China, Japan likely to debate trade bloc at Asia summit
Wall Street Journal | 22 October 2009
China, Japan Likely to Debate Trade Bloc at Asia Summit
By JAMES HOOKWAY
CHA-AM, Thailand — A summit this weekend between Asia’s main economies is likely to morph into a contest between China and Japan over whether to establish a free-trade bloc in the region as it recovers from the global slump.
China has been the powerhouse guiding trade in the region for several years. It has supplanted Southeast Asia’s old role as the world’s factory floor. Together with South Korea and Japan, China contributes to a fund that countries can tap into to stabilize their currencies if necessary.
"China’s role in the region is very well entrenched," says Rodolfo Severino, a former secretary-general at the Association of Southeast Asian Nations, or Asean, the 10-member regional group hosting the meeting in Thailand this weekend.
Japan, though, is looking to shake things up. New Prime Minister Yukio Hatoyama has put forward the view that Asian nations — Japan included — need to broaden their trade outlook beyond the U.S. and look for ways to stoke consumer demand in the region as the purchasing power of American buyers weakens.
To that end, Mr. Hatoyama argues that the East Asian Summit group — an embryonic economic cooperation bloc that includes India, Australia and New Zealand as well as the Asean countries, China, South Korea and Japan — should form the basis of a new regional trade bloc patterned on the European Union.
The group, which accounted for nearly a quarter of global economic output last year, is viewed by Japan as potentially superseding the existing economic and trade ties between Asean and China, South Korea and Japan.
China has responded cautiously. After meeting in Beijing Oct. 10, the leaders of China, Japan and South Korea said they would explore the idea of a deeper trade relationship in the region. Japanese diplomats have said that China has been relatively cool to the idea of an expanded trade bloc.
"Until now we have tended to be too reliant on the United States," Mr. Hatoyama said after the meeting. The U.S. is looking on with some concern. Kurt Campbell, assistant secretary of state for East Asia and Pacific Affairs, said on Japanese television last month that it isn’t in Washington’s interests to be left out as East Asia’s vibrant economies forge stronger ties.
The Obama administration already has signaled its intention not to be left behind on any movement toward greater economic integration in Asia. Secretary of State Hillary Clinton said this summer that the U.S. will appoint an ambassador to Asean’s secretariat in Jakarta, and President Barack Obama plans to hold a summit with Asean leaders — a first for a U.S. president — in Singapore next month.
Some U.S. politicians are trying to take the process further. Sen. Richard Lugar, the Republican Party leader on the Senate Foreign Relations Committee, has urged Obama administration officials to begin looking into a free-trade agreement with Asean.
The bloc groups 560 million people and countries from tiny, oil-rich Brunei, to the world’s most populous Muslim country, Indonesia, regional economic powerhouses such as Singapore and Vietnam, and the repressive military regime of Myanmar.
The U.S. already has a free-trade pact with Singapore, and has been working on one with Malaysia for several years. Opening negotiations with the entire region would be difficult considering "the varying levels of economic development and open markets among Asean countries," Mr. Lugar said this month. American sanctions on Myanmar would also likely be a complicating factor.
Mr. Lugar, though, pointed out that China, India, Australia, New Zealand and South Korea have already finalized free-trade deals with Asean, "and are sharpening a competitive edge over the U.S. in Southeast Asia."
Thailand, meanwhile, will be eager to see the meetings, which will be attended by regional leaders, pass without any more of the violent antigovernment protests that disrupted a similar summit in April. The government has authorized the use of draconian security laws to prevent demonstrations in Bangkok and at the summit venue near Cha-Am, a beach resort to the south.
Analysts said government leaders may also use the meetings to exert further pressure on Myanmar to ease back on human-rights abuses ahead of polls that the military regime plans to hold next year.
In addition, governments may also look at ways to improve their disaster-response capabilities in the wake of the typhoons and storms that damaged large areas of the Philippines, Vietnam, Cambodia and Laos in recent weeks, as well as the earthquake that struck Padang, Indonesia, on Sept. 30.
