FTAs IN ASIA
Razeen Sally
European Centre for International Political Economy/
London School of Economics
FTAs IN ASIA
Papers:
-- FTAs and the prospects for regional integration in Asia, ECIPE
Working Paper, 2006
-- Trade policy in Asia, ECIPE Policy Brief, 2007
Available at www.ecipe.org
FTAs IN ASIA
• New wave of global economic integration, but …
• Asian trade policies: from non-discrimination
(unilateralism and GATT/WTO) to discrimination (FTAs)
• Focus: east and south Asia (“globalising Asia”)
FTAs IN ASIA
• Trade and FDI trends:
-- China; India; ASEAN; Japan; Korea; Taiwan
-- Implications for comparative advantage and the
emerging Asian/global division of labour
Asian countries: economic and trade indicators 2005
Countries GDP GDP Population Per PPP Merchandise S ervice Total S ervices Trade/ FDI FDI/
Growth capita GDP Exports Exports Merchandise Trade GDP Inflow GDP
GDP Trade
(US$ (%) (mn) (US$) (US$ bn) (US$ bn) (US$ bn) (US$ bn) (US$ bn) (%) (US$ bn) (%)
bn)
China 2228.9 9.9 1304.5 1708.6 8572.7 761.9 73.9 1422.0 157.1 63.8 72.4 3.2
Indonesia 287.2 5.6 220.6 1302.2 847.4 86.2 5.1 155.7 22.3 54.2 5.3 1.8
Malaysia 130.1 5.3 25.3 5134.4 274.8 140.9 18.95 255.6 40.5 196.5 4.0 3.1
Philippines 98.3 5.1 83.1 1182.9 408.6 41.3 4.5 88.7 10.3 99.2 1.1 1.2
S ingapore 116.8 6.4 4.4 26836.1 130.2 229.6 45.1 429.7 89.1 367.9 20.1 17.2
Thailand 176.6 4.5 64.2 2749.4 549.3 110.1 20.5 228.3 48.0 129.3 3.7 2.1
Vietnam 52.4 8.4 83.0 631.3 254.0 31.6 3.9 68.1 8.6 130.0 2.0 3.8
AS EAN-6 861.4 5.9 480.6 1792.3 2464.3 639.7 98.05 1226.1 218.8 142.3 36.2 4.2
India 785.5 8.5 1094.6 717.6 3815.5 95.1 56.1 229.9 108.3 29.3 6.6 0.8
Japan 4505.9 2.7 128.0 35214.5 3943.7 595.0 107.9 1109.8 240.5 24.6 2.8 >0.1
Korea 787.6 4.0 48.3 16309.0 1056.1 284.4 43.9 545.7 101.7 69.3 7.2 0.9
Taipei 346.4 4.1 22.7 15291.8 - 197.8 25.6 380.3 57.1 109.8 1.6* 0.5
HongKong 177.7 7.3 6.9 25593.6 214.5 292.1 62.2 592.3 94.6 333.3 35.9 20.2
TOTAL 9693.4 - 3085.6 3139.4 20066.8 2866.0 467.65 5506.1 978.1 - 162.7 -
World 44384.8 3.6 6400.0 6835.1 61027.5 10431.0 2415 21214.0 4760 47.8 916.3 2.1
*Whole of Taiwan. Source: World Bank. WTO statistical database. UNCTAD WIR 2006 and ADB
FTAs IN ASIA
Global/Asian policy trends
• Slowdown of liberalisation in developing countries; no
new liberalisation in OECD
• China the major exception: unilateral opening and WTO
accession; ASEAN slowdown; India behind
• Sceptics and the Washington Consensus: arguments
against liberalisation; worse climate for future
liberalisation
• Case for further market reforms and global integration?
