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To
realise the RCEP, a trilateral FTA among
the PRC, Japan, and the Republic of Korea
should first be concluded and then be connected
with the existing ASEAN+1 FTAs - that is,
ASEAN's five FTAs with Australia and New
Zealand, the PRC, India, Japan, and the
Republic of Korea. The TPP aims to achieve
a high-quality agreement and includes four
ASEAN members and Japan, from Asia. These
two mega FTAs are key processes in creating
a larger Asia-Pacific FTA, which would however
require successfully addressing the difficult
task of forging a US–PRC agreement.
These
two processes are not mutually exclusive
and will likely prove to be complementary.
The changing centre of global economic gravity
- given the rapid economic rise of the PRC
and India - suggests that the Regional Comprehensive
Economic Partnership (RCEP) is attractive
to many Asian economies, including developing
ones. Countries that are ready to accept
high standards required for the Trans Pacific
Partnership (TPP) and wish to strengthen
existing ties with the US will likely join
the TPP.
The
region's rapid rise as the global factory
through successive waves of newly industrialising
economies is an unprecedented historical
achievement. Many factors (including initial
conditions and factor endowments) helped
the creation of Factory Asia. But there
is little doubt of the central role played
by outward-oriented development strategies
in facilitating trade promoting FDI and
market-led integration, which naturally
formed sophisticated production networks
within East Asia.
The
region's globalisation of trade and FDI
has been accompanied by regionalisation
characterised by rising intraregional trade
shares and increasing amounts of intermediate
goods trade.
Nonetheless,
East Asia still remains heavily dependent
on external demand.
From
a broader perspective, participation of
East Asian economies in production networks
has fostered rapid industrialisation, trade,
and growth in the region during the pre-global
financial crisis period. Ironically, the
very interdependence built up through a
complex web of production networks meant
that the negative impacts of the global
financial crisis were also transmitted rapidly
to East Asian economies through the trade
and finance channels.
Thus,
the evolving trade policy response in major
East Asian economies has focused on FTAs.
The
region's largest economies and Singapore
are key to the growing Asian FTA activity
while ASEAN, as an organisation, is emerging
as an integration hub for such efforts.
The trade coverage of Asian FTAs has increased,
and broader issues than simply trade liberalisation
have been addressed.
With
the large number of FTAs concluded, Asian
FTAs are here to stay. Maximising the benefits
of these Asian FTAs while minimising their
costs would be highly pragmatic. Some key
elements of pragmatic responses to Asian
FTAs at the national and regional levels
may include facilitating gradual increases
in liberalising services and trade policies.
To
strengthen global trade governance, such
national and regional level actions might
be accompanied by actions at the multilateral
level including the following:
Actual
developments may well not be as orderly,
neat, or rational as those described above.
The reality could easily become substantially
more complex. And the convergence between
national, regional, and global trade rules
will take time. Nonetheless, how Asia thinks
and acts on these issues will likely influence
the world economy.
Whatever
paths are taken, it will be important to
accelerate the liberalisation of goods and
services trade and investment, reduce behind-the-border
barriers, and pursue domestic reforms. A
harmonious Asia and the Pacific would likely
see a convergence of the two processes being
considered. This would be a win–win solution
for the Asia and Pacific community.
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