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Opinion
China's FTA Strategy in the Spotlight
Yukio Shotoku
(Executive Vice President, Matsushita Electric Industrial Co., Ltd.)

(The Breakdown of the New Round of WTO Negotiations and the Acceleration of the FTA)

Between 10th - 14th September this year, the new round of WTO (World Trade Organization) negotiations (5th Ministerial Conference) took place in Cancun, Mexico. The ministerial conference is the supreme decision-making body of the WTO and meets once every two years; this particular conference was the focus of worldwide attention, because it provided a forum for discussing new frameworks for common global trade rules. Negotiations at the Cancun Ministerial Conference took place with a view to determining the direction of i) the liberalization of agricultural produce, ii) the liberalization of non-agricultural produce, and iii) new areas (protecting investments, promoting competition, facilitating trade, and government procurement), but there were sharp divisions between developed and developing nations, and the unfortunate outcome was that negotiations broke down. Although the ministerial statement released on 18th October at the APEC (Asia-Pacific Economic Cooperation) meeting in Bangkok, Thailand called for the resumption of negotiations on the liberalization of trade (the new round), there is also the prospect that the breakdown at Cancun will mean that a two-year delay before agreement can be reached becomes inevitable.

Moves towards the conclusion of FTAs at the bilateral and regional levels have already intensified as a result of this breakdown in negotiations. At present, in East Asia, efforts to create FTAs focusing on such countries as Singapore and Thailand are gathering pace. Of these efforts, China's active promotion of a shift in its trade policy in favor of FTAs since its accession to the WTO in December 2001 has come under the spotlight.

(China's FTA Strategy)

At their November 2002 summit, China and ASEAN signed a framework agreement "aimed at the establishment in 2010 of an FTA between the two parties." According to this agreement, China and the six countries of ASEAN will abolish almost all tariffs by 2010 and create a vast FTA. Furthermore, China feels the ideal form of regional integration in East Asia to be the ASEAN+3 (Japan, China and the ROK) framework, and is redoubling its approaches to Japan and the ROK. In addition, China has recently expressed its intention to push forward with its deliberations regarding an FTA with India and the countries of Central Asia.

One feels that, while China's FTA policy is a strategic move based on the long-term perspective, its specific response is pragmatic and flexible. In strengthening its economic cooperative relationships with neighboring countries, China is not only increasing its influence while alleviating the threat to itself from those countries, but is also trying to accelerate domestic business reforms and increase its international competitiveness.

(Chinese Moves Towards the Formation of an East Asian Economic Bloc in the Spotlight)

According to a survey of Japanese businesses recently carried out (September 2003) by the Ministry of the Economy, Trade and Industry, about 47% of businesses in Japan hoped that an East Asian FTA would consist of the ASEAN+3 (Japan, China and the ROK) countries, considerably more than the figures for those in favor of other options, such as the 16% who expressed their hope that it would just encompass Japan and ASEAN. Japanese businesses, which already have a great deal of property in East Asia, such as manufacturing bases, are placing an emphasis on optimum production, procurement and sales in ways that will secure profits for them throughout East Asia. This may well be a sign that Japanese companies have high hopes for the realization of an ASEAN+3 FTA, which will lead to an increase in their competitiveness, just as European and US companies have made significant profits from the formation of regional economic blocs, such as the EU and NAFTA. Japan's only FTA is its EPA (economic partnership agreement) with Singapore, but it has also conducted negotiations regarding collaboration with Mexico on a fully-fledged FTA that will encompass agriculture. When President Vicente Fox of Mexico visited Japan in mid-October, there were hopes that negotiations might be completed and an agreement concluded, but unfortunately no agreement was reached on agriculture. There are fears that, if negotiations regarding an FTA with Mexico have become protracted due to the situation in the Japanese agricultural sector, then there will also be problems in the agricultural sector with regard to the negotiation of FTAs with ASEAN, Thailand and the Philippines, and other partners will put FTA negotiations with Japan on the back burner. It is conceivable that Japanese manufacturers (domestic) would encounter various restrictions on their exports, which would result in an acceleration in the shift of their manufacturing operations to countries and regions within the global FTA network, as they would decide that they could not be victorious in global competition if they continued to manufacture within Japan.

My company, which is developing many business hubs in Asia, including China and the ASEAN nations, also hopes that both a bilateral FTA with ASEAN and an ASEAN+3 FTA will be concluded, and an East Asian economic bloc formed. Of all the FTA-related developments in Asia in the future, China's positive FTA strategy is definitely deserving of special attention; I very much hope that Japan's politicians will demonstrate strong leadership in thinking about the country's interests in the mid- to long-term, and that we will see an expansion in FTA networks.

[Translated by ERINA]

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