
  negotiating powers
• calls for greater democratization of trade policy
  formulation strengthened consultative mechanisms
  (bottom-up), increased role for parliamentarians
  as interface between societies and policy making
  executive branch

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Where Does Asia-Pacific Stand? New Age
Regionalism

• Other forms of regional economic cooperation also
  continue
• Growth triangles/quadrangles, EPZs, SEZs
• Many forms intergovernmental/private sector
  driven
• Common themes riparian cooperation, transport
  corridors, energy selfsufficiency.

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Where Does Central Asian Regionalism Stand?

• Numerous economic cooperation schemes and
  BTAs/RTAs.
• Renewal of economic cooperation after collapse of
  USSR
• WTO membership a priority for most. Also allows
  regional integration to proceed more effectively
  Armenia, Georgia, Kyrgyzstan
• SPECA Economic Cooperation Programme by 2 UN
  regional Commissions ESCAP ECE

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Where Does Asia-Pacific Stand? New Age
Regionalism and the Contagion Effect

• Domino effect
• Fear of marginalization (not being able to share
  benefits of membership) as more and more
  countries become members of FTA
• Originally used to explain successive waves of EU
  expansion
• Fatigue with multilateralism
• Disenchantment with APEC as a driver of
  liberalization,
• Aftermath of 1997 financial crisis and
  disappointment with global response and policy
  prescriptions few countries untouched, rekindled
  common destiny bonds and regional identity
• Turning point ASEANChinaJapanRoK, Singapore
  took lead in BTAs
• Competitive regionalism
• Secure trade interests and establish sphere of
  influence that goes beyond trade
• United States now trend setter, also Japan.
• Used as strategy to pressure non-members to join
  or enter into broader trade agreements
• Defensive and offensive mutually reinforcing
  strategies at play

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New Age Regionalism Where is Asia-Pacific Going?

• At what configuration will this process come to
  rest?
• Emergence of natural hubs large trading country
  establishing trade hegemony, linked to a series
  of spokes (developing countries)
• A developing country hub may also emerge a
  defensive hub seeking to avoid spoke position
  with trade hegemon
• Mulilayered strata of hubs and spokes emerging
• Through time, gravitational force of one hub
  linked to rest of region through spokes may be
  final resting point

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New Age Regionalism Where is Asia-Pacific Going?

• Role of ASEAN option of developing countries
  collectively establishing themselves as
  alternative hub? Has ASEAN managed to overcome
  internal differences associated with its diverse
  membership? Can ASEAN move from shallow to deep
  integration?
• Spinning top - centrifugal force driven by an
  inertia at the center- that acts outwards and
  draws energy from a body moving about the center.
  How can the force be directed towards the center?
  Can the ASEAN Charter, or the dynamism of 111
  countries, or a conclusion of the Doha Round
  impart the energy needed for ASEAN to harmonize
  policies and achieve deep integration?

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Policy Implications and Negotiating Strategies

• To promote trade for development, there is a need
  for geographical and functional harmonization and
  consolidation of the many RTAs through.
• the establishment of common principles,
  practices, and operational procedures for
  liberalization initiatives, in both trade and
  investment
• As a first step, start with a comprehensive
  framework on RoO

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New Age Regionalism Where is Asia-Pacific Going?

• Geographical Consolidation
• Historical conflicts, wide variations in
  political, legal systems, cultural values. Fear
  that integration will become dysfunctional.
• Expansion of EU membership a positive example of
  geographical consolidation. More than 65
  bilateral trade agreements notified to WTO
  abrogated when EU expanded
• Crucial differences between EU and Asia
• Customs Union vs FTAs. Geographical proximity
  much more relevant for CU than FTAs. No example
  of CU among geographically dispersed countries
  such as in cross continental BTAs of Asia
• Is Customs Union with common external trade
  policy and deep integration sine qua non for
  geographical consolidation?

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Integrating East, South-east and Central Asia


ECOTA

Afghanistan
Islamic
Rep. of Iran
Turkmenistan


ECOTA Afghanistan Islamic Rep. of
Iran Turkmenistan
ECOTA Afghanistan Islamic Rep. of Iran
Turkmenistan










BSEC Georgia (Albania, Bulgaria, Greece,
Romania)
CIS EU
Moldova Ukraine
Kazakhstan Kyrgyzstan Tajikistan Uzbekistan

EurAsEC
Russian Federation
Belarus



Armenia
China Republic of Korea Lao PDR
SCO
Azerbaijan
China
Turkey
Japan
AFTA
Indonesia Malaysia
Philippines Brunei Darussalam
Singapore Viet Nam Cambodia
APTA

BIMSTEC
Pakistan
India Bangladesh Sri Lanka
Thailand
Myanmar
Note WTO members are in italics. Armenia,
Moldova, Ukraine Observer Status of EurAsEC
Bhutan
Maldives
SAFTA
Nepal
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New Age Regionalism Where is Asia-Pacific Going?
B. Functional cooperation and consolidation Asia-P
acific could also evolve its own form of
consolidation, based on pragmatism, flexibility
and outward orientation which have served the
region well up to now Adoption of common
framework of principles, practices and procedures
that puts regionalism as a building block of
multilateralism on a more solid and commonly
shared foundation Rules of origin one key
area. APTA representing a wide spectrum of
industrial development across the region has
evolved a set of common rules of origin, based on
flat percentage rate 45 per cent (35 per cent for
LDCs) local content that may imply an acceptable
commonality Investment (proliferation of BITs)
and coherence with investment provisions in
BTAs?
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New Age Regionalism Where is Asia-Pacific Going?

• C. Integration through enhanced institutions
• Numerous regional organizations such as UNESCAP,
  ADB, ASEAN, SAARC APEC, Pacific Forum Secretariat
  are in good position to draw out commonalities
  and work on common principles, best practices,
  modal agreements.
• Bold mandates and resources lacking, and more
  importantly, these institutions are
  intergovernmental, member driven
• Is there a need for a more formal supranational
  system of regional governance or are current
  intergovernmental institutions sufficient?
• Can institution driven integration of EU offer
  useful example?
• Need for balancing vision with realism more
  effective use of existing institutions. Cost
  effectiveness of creating new institutions?
• Deep policy, political and historical differences
  among countries of the region might prevent
  supranational governance?

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APTA A Bridge across Asia

• Signed in 1975 as an initiative of UNESCAP, the
  Bangkok Agreement, now APTA, is Asias oldest
  preferential trade agreement between developing
  countries.
• It aims to promote regional trade through an
  exchange of mutually-agreed concessions.
• Bangladesh, China, India, Republic of Korea, Lao
  PDR and Sri Lanka are member countries.

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• Region-wide membership potential
• Only RTA in which two most populous and fastest
  growing economies are members (i.e. China and
  India)
• Through China and India linkages with other RTAs
  in the region can be established (e.g. AFTA,
  BIMSTEC, SAFTA)

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Expanding Membership
Status Chinas accession in particular makes
membership more attractive to countries in the
region Efforts are being taken to expand
membership. Mongolia and Pakistan have indicated
intention to join, others have expressed
interest Next target Central Asia
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THANK YOU!