Chinese Premier Zhu Rongji (
Back in September, Chinese foreign trade officials met with ASEAN economic officials in Hanoi and had an in-depth discussion of plans for such a free trade area. The two sides drew up a 107-page proposal covering how to strengthen trade exchanges and investment cooperation between China and ASEAN.
Japan is actively negotiating a similar agreement with ASEAN. This reflects a sense of crisis in Japan about China's expanding economic influence, according to the Japanese business daily Nihon Keizai Shimbun. Japan has long been in talks with Singapore for a free trade deal. The talks are in their final stage and expected to conclude before the end of this year. The pact may be put into effect in April next year. Japan initially planned to enter the ASEAN market via a free trade pact with Singapore, but the plan created discontent among other ASEAN countries, which believe it would open a backdoor for cheap foreign products to flood their markets.
Japan has drafted a new strategy and is actively pushing for a free trade agreement with ASEAN. Because Japanese businesses have invested heavily in ASEAN countries, a free trade pact will raise the added value of products and improve competitiveness. This will in turn neutralize the challenge posed by China's entry into the WTO. For their part, ASEAN countries hope to seek, through a free trade agreement, an expansion of Japanese business investments in their region.
The long-trumpeted "Japan-China-South Korea-ASEAN free trade area" plan has also gained more credibility. At the ASEAN summit, South Korean President Kim Dae-jung won backing for his proposal to include South Korea and Japan in the free trade zone. But the proposal will not be considered until next year's summit.
Australia and New Zealand have a close economic partnership. Seeing Asian countries swarming toward free trade agreements, however, both nations fear that they might be marginalized. They also want free trade pacts with ASEAN nations, which have already agreed to an ASEAN-Australia-New Zealand free trade agreement to be signed at ministerial meetings next year. At that time, the two sides will remove technical trade barriers, promote cooperation in electronic commerce and establish close relations in economics, trade and investment.
A variety of free trade deals are being signed across the Western Pacific, but Taiwan is missing from all of them. By forming links with China, Japan and South Korea, as well as New Zealand and Australia, ASEAN countries are shaping a "dragon" of a free trade area, which will inevitably threaten and isolate Taiwan's economic interests in the Asia-Pacific region.
Taiwan's Bureau of Foreign Trade has already set up a task force to prepare for negotiations with trade partners like Singapore, New Zealand and Japan on the possibility of signing free trade agreements within the WTO framework. Given the unifying trend in sub-regional economies, Taiwan should also try to plan a high-level regional integration strategy. Only by doing so will it be able to avoid the fate of becoming an "orphan of Asia."
Wu Fu-cheng is an associate research fellow at the division of international affairs of the Taiwan Institute of Economic Research.
Translated by Francis Huang
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