Lagged Trade Liberalization: the case of FTA Negotiations with ASEAN
It explores the differences between Japan and China, on the case of FTA (Free Trade Agreement) negotiations with ASEAN. It tells why a multilateral trade liberalization proposal failed, but left lagged, bilateral trade liberalizations, AC-FTA (ASEAN-China-FTA) and AJ-CEP (ASEAN-Japan-Common Effective Preferential Tariff).
Tokyo and Beijing have been standing differently in the rationale, decision-making process and strategy in the regional economic cooperation and trade liberalization.
I. The rationale of promoting FTA negotiations varies between China and Japan.
Compared to Japan, mainly driven by market demands, China is more complicated. China actively promotes the regional economic integration in Asia, not only primarily by economic concerns, but also aims to improve relationships with its neighbors for depriving the mistrust from “China threats”. More importantly, it is Beijing’s counterbalance to the growing American economic influence in Asia, and a strategic response to Obama administration’s “returning to Asia” agenda.
II. The decision making processes plays an important role in multilateral negotiations.
Tokyo started FTA negotiation with ASEAN in the early 2000s, took steady and moderate steps, sector by sector. Despite a latecomer, Beijing is an active, fast and efficient negotiator. After fully opening its banking sector to foreign investors in 2007, Beijing took a comprehensive, coherent response to different countries’ needs. Furthermore, at the very moment of Beijing’s round talks with ASEAN between 2008 and 2010, Tokyo was busily engaged in political regime transitions, of which the opposition party DPJ (Democratic Party of Japan) took the power. Unfortunately, the DPJ did not manage the government as it was expected. This policy diffusion to some extent caused the lagged liberalization between Japan’s negotiations with ASEAN.
III. Industrial structures, mainly determine foreign trade strategies.
As an export oriented, agriculture protected, and manufactures predominated market, but a raw materials scarce country, Japan stands distinct from China, thus owned marginal spaces during negotiation processes. Moreover, on the Sensitive List (SL) and High Sensitive List (HSL), Beijing also has fewer concerns compared to Tokyo. On the other side, “made in China” products, cheap labor costs and SOEs dominated markets, contain more comparative advantages when facing ASEAN markets.
In conclusion, the difference between China and Japan on the trade bargaining context, domestic actors, and industrial structures in all, shaped the regional economic cooperation, thus left lagged trade liberations in Asia.
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