Signing lofty agreements with economic powerhouses China and Japan this week, Asean members have emerged with a more significant economic position—all the more reason to come together as a single market—officials said on the closing day of regional summits here.
In separate meetings with both of its neighbors, Asean signed on to a Chinese free-trade-area plan and agreed to forge closer economic ties with Japan. Both moves put Asean in a better position economically, officials said.
“There has been a change in how China and Japan see the world. They see it as more trade dominated, with trade-dominated concerns,” said Ong Keng Yong, press secretary for Singaporean Prime Minister Goh Chok Tong.
“As for economic importance [of Asean], these two countries have seen that Asean has economic potential. They are coming in first.”
China and Japan were each seeking footholds in the region ahead of other major economies, he said.
Japanese Prime Minister Junichiro Koizumi said Tuesday afternoon that, through cooperation, Asia could become “a major driving force” in the global economy.
“A population of East Asia together forms about one-third of the global population…and about 20 percent of global trade,” Koizumi said, making it necessary “to deepen economic exchange.”
The premier has received criticism in Japan for falling behind China economically. But he brushed those criticisms aside Tuesday, saying that an economic partnership agreement with Asean would act as a “stimulus for Japan” and he “would not consider China a threat.” He said a free-trade agreement with China would be mutually beneficial for the two countries, and for all of Asia.
“Cooperation must be expanded,” Koizumi said of Asean and Japan, but he said a free-trade agreement between the two—with its zero percent tariffs—was not necessarily the path to take.
“Let’s start where we can,” he said. Japan, which despite a decade-long recession remains the world’s No 2 economy, has thrown significant developmental support toward Southeast Asia.
Asean said in a statement that a joint partnership program between its countries and Japan could boost Asean exports to Japan by more than 44 percent, leading to a slight economic growth.
In return, Japan could see an increase in its exports to Southeast Asia climb by 27.5 percent. Because of the developed nature of its economy, Japan is not seen as a serious economic competitor for Asean investment.
China is another story.
With an economic growth that continues to skyrocket, World Trade Organization membership and a vast pool of natural resources and labor, China has begun to draw foreign investment away from Southeast Asia.
Nevertheless, the country extended a cooperative hand to Asean this week when the two blocs agreed to push for a free-trade area that would be the largest in the world. Between them, China and Asean have close to 1.7 billion consumers.
Philippine President Gloria Macapagal Arroyo said late Tuesday that China was only a threat if countries failed to gain from the benefits it had to offer.
“Before China entered the WTO, our trade imbalance was $300 million,” Arroyo said. After China joined, the Philippines had a trade surplus of $700 million. “So China has in fact assured us that she is not intent on gobbling up all our countries.”
“There are always going to be opportunities and threats,” she said. The key is protecting yourself against those threats by “maximizing flexibilities.”
Individual countries will have to decide on which path they will take, but that doesn’t matter for now, officials said this week.
“The importance of agreements with China and Japan is not so much whether there are immediate dollar-and-cents benefits, but it’s more strategic,” Singapore’s Ong said.
“The important thing is that these two countries see the need to form framework agreements with Asean to get them through the next eight to 10 years. In the past they haven’t looked at these agreements.”
Asean must now come together, he said, because these agreements will make other large-scale markets look again at Asean.
“These agreements will motivate other countries to look at Asean. The US and European businesses have always exported and invested in the region. But now there is a rise in the calculations of all these significant economic players: The US, Europe, China, Japan,” Ong said.
Calling the summits in Phnom Penh a “landmark,” Cambodian Foreign Minister Hor Namhong said earlier this week that the agreements signed here marked a step toward cooperation—not competition—with Southeast Asia’s neighbors.
“Asean is in the process of expanding toward East-Asian cooperation…toward what could become in the future full East Asia cooperation,” Hor Namhong said.
This week’s agreements signaled a positive step for Asean, but they also meant that “we have to strengthen ourselves internally,” said Srirat Rastapana, Thai deputy director-general for the Ministry of Commerce’s Department of Trade Negotiations.
“If we are serious about having relationships with bigger economies, [Asean] must be more integrated,” Ong said. “We must unite: 10 economies, one single market…. If we have a market of half a billion people, then people outside will take notice.”
(Additional reporting by Michelle Vachon)
