Asia risks spaghetti bowl trade deal mess: ADB
Business Times, Malaysia
Asia risks spaghetti bowl trade deal mess: ADB
February 9 2006
TOKYO, Wed: A proliferation of bilateral free trade deals in Asia risks creating a "spaghetti bowl" of overlapping measures that could actually harm companies, the head of the Asia Development Bank (ADB) said today.
"We now have an explosion of new trade and investment incentives - currently 15 under implementation, close to 10 signed, more than 20 under negotiation and at least 16 more proposed," said Haruhiko Kuroda.
He referred to this as a "spaghetti bowl" or "Asian noodle" effect because the initiatives overlap in country coverages but vary in scope.
If various free trade agreements (FTAs) exist in Asia, a Thai company for example importing goods could be subjected to complicated rules depending on the origin of the products it is buying.
"For a Thai company this administrative cost could be huge," said Kuroda, a former Japanese vice-minister of finance and adviser to Prime Minister Junichiro Koizumi who took up the reins of the ADB in November 2004.
A single free trade area across East Asia would solve the problem but could be hard to achieve, he added.
One possibility was the creation of a free trade pact between Japan and China which could then be enlarged to include other countries but this would be hard to achieve politically given strained ties between the two nations.
"From a purely economic perspective, if we have a Japan- China FTA then a major part of trade in Asia will be covered by this and it could help lead to an overarching Asean (Association of South East Asian Nations) FTA," he said. "However, at this time we don’t have any signs of such negotiations (between Japan and China)."
The China-Japan rift was also likely to restrain the growth of trade and investment between the two neighbours, although to date the impact has been limited, the ADB chief warned. - AFP
