The United States: Republican Senator Dick Lugar is calling for the U.S. to create a free trade agreement with ASEAN. Lugar stated that sanctions on Myanmar should not negatively America’s economic relationship with the rest of the region. Further:
“China, India, Australia, New Zealand and South Korea have already finalized FTAs with Asean and are sharpening a competitive edge over the U.S. in Southeast Asia,” Lugar said. “The United States should proceed to develop a comprehensive strategy toward engaging ASEAN in serious FTA discussions.
This blog suggested a few months ago that a FTA with ASEAN would greatly increase America’s soft power in the region. Although politically difficult to do in the tail-end of a very damaging recession, if the Democratic Party can afford to buck the labor unions in some sectors, it would be worth it for the Obama Administration to get behind a strong bi-partisan trade deal. In any case, this type of agreement will be years in the making, hopefully in an off-election year.
Japan: It appears that Japan’s new Hatoyama Administration is not wasting time shoring up relations with Southeast Asia. In Jakarta on Oct. 13th, the Japanese Foreign Minister Katsuya Okada, announced that Japan intends to strengthen ties with Southeast Asia after years of stagnation. He promised Japan would be providing much larger amounts of investment and aid to the region than previously seen. Indonesian President Susilo Bambang Yudhyono was quite receptive to this message. Hopefully, there will be a detailed strategy coming from the PM’s office in the near future.
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There’s a lot less to this than meets the eye. The so-called “bowl of noodles” of FTAs in Asia is more fluff than substance. The agreements might reduce tariffs, but keep non-tariff barriers. They largely haven’t been implemented and end up being symbolic. By contrast, the U.S. (for right or wrong) takes free trade agreements seriously, so it would require many years of negotiation. Any U.S.-ASEAN FTA won’t be one of these vague “bowl of noodles” FTAs, but rather a specific document. Which makes it less likely that either side would pursue it aggressively. We had the same problem with the Treaty of Amity and Cooperation - which the U.S. only signed recently.
By the way, there is some economic literature suggesting these regional FTAs may undermine multilateral FTAs by diverting efficient trade into the new trade bloc. Thus, while an ASEAN-US FTA might bring ASEAN political benefits, it would probably set back the cause of free trade overall.
Thank you for your comment. Yes, I have read complaints about trading blocs being inefficient and hurting global mutilateral trade efforts, such as the World Trade Organization. I think the WTO is frustrating as it requires so much consensus you are bound to have deadlock, the less cooks in the kitchen the better to get something done in the short term.
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