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April 1998

Asian trade bloc would rival NAFTA, EU

Globe and Mail
August 24, 2006
By Geoffrey York

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BEIJING — Backed by the economic muscle of Japan and China, a new free-trade zone representing almost half of the world's population could soon be emerging in Asia to challenge the older spheres of the Western world.

The free-trade idea, spearheaded by a Japanese promise of ¥10-billion ($95-million) for a detailed study of how to make it work, won support yesterday from the Association of Southeast Asian Nations (ASEAN) at a meeting in Malaysia.

Plans for the trade zone, originally aimed for completion in 2020, are now being accelerated. The new goal is to have the trade zone established by 2015. It would cover 16 nations -- the 10 members of ASEAN plus China, Japan, South Korea, India, Australia and New Zealand.

The zone would have a combined population of 3.1 billion, almost half of the global population. Its total economic output would be almost $10-trillion (U.S.) -- about a quarter of the world's GDP.

It could become a natural rival to the power of the European Union and the North American free-trade agreement. The United States and Canada would be conspicuously absent from the new Asian trade zone, despite their close links to Asian countries and their own status as Asia-Pacific economies.

Japan is pushing the idea hard. It estimates that a free-trade zone would increase the total economic output of the 16 countries by $215-billion. Formal negotiations could begin by 2008.

"ASEAN countries expressed their interest and support," Japanese Economy Minister Toshihiro Nikai told reporters after his talks with ASEAN members in Kuala Lumpur yesterday. "It will be discussed in detail between now and the end of the year."

After unveiling Japan's proposal for the 16-nation free-trade agreement, Mr. Nikai said it was a "main pillar" of Japan's policies in the region. "If we are able to create an amicable grouping for the development progress of Asia, we are certain that this will bring benefit for all the countries in the region."

Some ASEAN countries, however, want the association to focus on its existing talks with Japan over a bilateral deal between the two sides. The association already has trade agreements with China and South Korea, and it doesn't want to lose momentum on its Japan negotiations.

Another potential problem is the rivalry between Japan and China. Although both are in favour of free trade in the region, China has backed a slightly different version of the trade zone. It remains to be seen if both countries will fully throw their weight behind a plan that both can agree on.

The free-trade idea has been gaining political support since last December, when the 16 nations held their first-ever East Asia Summit. The summit heard a growing chorus of support for the idea of an East Asian community, similar to the early phases of the European Union.

The collapse of the World Trade Organization's multilateral trade talks has also bolstered the level of support for an Asian free-trade zone.

But the idea has had economic momentum for much longer. Trade among the 16 nations has been growing steadily for many years. Intraregion trade now accounts for 56 per cent of all trade by the 16 countries, compared with just 33 per cent in 1984.

The member nations of ASEAN include Malaysia, Singapore, Thailand, the Philippines, Indonesia, Brunei, Vietnam, Myanmar, Laos and Cambodia.

Proposed Asian group

Members: Japan, China, India, Australia, South Korea, New Zealand and the 10-member ASEAN group: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, the Philippines and Vietnam

Population: 3.1 billion

Total GDP: almost $10-trillion (U.S.)

NAFTA

Members: Canada, United States, Mexico

Population: 430.5 million

Total GDP: $12.9-trillion

European Union

Members: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, the Netherlands, United Kingdom

Population: 460.1 million

Total GDP: $11.7-trillion

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