FTAs IN ASIA
• Trade policy in Asia
-- Trends in countries and regions
-- WTO
-- FTAs
-- China and unilateral liberalisation
-- From non-discriminatory liberalisation (unilateral and
GATT/WTO) to discrimination
Applied Tariff rates in Asia
1995 2005
Japan 3.1 2.7
Korea 8.3 8.6
Taiwan 11.2 5.3
Hong Kong 0 0
Singapore 0.4 0
Malaysia 8.4* 7.5
Indonesia 14 6.5
Philippines 19.8 5.4
Thailand 21 9.9
Vietnam 13* 13.1
China 22.4 9
India 41 16
*Malaysia 1996 *Vietnam 1997. All tariff rates are based on unweighted averages for all goods in ad valorem rates,
or applied rates, or MFN rates whichever data is available in a longer period. Source: World Bank
Bound and applied MFN tariffs in Asia
Binding Bound Tariff Applied Tariff Applied Tariff Overall applied
Coverage Rate Rate Rate Tariff
(All goods) (Manufactures) (Agriculture)
Japan 99.6 5.0 3.3 10.4 4.7
Korea 94.4 16.1 6.6 42.5 11.9
China 100 10.0 9.5 15.0 10.3
Hong Kong 45.7 0.0 0.0 0.0 0.0
Malaysia 83.7 14.5 8.1 2.1 7.3
Thailand 74.7 25.7 14.6 16.2 14.7
Indonesia 96.6 37.1 6.1 8.0 6.4
Philippines 66.8 25.6 6.9 11.8 7.5
Vietnam - - 12.9 18.1 13.7
Taiwan 100.0 6.1 5.5 16.3 6.9
Singapore 69.2 6.9 0.0 0.0 0.0
India 73.8 49.8 25.3 30.0 28.3
Pakistan 44.3 52.4 16.1 13.9 15.9
Bangladesh 15.8 163.8 19.2 21.7 19.5
Sri Lanka 37.8 29.8 9.6 15.4 10.2
The figures are simple unweighted averages of the tariff rates in percent from the year of 2003 and 2004.
Source: World Bank
Table x: Coverage Ratio of Non-tariff Barriers in Import Trade*
(Unweighted, percent)
1984-87 1988-90 1991-93 1997-2000
China 10.6 23.2 11.3 5.7
Indonesia 94.7 9.4 2.7 3.1
Korea, Rep 8.8 4.0 2.6 1.5
Malaysia 3.7 2.8 2.1 2.3
Philippines 44.9 --- --- 1.8
Thailand 12.4 8.5 5.5 2.1
Notes:
… Not available
* Calculated as percentage of import value of HS6 tariff lines affected by NTBs in total imports. NTBs
include quantitative restrictions in the form of all types of licenses and import authorization, quotas, import
prohibitions, advanced import deposits, foreign exchange restrictions, fixed customs valuations, and state trading
monopolies. Figures reported under a given sub-period relates a single year within that sub-period.
Source: Hoekman et al (2002, Table A-4 and WTO, Trade Policy Review – Country Report
(various)
FTAs IN ASIA
• FTAs
-- Proliferation in Asia; catch up with other regions
-- Motives: foreign policy; WTO stalled
-- Building blocks? WTO-plus FTAs dependent on
economic strategy
-- But exceptions, not the rule
-- Trade-lite FTAs (except with USA and EU?)
-- Future of Asian FTAs?
FTAs IN ASIA
• China and FTAs
-- 9 FTAs; 30 under discussion/negotiation
-- China-ASEAN: increasing complementary trade but competing
sectors
-- Encouraging results on tariffs and rules of origin; WTO-compatible
but not WTO-plus; services and investment?
-- WTO-plus FTAs with HK and Macau
-- Negotiations with Aus and NZ
-- PTAs with SACU, India and others?
-- Overall: pragmatic, eclectic approach
-- Danger of politics-driven trade-light FTAs (unlike China in WTO); but
stronger FTAs in east Asia
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group Partners Nature of Status of Agreement
of countries Agreement 2007
China Pakistan FTA -Agreement signed
ASEAN EPA -EHP in force
FTA -Under negotiation
Singapore FTA -Under negotiation
Thailand PTA -Agreement in force
India BIPA -Proposed
FTA -Proposed
Australia FTA -Under negotiation
New Zealand FTA -Under negotiation
Macao FTA -Agreement in force
Hong Hong FTA -Agreement in force
Chile FTA -Agreement in force
SACU FTA -Proposed
GCC FTA -Under negotiation
Iceland FTA -Proposed
Korea FTA -Under study
Japan FTA -Proposed
Peru FTA -Proposed
Norway FTA -Proposed
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade,
Grouping 2003 (%)
China ASEAN 8.5
Thailand 1.5
Australia 1.6
India 0.9
Hong Kong 10.3
Macau 0.2
New Zealand 0.2
Chile 0.4
SACU 0.5
FTAs IN ASIA
• Southeast Asia and FTAs
-- Singapore’s FTAs: misleading indicator for region
-- Thailand a better indicator: all politics, no economic
strategy; trade-light
-- Bilateral FTAs take priority over ASEAN-plus FTAs (ROO
complications)
-- ASEAN FTAs: weak and partial?
