Trade fever hits Asia-Pacific region
International Herald Tribune, April 21, 2005
Trade fever hits Asia-Pacific region
Donald Greenlees
Trade group encourages responsible, cautious deal-making
HONG KONG — South Korea is set to consider the ratification of a bilateral free trade agreement with Singapore. Australia penciled in negotiations with China on a similar agreement on a recent visit to Beijing by Prime Minister John Howard. Singapore, Chile and New Zealand are discussing a closer economic partnership - a "Pacific Three" agreement that would nurture trade and investment.
These talks are part of the fast-growing spider’s web of preferential deals signed or under negotiation in the Asia-Pacific region, aimed at securing market share for countries in an increasingly tough trade environment. About 40 bilateral or regional trade agreements have already been signed between countries in the region, according to the secretariat of the Asia Pacific Economic Co-operation forum.
Regional trade officials say there is a lot more to come as countries race to ensure they remain competitive in vital export markets. The forum’s secretariat estimates that 30 bilateral or sub-regional agreements are now under negotiation.
"I think the free trade agreements currently being negotiated are the result of a kind of domino effect," said Choi Seok Young, the Singapore-based executive director of the forum. "This trend may not be reversed."
South Korea, this year’s host of the forum’s trade and economic cooperation meetings and leaders’ summit, is a case in point. One year ago, after a rancorous debate with farmers, it ratified its first-ever free trade agreement - a deal with Chile that had more symbolic political importance than economic impact.
After several delays and a bitter battle over cheap imported Chilean grapes, South Korea’s National Assembly finally approved the deal. Since then, it has moved to negotiate deals with Singapore, Japan and the 10-member Association of Southeast Asian Nations. It is seeking to start negotiations with the United States and the European Union.
Although a late-starter in the business of preferential trade deals, South Korea has set the target of having free trade agreements with 50 nations by 2007, according to government officials.
The enthusiasm for bilateral free trade agreements, or FTAs, and regional trade agreements, or RTAs, around Asia-Pacific reflects frustration over the slow pace of multilateral trade reform, once seen as the great hope for regional trade.
As the trade forum observes its 16th anniversary this year, it is still a long way from the goals it set at a landmark meeting in the Indonesian city of Bogor in 1994 to create free and open trade and investment in the Asia-Pacific region by 2010 for industrialized economies and 2020 for developing economies. Its 21 members include a diverse mix: powerful economies and trading nations like the United States, China, Japan, and South Korea and poor developing nations like Peru and Vietnam.
South Korea’s ambassador to the forum, Kim Jong Hoon, has the job of implementing the group’s vision of "open regionalism," as the southern city of Busan prepares to be host to the forum’s summit meeting in November. But he acknowledges that the rush to do deals outside the framework of the forum and the World Trade Organization reflects a degree of impatience among countries with the multilateral trading system.
"Some people say FTAs and RTAs have been proliferating in an environment where the multilateral system has stalled. They might be right," he says.
Critics say that, while bilateral and regional deals can bring immediate benefits to the countries involved, there is a downside. The forums’s Business Advisory Council published a report in October warning that the trade deals now being done could impose higher transaction costs on businesses and impede the goal of building a multilateral trading system.
"Logic suggests that selectivity in product coverage distorts trade and investment flows and in doing so creates tensions with the Bogor goals," the council said in its report.
The forum, which once opposed the idea of bilateral or sub-regional agreements, now embraces the concept on the grounds that they can help spur the multilateral free trade agenda. Still, it wants to ensure that deals between individual countries meet certain global standards - last year it released a two-page guide to what good free trade agreements should include.
This issue will be on the agenda when senior trade officials meet on the South Korean island of Jeju at the end of May.
"The proliferation of free trade agreements and regional trade agreements can positively contribute to APEC member economies in achieving trade liberalization," said the ambassador, Kim, although he cautioned that countries needed to strike the right kind of deals. He pointed, in particular, to the lack of clarity in rules about product origin.
Former Australian prime minister, Paul Keating, one of the key figures in the creation of the forum, argued for the continued relevance of its ambitious agenda despite to shift in interest to selective deals.
APEC, he said, has been important in bringing together a region which suffers from many unresolved conflicts. "These things by their frequency and the way they work builds trust," he said.
