Must Asean be wary of FTAs while embracing them?
Bernama, Malaysia
Must Asean Be Wary Of FTAs While Embracing Them?
An analysis by Siti Hawa Othman
20 August 2006
KUALA LUMPUR, Aug 20 (Bernama) — While everybody has been rushing to ink Free Trade Agreements (FTAs), no thanks to the consistent failure in global trade talks, questions are raised as to whether its adverse consequences are being ignored.
At the same time, does it signal the end of countries advocating multilateralism — especially with the World Trade Organisation (WTO) hanging on dearly to life support, and the beginning of private trading arrangements?
Regional analysts say FTAs between two countries are fine as it is their own business.
But what if it is Asean, whose members with varying degrees of economic development — especially members with vulnerable economies and low competitive levels — fearing they would lose out.
The first thing would be for Asean to integrate, reinforce the regional economy and raise its bargaining power as a bloc so that it is able to extricate a pact that is equitable to all members.
Asean must not lose sight of the common good in the rush to forge FTAs amid concerns it could be sacrificing long-term interests for short term gains.
More than anything else, FTAs must not undermine integration, which means developed members must not take a self-centred approach in negotiating FTAs.
An economist said that members must not play into the hands of the rich and powerful and must resist the tendency by them to divide and rule given that many of the developed countries are forging individual FTAs with Asean members.
Another area of concern is Japan’s push for a free trade in East Asia.
East Asia, once a strong advocate of multilateralism, is seen moving faster to sign up the FTAs with its core component Asean now negotiating such arrangements with its dialogue partners.
As it is, Asean is facing tough times in negotiating FTAs as a single economic entity when it is far from being one, with the likes of India, Australia, New Zealand, the United States and even the European Union.
These are predicaments Asean Economic Ministers who are already arriving here for their annual meeting have to bear in mind especially during consultations with dialogue partners.
As if this was not enough, they have to accommodate Japan’s hurried proposal for an East Asia-FTA (EAFTA) that includes India, Australia and New Zealand.
And Japan’s eagerness is evident given its commitment to sponsor the US$100 million Nikai initiative to kick-start moves towards creating an EAFTA covering 16 countries.
This has obviously raised eyebrows, triggering the notion that it does not want to be overshadowed by China’s earlier contention of not including the three countries in an EAFTA.
China was reportedly against an EAFTA which includes India, Australia and New Zealand.
Japan’s plan goes beyond earlier calls by Malaysia for an East Asia Economic Caucus (EAEC) comprising Asean plus three (China, Japan and Korea).
EAEC was vehemently opposed by the United States despite it being proposed as a forum, yet Washington cannot wait to sign FTAs with the region’s countries.
The question that beckons again is whether Japan’s proposal would draw a similar reaction.
Amid such trends, there is a feeling among some that Asean should firstly focus on deepening integration with China, Japan and Korea before inviting the others.
Nevertheless, FTAs are touted as having the potential to make Asean a more dynamic region for business.
And Asean members are well aware of their commitment to the grouping in terms of trade liberalisation and investment despite the individual FTAs.
The elimination of tariffs and non-tariff barriers has reportedly raised the trade volume and to a certain extent efficiency, productivity and competitiveness.
But what about the implications on a country’s development and more importantly, on society.
Sometimes, the benefits of FTAs have been exaggerated.
Even in efforts towards Asean integration, there have been grouses and claims it only benefit multinational corporations and large domestic companies at the expense of small and medium enterprises.
But some analysts say the experience of many signatory countries to such agreements have been bitter.
Some countries have to amend legislations to accommodate new inputs such as privatisation, some saw declining exports, incurred rising cost of doing business, or that it went against national social obligations.
Of course, for developed countries, FTAs are a boon as they have nothing to lose given their ability to export to less developed markets.
In contrast, developing countries were forced to reduce tariffs and trade barriers almost overnight under such pacts.
Less developed countries would receive more imports but would export less as their own products would not be able to compete with imports.
The proliferation of regional and bilateral FTAs would also drive up transaction costs as divergent practices make business operations more complex.
There are also those who go as far as accusing FTAs as a political apparatus to expand a new brand of imperialism.
They claim that the aim of the rich and powerful is to take control over trade and natural resources of countries in strategic parts of the world.
Whether or not such assumptions are true, it would all depend on how united Asean is in forging an economic destiny that in no way marginalises any of its 10-member countries.