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group Partners Nature of Status of Agreement 2007
of countries Agreement
ASEAN China EPA -EHP in force
FTA -Under negotiation
India EPA -EHP in force
FTA -Under negotiation
Japan EPA -Framework Agreement signed
Korea FTA -Agreement in force
USA TIFA -Agreement signed
CER EPA -Under negotiation
EU FTA -Negotiation planned
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003
Country/ Partners Share in total
Grouping trade, 2003 (%)
ASEAN-6 China 7.4
India 1.5
Japan 14.4
Korea 4.2
USA 15.0
CER 2.8
EU 12.4
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group Partners Nature of Status of Agreement 2007
of countries Agreement
Malaysia Japan FTA -Agreement in force
USA TIFA -Agreement signed
FTA -Under negotiation
Australia FTA -Under negotiation
New Zealand FTA -Under negotiation
EU FTA -Under study
Korea EPA -Proposed
India FTA -Under Study
Pakistan FTA -Under negotiation
-EHP in force
Chile FTA -Under negotiation
Canada FTA -Proposed
GCC FTA -Proposed
Philippines Japan EPA Agreement signed
USA FTA Proposed
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade,
Grouping 2003 (%)
Malaysia Japan 13.6
USA 17.8
Australia 2.1
New Zealand 0.4
EU 12.0
Korea 4.1
India 1.7
Pakistan 0.4
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group Partners Nature of Status of Agreement 2007
of countries Agreement
Singapore Australia FTA -Agreement in force
Canada FTA -Under negotiation
Egypt CECA -Under study
EFTA FTA -Agreement in force
EU EPA -Proposed (rejected by EU)
India FTA -Agreement in force
Japan FTA -Agreement in force
Jordan FTA -Agreement in force
Korea FTA -Agreement in force
Mexico FTA -Under negotiation
New Zealand FTA -Agreement in force
Sri Lanka EPA -Under negotiation
USA FTA -Agreement in force
Qatar FTA -Under negotiation
Peru FTA -Under negotiation
Panama FTA -Agreement in force
GCC FTA -Negotiation planed
Brunei, Chile, NZ FTA -Agreement in force
China FTA -Under negotiation
Pakistan FTA -Under negotiation
Morocco FTA -Under study
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade, 2003
Grouping (%)
Singapore New Zealand 0.3
Sri Lanka 0.2
USA 14.2
Qatar 0.5
Peru 0.01
Panama 0.4
Kuwait 0.8
Bahrain 0.03
Brunei 0.2
Chile 0.03
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade, 2003
Grouping (%)
Singapore Australia 2.5
Canada 0.4
Egypt 0.1
EFTA 1.1
EU 12.9
India 1.7
Japan 9.2
Jordan 0.01
Korea 4.0
Mexico 0.4
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group of Partners Nature of Status of Agreement
countries Agreement 2007
Vietnam USA BTA -Agreement signed
TIFA -Under negotiation
Japan BIT -Agreement in force
FTA -Under negotiation
Sri Lanka EPA -Agreement in force
Korea FTA -Proposed
Chile FTA -Proposed
Country / Group Partners Nature of Status of Agreement
of countries Agreement 2007
Brunei Singapore, Chile, NZ FTA -Agreement in force
Japan FTA -Under negotiation
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Partners Nature of Status of Agreement 2007
Group of Agreement
countries
Thailand Australia FTA -Agreement in force
Bahrain FTA -Agreement signed
China PTA -Agreement in force
India EPA -PTA in force
Japan FTA -Negotiations completed
Korea EPA -Under study
New Zealand FTA -Agreement in force
Peru PTA -Agreement signed
South Africa PTA -Under study
USA FTA -Negotiation postponed
BIMSTEC FTA -Framework Agreement signed
FTAs IN ASIA
• India and FTAs
-- Problems with SAFTA
-- Outside south Asia: trade light; foreign policy not
economic policy
-- Part of overall trade-policy profile (fitful unilateral
liberalisation and WTO defensiveness)
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Partners Nature of Status of Agreement 2007
Group of Agreement
countries
India ASEAN FTA -Framework Agreement signed
China BIPA -Proposed
FTA -Proposed
Korea FTA -Under negotiation
Singapore FTA -Agreement in force
Sri Lanka FTA -Agreement in force
Thailand EPA -PTA in force
BIMSTEC FTA -Framework Agreement signed
SACU FTA -Framework Agreement signed
COMESA FTA -Framework Agreement signed
MERCOSUR FTA -Framework Agreement signed
CEFTA FTA -Agreement signed
Mauritius CEPA -Under negotiation
Japan EPA -Under negotiation
Malaysia FTA -Under study
Brazil/South Africa FTA -Proposed
GCC FTA -Framework Agreement signed
