The first speaker, Prof. Shujiro Urata, Waseda University, presented on the progress made on trade liberalization thanks to APEC. So far trade liberalization has gone well, but it seems that the speed of progress is dulling. Prof. Urata explained that Asia may have reached a stage where the nonbinding approach of APEC is no longer enough, and movement forward may rely on legal requirements.
While most economies in Asia have made progress in reducing tariff rates, hardly any economies save for Hong Kong (China) and Singapore have zero taxes across all or nearly all tariff lines. Furthermore, although many economies in the region have agreed to FTAs, that does not mean that companies always make use of these agreements.
Notably absent from the region is an FTA between Japan, China, and the Republic of Korea (ROK). It has been proposed that such an FTA may be facilitated by ASEAN as an ASEAN+3 or +6 agreement. It is unlikely that the Free Trade Area of the Asia-Pacific (FTAAP) will ever be a reality without a China-Japan-ROK FTA. The TPP may also be a good means by which to implement a region-wide FTA. Japan has until now been proactive in pursuing FTAs with other nations but, if it is to join the TPP, it will need to liberalize even further.
Prof. Urata explained that he had done a survey of the rates at which Japanese companies utilize the FTAs with Mexico, Malaysia and Chile. Of the companies surveyed, 33% utilized the Japan- Mexico FTA; 12% utilized the Japan-Malaysia
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| The fifth session on the Post-2010 APEC Trade Agenda: (l-r) Dr. Charles
Morrison, Co-Chair, PECC / Chair, USAPC; Prof. Shujiro Urata, Waseda University;
Dr. Narongchai Akrasanee, Chair, TNCPEC; and Prof. Robert Scollay, University
of Auckland |
Prof. Urata closed his presentation by urging meeting participants to promote the importance of a region-wide FTA to their governments.
The second speaker of the session, Dr. Narongchai Akrasanee, Chair, TNCPEC, raised the issue of the post-2010 APEC trade agenda.
Prior to the year 2000, tariffs were highly important to foreign trade and had a large effect on prices. However, with the conclusion of the Uruguay Round in 1994, tariffs have become a lot less influential. The revenue from tariffs has dramatically fallen in many nations.
Another change since 2000 has been the rapid growth in foreign trade. Despite the lack of real success in the Doha Round, foreign trade values across Asia continue to grow. This is true of inter- APEC, interregional and inter-ASEAN trade. Although there was a large drop in the amount of foreign trade going on in Asia just after the financial crisis of 2008, exports and imports have since more or less recovered. Trade between economies with FTAs has actually increased. Additionally, Japan is now selling a lot more to China.
If tariffs no longer matter with respect to trade amounts, what does? The IMF and other development institutions suggest that exchange rates are now the most influential monetary factors affecting trade, and specifically, the real exchange rates adjusted for inflation.
In recent years many surplus economies have been unfairly manipulating exchange rates. The Federal Reserve in the United States has been printing money in such an excessive amount over the last two years as to be no longer in line with Keynesian or Friedman economics.
Aside from exchange rates, FTAs also seem to have an effect on trade, but this is hard to measure. Interregional trade has been increasing substantially. Even if companies do not make use of FTAs, it seems that having FTAs with another economy encourages trade.
Dr. Narongchai concluded by commenting that APEC seemed likely to adopt exchange rate issues and that he hoped it would.
The last speaker of the session, Prof. Robert Scollay, University of Auckland, gave an interim report on the PECC trade project, beginning with progress in the Doha Round.
Negotiations for the round are stuck in agriculture, and there are other underlying issues in the world economy that are delaying progress, the rise of BRIC economies among them. So far there has been no clear leadership within the negotiation process. The G-20 has not been able to make progress on this. The trade priorities for developing countries seem to be in areas on which developed countries do not want to negotiate, and the opposite is true as well. This has meant that, even when a deal might benefit the world economy greatly, it fails to win support among the countries concerned.
Prof. Scollay questioned whether it was not time to think about sector-based approaches to trade liberalization, given that traditional global trade cooperation initiatives may no longer be effective.
The greatest threat to global trade may be the collision between climate change and economic policy. Doha Round negotiations are close to an agreement on environmental goods and services, but it is not likely going to help avoid this issue. It is likely that many countries will try and implement trade policy to support green growth in a way which is dubious in terms of WTO-sanctioned trade policy. There is still no global consensus about rules regarding industries concerned with climate change. Prof. Scollay stated that the WTO settlement system was the best option for sorting out these issues.
Services-trade-related issues are another key issue of the Doha Round. The liberalization of trade in the services will be crucial to economic growth in Asia in the future, and zero progress has been made. Less than a third of WTO member nations have offered any concessions on services trade. This issue is only going to grow in importance. Remittances are becoming a larger and larger part of the economies of the emerging nations of Asia.
Prof. Scollay explained that regional economic integration through an FTAAP or other agreement could be extremely beneficial to the Asia-Pacific. However, he underlined the necessity of a China- Japan-ROK FTA in order to achieve this. The three economies create nearly 90% of the GDP of Asia, so it is important that they come together for the sake of the entire region. He noted that the TPP may help to make an FTAAP a reality, but that for the TPP to be effective all the nations joining it needed to do so with the resolve that every tariff item should be up for negotiation.
Discussion
A participant asked about the utilization rate of FTAs, and stated that he had heard tariff reductions needed to be at least 15% for companies to eagerly make use of FTAs. Prof. Urata replied that, in his studies, he had found that a difference of even 1% made an FTA attractive to a company.
A participant asked if the regional cooperation initiative movement had lost momentum, and if there was any reasonable hope to think that a China-Japan-ROK FTA would ever happen. Prof. Urata answered that he still believed there to be momentum for this, further explaining that the numerous FTAs in Asia had all come about largely due to the successful completion of the Japan-Singapore FTA in 2002. He said that a little success could have a large effect. Dr. Narongchai answered that the FTA process was in need of political leadership from any one of the three economies. Prof. Scollay responded that he believed once agricultural issues were dealt with, the FTA would happen.
A participant asked about the likelihood of Japan engaging in the TPP, and commented that, although many had stated that Japan's agricultural sector was closed off, it seemed to be more open than the agricultural sector of the Republic of Korea, and further asked if this issue could be cleared up. A second participant said that agriculture was not a real problem for China-Japan-ROK FTA, as much as fisheries, history and culture were. He then asked if the TPP was really an open venue or if there was the possibility Japan might actually be refused membership. Prof. Urata stated that agricultural subsidies were an important issue to the Democratic Party of Japan (DPJ) and that he had heard Canada had applied to join the TPP but had been refused. A participant clarified that the rumor about Canada was untrue and that the TPP was an open venue.