East Asian FTA should seek multilayered framework with the U.S. in mind

Presently preparations to establish the Free Trade Agreement (FTA) are steadily progressing among East Asian nations. Since the region lacks an intraregional framework that ranks with the North American Free Trade Agreement (NAFTA) or the European Union (EU), it is expected that its realization would further revitalize trade and investments in the area. However, there is also some concern over its relationship with the United States that is wary of the move.

So far, Chinese and Japanese plans have been proposed for the East Asian FTA concept. China has proposed that the member nations be “ASEAN+3,” namely the 10 Association of Southeast Asian Nation (ASEAN) members plus Japan, China and Korea. Japan's plan suggests having these plus three more -- India, Australia and New Zealand -- for a total of 16 nations. Joint researches of the concepts are being conducted by private-sector experts of each nation with the consent of the governments involved.

Washington has expressed displeasure at the fact that these concepts do not include the United States. Nevertheless, it has refrained from directly demanding its inclusion, possibly out of consideration for the unreasonableness of asking to join an FTA that is crowned with the words “East Asian.” The private think tanks, however, are more straightforward in their opinion.

They point out that “Geographically speaking, the U.S. does not belong to East Asia. But it is the largest export market for many nations in this region and it has established bilateral security treaties with various countries in this area including Japan. It does not make sense to exclude such a country.”

Indeed, the United States is the largest export market for many East Asian countries, and it is also responsible for their ultimate security. Yet there was a similar situation in Europe immediately after World War II. At that time, the U.S. was committed to the economic recovery of Europe and contributed to ensure the region’s security by establishing the North Atlantic Treaty Organization (NATO) and other organizations. Despite this, the U.S. did not join the then European Economic Community. This is because the U.S. is not located in Europe. It is for the exact same reason that the United States, which is not in East Asia, cannot join the East Asian FTA.

The reason the U.S. seems to react so sensitively to the East Asian FTA is perhaps because the concept reminds it of the East Asia Economic Group (EAEG), which was proposed in 1990 by the then Malaysian Prime Minister Mahathir bin Mohamad . His plan naturally did not include the U.S. as a member and the then Secretary of State James Baker strongly criticized the concept as drawing a line down in the middle of the Pacific Ocean. It is well known that this aroused resentment in Southeast Asia where some asked, “If so, what about the NAFTA plan?”

Actually, the difficulty of this problem lies beyond the simple geographical context. The crux is the wide gap between the two sides’ awareness of the fundamental problem of whether East Asian nations possess the freedom to formulate regional integration mechanism without the United States.

The nations feel that they naturally possess this freedom and that a regional FTA should be formed without the U.S. to prove this point. They advocate that by doing so, trade and investment in the region will become even more active and that excessive dependency on the U.S. market will ease to the benefit of the U.S. as well.

On the other hand, the United States probably feels that the matter is not as simple as that. To begin with, the U.S. takes strong pride in having taken care of this region for years. What is more, it is alarmed that the undertaking may become an occasion to steer the U.S. away from the rapidly growing East Asian markets. Perhaps the U.S. cannot afford to let this happen unlike in those days in Europe.

On a calmer note, it is desirable for not only the United States but also the East Asian nations to institutionally anchor the U.S. to this region in terms of economics, since the treaty would promise free entry to the world’s largest market.

A relationship that would be beneficial to both sides may be forged without the United States straining to join the FTA. Firstly the U.S. signs an FTA individually with the countries in this region and tries to increase the number of such an FTA. Another method is for the U.S. to join a new regional FTA that includes this region, which is different from the East Asian FTA.

As for individual FTAs, the U.S.-Singapore FTA already exists and the U.S.-Korea FTA that was recently agreed upon should be highly welcome in this respect. If a Japan-U.S. FTA becomes reality, the partnership would fall into this category.

As for the other regional FTA, the United States proposed an FTA by APEC members (FTAAP) at the summit meeting of Asia-Pacific Economic Cooperation (APEC) held in Hanoi in 2006. Although the East Asian nations are not keen about this idea on the whole, it should be actively promoted to revitalize APEC, which seems to have run into an impasse, and to realize a multilayered regional economic integration in the region.

Since Japan, the United States and China are the main members of APEC, it would truly be a major breakthrough if an FTA with these nations as members would be formed. If the present 21 APEC members are too many for the FTA negotiations, it would be an idea to form an FTA with the like-minded nations among the members.