TCS Daily

Unite and Conquer

By Woo Yuen Pau - December 10, 2003 12:00 AM

ASEAN leaders descend on Tokyo this week to celebrate 30 years of relations with Japan. The Japanese government has been unusually forward in hyping the event in the media. Prime Minister Koizumi is touting the meeting as a marker of Japan's special and enduring relationship with ASEAN, a not-so-subtle contrast with China's more recent and arguably more passionate courtship of Southeast Asia. Ironically, Japan's big announcement at the upcoming meeting -- accession to the ASEAN Treaty of Amity and Cooperation -- only serves to highlight the fact that China (and India) signed up a month earlier at the ASEAN Summit in Bali.


On the economic front, however, Tokyo will seek to leapfrog China by announcing that it will begin free trade negotiations with Thailand, Malaysia, and the Philippines in 2004, as part of a Comprehensive Economic Partnership (CEP) with the region as a whole. China has also proposed a free trade agreement with ASEAN and is generally perceived to be ahead of the Japanese because its "early harvest" proposals for tariff reduction in agricultural products. There remains considerable uncertainly, however, over just how Beijing and ASEAN will come to a trade pact by 2010.


Japan signed a framework agreement for the CEP only two months ago, amid confusion over the relationship between bilateral and regional negotiations. The framework agreement contains ambiguous language about launching negotiations on the CEP Agreement between Japan and ASEAN as a whole, "taking into account the achievements of bilateral negotiations between each ASEAN Member State and Japan".


The agreement calls for ASEAN Members that have not concluded bilateral Economic Partnership Agreements with Japan to negotiate concessions bilaterally. "Schedules of liberalization concessions between Japan and those ASEAN Member States that have concluded a bilateral EPA should not be renegotiated in the negotiation of the ASEAN-Japan CEP Agreement."


The agreement does not spell out either the sequencing of bilateral versus regional negotiations, or the relationship between concessions offered to individual ASEAN countries and concessions offered to ASEAN as a whole. Will the CEP amount to 10 bilateral free trade agreements held in place by complex rules of origin, or will it be a truly regional agreement between Japan and ASEAN as a whole? More to the point, when Malaysia, Thailand, and the Philippines begin negotiations with Japan next year, how will they know if the concessions they obtain from Tokyo are not inferior to the concessions offered to their neighbors?


The answers to these questions have yet to be worked out. The framework agreement calls for consultations on the principles and modalities for regional free trade negotiations to begin in 2004, in advance of actual negotiations that are slated to start in 2005. ASEAN as a whole, and especially members that have not yet received Tokyo's offer of bilateral talks, should be concerned about the potential for a negotiating approach that pits one member against another, dividing the regional forum and leaving the smaller members worse off.


In the interest of regional solidarity and integrity, ASEAN should insist on the principle of Most Favored ASEAN Nation (MFAN), whereby market access offered by Japan to any ASEAN member is similarly offered to all ASEAN members. In this way, ASEAN nations can concentrate on negotiating with Japan, rather than on what special deals their neighbors may be getting from Tokyo. Concomitantly, ASEAN members should accelerate and expand their efforts to liberalize trade and investment in the region through the ASEAN Free Trade Agreement (AFTA). It would seem pretty hollow to ask Tokyo for MFAN when ASEAN members are dragging their feet on intra-regional barriers.


Japan will no doubt be tempted to pursue a "divide and conquer" strategy of negotiating multiple bilateral trade deals that are unconnected to each other. However, if it is serious about regaining some of the regional leadership and moral high ground that has been lost to China in recent years, Tokyo should seriously consider offering MFAN as the basis for its negotiations with ASEAN. Ironically, the strongest opposition to MFAN may come from a few ASEAN countries that are inclined to go it alone and for whom "ASEAN solidarity" is rhetorical cover for the pursuit of narrow national interests. Japan's leadership on this issue, therefore, is important not only for Japan, but for the long-term viability of ASEAN as well.


Woo Yuen Pau is Chief Economist for the Asia Pacific Foundation of Canada.


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