HK, Ma­cao and Tai­wan should form a sub-trad­ing bloc

The Pak Banker - - Front Page - Thomas Chan

IT was expected that at the Novem­ber ASEAN sum­mit meet­ing in Phnom Penh, there would see dis­cus­sion of the 10+6 re­gional free trade agree­ment frame­work, pos­si­bly even an an­nounce­ment that ne­go­ti­a­tions had be­gun.

Al­ready the ASEAN coun­tries and their East Asian neigh­bors have con­cluded the 10+3 (China, Ja­pan and South Korea) agree­ment both bi­lat­er­ally and mul­ti­lat­er­ally. The log­i­cal next step, in an­tic­i­pa­tion also of the fi­nal in­te­gra­tion of the ASEAN free trade area in 2015, is the fur­ther ex­pan­sion of the re­gional free trade sys­tem to in­clude the other even more en­thu­si­as­tic three ( Aus­tralia, New Zealand and In­dia).

There are two ma­jor points of sig­nif­i­cance of this de­vel­op­ment. The first is po­lit­i­cal or arises from po­lit­i­cal econ­omy. The US is now pro­mot­ing the Trans Pa­cific Part­ner­ship (TPP) as a re­gional trade agree­ment in East Asia to com­pete with the 10+3 frame­work. So far, from the core found­ing mem­bers of Chile, New Zealand, Sin­ga­pore and Brunei, the US is suc­ceed­ing in en­gag­ing a rea­son- able num­ber of Pa­cific coun­tries to join the ne­go­ti­a­tions, in­clud­ing Canada, Mex­ico, Ja­pan, Aus­tralia, Peru, Viet­nam and Malaysia. The US is un­able to get ei­ther China or In­dia in­ter­ested. Nor has the TPP be­come an es­tab­lished re­gional sys­tem. Ev­ery­thing is still in ne­go­ti­a­tion.

Nev­er­the­less, China and other East and South­east Asian coun­tries have felt pres­sured, if not threat­ened by this ex­er­cise mark­ing the re­turn of the US to Asia. The quick evo­lu­tion of 10+3 to 10+6 may be a strate­gic re­sponse from Asia to the US ini­tia­tive. Whether it would di­vide the Asian coun­tries will de­pend on how de­ter­mined the US is to push for­ward the TPP in Asia. Be­hind the scenes, the TPP seems to group to­gether coun­tries that are sus­pi­cious of the resur­gence of China in Asia or hos­tile to China un­der the US ban­ner.

The sec­ond is the ac­cel­er­a­tion of re­gional in­te­gra­tion in East and South­east Asia. By 2015 the 10+3 would be­come the largest re­gional trad­ing bloc in the world, at least in terms of pop­u­la­tion and with its al­ready well es­tab­lished eco­nomic and trade dy­namism.

One would ex­pect it to chal­lenge in eco­nomic scale and eco­nomic com­pet­i­tive­ness the NAFTA led by the US, and the ex­pand­ing EU, in the com­ing years. Al­though it would not lead to a tripo­lar de­vel­op­ment of the world econ­omy and trade, as there are still dy­namic emer­gent mar­ket coun­tries out­side the three blocs, in­clud­ing Rus­sia, Brazil and South Africa in the BRICS, it would surely cre­ate a more multi-polar global sys­tem that would re­duce the past dom­i­na­tion of the triad economies (the US, EU and Ja­pan).

These rad­i­cal changes at the re­gional and global lev­els in­volve China on cen­ter stage, but other Chi­nese economies - Hong Kong, Ma­cao and Tai­wan - would be ex­cluded, de­spite their eco­nomic scale and dy­namism and their past cen­tral­ity. The ex­clu­sion would mean marginal­iza­tion, even though the three have re­spec­tive free trade agree­ments with the Chi­nese main­land.

It is not cer­tain whether other Asian coun­tries are in­ter­ested or will­ing to get the three economies on board, fear­ing that with the in­clu­sion of the three, the for­mi­da­ble China would be­come even more for­mi­da­ble, be­cause of the eco­nomic de­pen­dence on her of the three re­gional economies. Of course, the US is ea­ger to get Tai­wan and Hong Kong to join the TPP, in or­der to strengthen its own re­gional sys­tem, at the ex­pense of the pro­posed 10+6 and to weaken the eco­nomic influence of the main­land over them. Bei­jing would cer­tainly not al­low it to hap­pen.

If other Asian coun­tries do not want the three economies to join the re­gional sys­tem and the main­land would not want them to ally with the US, the only break­through for the three might be to set up their own smaller free trade bloc.

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