Chile PTA -PTA signed
Egypt PTA -Under negotiation
EU FTA -Negotiation planned
Russia CEPA -Proposed
EFTA FTA -Under study
USA FTA -Proposed
Trinidad & Tobago BIPA -Signed
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade,
Grouping 2003 (%)
India ASEAN 8.7
China 5.0
Korea 2.5
Singapore 3.0
Sri Lanka 1.1
Thailand 1.0
BIMSTEC 4.5
SACU 1.7
COMESA 1.2
MERCOSUR 0.9
Table 15
Trade among recently established or Proposed RTAs/CEPAs partners
involving ASEAN, China and India, 2003 (cont’d)
Country/ Partners Share in total trade,
Grouping 2003 (%)
India Mauritius 0.1
Japan 3.1
Malaysia 2.1
South Africa 1.7
GCC 7.2
Chile 0.2
Egypt 0.3
FTAs IN ASIA
• Japan and FTAs
-- Japan-ASEAN: bilaterals take priority; agriculture carve
outs; unambitious on other market access; ROO
restrictiveness
-- Trade light and reactive compared with China
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group Partners Nature of Status of Agreement 2007
of countries Agree
ment
Japan ASEAN EPA -Framework agreement signed
Malaysia FTA -Agreement in force
Singapore FTA -Agreement in force
Philippines EPA -Agreement signed
Vietnam BIT -Agreement in force
FTA -Under negotiation
Thailand FTA -Negotiations completed
India EPA -Under negotiation
China FTA -Proposed
Korea FTA -Under negotiation
Mexico FTA -Agreement in force
Cambodia FTA -Proposed
Laos FTA -Proposed
Indonesia EPA -Under negotiation
Chile FTA -Under negotiation
Switzerland FTA -Proposed
GCC FTA -Under negotiation
Brunei FTA -Under negotiation
FTAs IN ASIA
• South Korea and FTAs
-- Defensive on agriculture, but more serious than other
Asian players
-- US-Korean FTA negotiations
Table 14: Recently Established or Proposed RTAs/CEPAs
in ASEAN, China and India, 2000-2007 (cont’d)
Country / Group of Partners Nature of Status of Agreement 2007
countries Agreement
Korea ASEAN FTA -Agreement in force (except Thailand)
Malaysia EPA -Proposed
Singapore FTA -Agreement in force
Vietnam FTA -Proposed
Thailand EPA -Under study
India FTA -Under negotiation
China FTA -Proposed
Chile FTA -Agreement in force
EFTA FTA -Agreement in force
USA FTA -Under negotiation
EU FTA -Negotiation planed
Canada FTA -Under negotiation
Australia FTA -Under study
New Zealand FTA -Proposed
GCC FTA -Proposed
FTAs IN ASIA
• USA, EU and FTAs in Asia
-- US negotiations in Asia: Thailand, Malaysia, Korea
-- Changes in US trade policy: greater defensiveness; more difficult to
negotiate agreements
-- EU’s new Asian FTA policy
-- EU negotiations: India, Korea, ASEAN
-- EU-China
FTAs IN ASIA
• Regional economic integration
-- APEC: a better yesterday
-- ASEAN: Visions galore, but where’s the beef? CEPT
progress but little else
-- APT, EAEC, AEC etc.: Any common denominators?
Empty talk?
-- FTAs unlikely to contribute much to regional economic
integration; disintegration dangers (ROO etc)
The map shows FTAs signed or under negotiation in January 2006.
East Asia is defined here as the 10 ASEANs, China, Japan and Korea. Source Richard Baldwin 2006
Noodle bowl syndrome in Africa
Source: World Bank
Noodle bowl syndrome in America
Source: Inter-American Development Bank.
FTAs IN ASIA
• Asia in the WTO
-- India: defensive, but slightly more flexible than before
-- China: pragmatic, flexible but low key
-- ASEAN: mixed; distracted with FTAs
-- Japan/Korea: defensive, passive, punching below weight
-- Asia needs effective WTO; but distracted with FTAs
ASIA, GLOBALISATION, TRADE POLICY
Unilateral liberalisation – role of China
• WTO, FTAs and diminishing returns to
trade negotiations
• Rely more on unilateral reforms and
competitive emulation; the Chinese engine
• But leaves gaps, e.g. agriculture and rules
Share of total tariff reduction, by type of
liberalization, 1983–2003
Multilateral
Agreements
25%
Autonomous
Liberalization
66%
Regional
Agreements
10%
Source: World Bank
http://siteresources.worldbank.org/INTGEP2005/ Resources/GEP107053_Ch 02.pdf
Unilateral tariff cutting in Phase II.
The diagram shows tariff revenue divided by total imports. Source: Richard Baldwin 2006; Ando and Kimura (2005).
Formal unilateralism; reductions in applied MFN tariffs on
Source: Richard Baldwin 2006: Kimura, Takahashi, and Hayakawa (2005)
ASIA, GLOBALISATION, TRADE POLICY
• Three Post-Doha priorities
-- WTO
--FTAs
-- China-led unilateral liberalisation