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East Asian Free Trade Agreement (EAFTA): The road to better quality life?

Asian Institute of Management

Policy Center

East Asian Free Trade Agreement (EAFTA): The road to better quality life? (or the road to East Asian Community? Or the road to global free trade?)

“Cooperation ultimately depends on a sense of community at a people-to-people level. We must begin to take pride in belonging to the Asian community...”
— Former President Fidel V. Ramos in his keynote speech, EAFTA International Symposium

The AIM Policy Center and the Japan Economic Foundation co-convened an international conference entitled “An Integrated Road Map to East Asian Free Trade Agreement” at the Peninsula Manila last 4 February 2005. Distinguished speakers from China, Indonesia, Japan, Republic of Korea, Singapore, Taiwan (ROC), Thailand, and the Philippines gathered for an in-depth discussion on the East Asian Free Trade together with representatives from government, business sector, academe and non-governmental organizations. Panelists included Dr. Tomas Aquino, Undersecretary, International Trade Group, Department of Trade and Industry-Philippines; Dr. Thanong Bidaya, Vice Chairman of the Council of Economic Advisors to the Prime Minister - Thailand; Mr. Jacques Desponts, Senior Executive Vice President, Member of the Executive Committee, BNP PARIBAS (Former Deputy Minister of Foreign Economic Relations, Ministry of Finance and Budget- France); Dr. Hank Lim, Director of Research, Singapore Institute of International Affairs (SIIA); Dr. Chulsu Kim, President, Sejong University; Mr. Tadakatsu Sano, former Vice Minister for International Affairs, Ministry of Economy, Trade and Industry-Japan; Mr. Vincent Siew, Chairman, Chung-Hua Institution for Economic Research, Taiwan-Japan Science and Technology Interchange Committee (Former Premier of Taiwan R.O.C.); Dr. Hadi Soesastro, Executive Director, Center for Strategic and International Studies (CSIS); Mr. Yasuo Tanabe, Vice President, Research Institute of Economy, Trade and Industry (RIETI) - Japan; A/P Simon SC Tay, Chairman, Singapore Institute of International Affairs; Mr. Hiroshi Tsukamoto, President, Japan External Trade Organization (JETRO); Dr. Shujiro Urata, Professor, School of Social Science, Waseda University; H.E. Mr. Ong Keng Yong, Secretary-General, Association of Southeast Asian Nations (ASEAN); Prof. Zhang Yunling, Director, Institute of Asia Pacific Studies/APEC Policy Center, Chinese Academy of Social Sciences. The symposium was co-chaired by Dr. Federico M. Macaranas, AIM Policy Center Executive Director and former Foreign Affairs Undersecretary and Mr. Noburo Hatakeyama, Chairman and Chief Executive Officer of JEF.

H.E. former President Fidel V. Ramos, in his keynote address, highlighted the vital role of regional integration in developing the global financial market, the establishment of worldwide supply of chain networks, and the revolution of information and communication technology (ICT). EAFTA was envisaged to facilitate the “integration of the East Asian economies, ultimately leading to an East Asia Economic Community.” Furthermore, EAFTA, which can take the form of “encompassing bilateral and sub-regional free trade areas in the region,” seeks to boost not only intra-regional trade and investments, but also cooperation among East Asian countries including human resource development, tourism, security, environment, and financial services. EAFTA is seen as a prelude to the ASEAN Common Market by 2020 where there is free movement of goods, services, investments and people.

The panelists affirmed the key concepts forwarded by former Pres. Ramos, particularly on the need to foster stronger policy coordination, greater liberalization and market openness based on the WTO (and plus) principles, and a sense of community at the people-to-people level. They believed that East Asian economies would greatly benefit from the creation of EAFTA since it would promote domestic structural reforms in agriculture and labor sectors and it would deepen mutual understanding, thereby contributing to the reduction of political and social frictions leading to the revitalization of the East Asian economies. Social and political stability plus economic growth in the region would provide better quality of life for its people. However, great challenges need to be addressed such as raising workers’ productivity, cutting transaction costs across the supply chain, boosting demand, increasing regional export, and key issues need to be prioritized such as market access, competition policy, rules of origin, investments and services, movement of people, cross border concerns like environmental disasters and epidemics, and regional security arrangements, among others. In this regard, former President Ramos broached the idea of shifting from “Pax Americana” (peace and security guaranteed by the US) to a “Pax Asia-Pacifica” (peace and security arrangements shared by the East Asian countries).

There was a general feeling that Japan and China are key catalysts for the East Asian integration. However, there was an emerging consensus that countries in East Asia that are parties to, or in the process of negotiating, one or more free trade arrangements not only with countries within the region but outside the region as well, are looming to take the “hub and spoke” characteristic, for example, ASEAN-China (2010), ASEAN-Japan (2012), and ASEAN-Korea, and Japan-Singapore (2002) and Japan-Philippines. Whether ASEAN would be the hub or spoke remains to be seen. It was believed that ASEAN integration with the Northeast Asian countries will bring about great business potentials and significant benefits to the peoples of East Asia and substantial political and bargaining leverage in the multilateral trading arena. An integrated East Asia, home to about 1/3 of the world’s population and host to more than 1/5 of global economic production is believed to set the pace of the global economy and influence the direction of the multilateral trading system.

The creation of the East Asian Economic Community may take years to materialize. Political questions remain to be addressed e.g., relations between Japan and China on one hand, and Taiwan and China on the other. In addition, integrating the various FTAs to form a single East Asian Free Trade Area could be a complex exercise as the sensitivities of each country will have to be taken into account. Hence, strong political leadership, a two-track approach (bilateral and multilateral), consensus-building and a feasible approach e.g., (ASEAN + 1) times 3 (Japan, China, Republic of Korea), ASEAN+3+2 (Taiwan and Hong Kong), ASEAN+3+2+CER (Australia and New Zealand) and ASEAN+3+2+CER+India are all critical steps leading to an East Asian Community and eventually global free trade under the WTO.

Click below to view presentations:

1.Singapore Institute of International affairs
2.Shujiro Urata
3.Yasuo Tanabe

 source: AIM