logo logo

WTO collapse set to fuel Asia’s "noodle bowl" effect

Today, Singapore

WTO collapse set to fuel Asia’s "noodle bowl" effect

25 July 2006

The breakdown of the WTO talks has dealt a blow to the trade prospects of Asia’s open economies and is likely to encourage a growing "noodle bowl" of bilateral pacts, analysts said.

East Asian nations have already been rushing to negotiate individual agreements to remove barriers to trade, apparently on the expectation that the 149-nation World Trade Organization talks would flounder, they said.

Even so, the suspension of the WTO talks was a concern for many Asian economies because they are very open and outward oriented, said Masahiro Kawai, the Asian Development Bank’s head of regional economic integration.

"Their trade prospects are extremely important for their future economic growth and development," Kawai told AFP by telephone from Manila.

The indefinite suspension of the long-faltering Doha round negotiations is expected to lead to more bilateral deals in Asia and elsewhere.

"The prospect of an intensification of bilateral free trade deals is very real if the Doha round finally does break down," said Professor Peter Drysdale at the Australian National University in Canberra.

East Asia’s trade with North America and Europe, particularly in finished goods, has been growing even faster than intra-regional commerce, he said.

"So a retreat to negotiation of more narrow bilateral arrangements is not good news for the East Asian economies and the hope is that if the round does stall, it won’t be put on hold permanently," said Drysdale.

The Asian Development Bank has warned that the mushrooming of bilateral free trade agreements (FTAs) risks creating a "noodle bowl" of overlapping rules that could actually make life harder for companies.

"FTAs can be useful if they really encourage structural reforms on the part of participating countries and expand trade, not only among the two countries but with the rest of the world by stimulating growth," said Kawai.

"But there is no guarantee that bilateral FTAs will be positive," he added.

Japan in particular has been pushing for more FTAs around the world to secure access to raw materials and markets for its exports, and has already signed deals with Malaysia, Mexico and Singapore.

It has also struck basic accords with Thailand and the Philippines and launched negotiations with South Korea, Indonesia, six Gulf kingdoms, Chile and the Association of Southeast Asian Nations (ASEAN) as a whole.

"Japan will continue actively pursuing FTA accords with as many countries as possible," a trade ministry official said Tuesday.

"But the importance of the WTO talks remains unchanged. We will try to expand talks on FTAs and the WTO equally," said the official, who declined to be named.

South Korea for its part has held FTA talks with the United States but the negotiations have stalled.

"Most Asian governments were prepared for the (failure) of the WTO talks," said Martin Schulz, an economist at the Fujitsu Research Institute.

"This is why the FTA talks (in Asia) have been in full swing over the last couple of years," he added.

The breakdown in the WTO Doha round could also encourage the development of an East Asian free trade pact but diplomatic frictions between the region’s economic powerhouses will make a deal difficult, analysts said.

ASEAN aims by 2015 to abolish tariffs under a regional free-trade deal and is negotiating FTAs with China, Japan and South Korea, hoping this will become a catalyst for a wider East Asian free trade zone.

"What they need is an FTA of ASEAN-Plus-Three with China, (South) Korea and Japan in the group (but) since Korea, China and Japan are not talking at a high level any more, there has not been any progress in this area," said Schulz. - AFP