Posted on: Sunday, December 9, 2001

Commentary
China dangles Free Trade Area offer to ASEAN

By Tom Plate

Beijing is trying to calm the nerves in Southeast Asia of farmers and manufacturers who fear being overwhelmed by Chinese exports.

Something major is happening in the Asia-Pacific region besides Afghanistan. It's a bid to create a sprawling Free Trade Area that has the potential to reshape the globe's geopolitics.

Indeed, if you grant that economic integration can lead to political integration — and that the prime mover here is China — this development could prove, over time, at least as significant as the elimination of al-Qaida.

The Beijing government knows China cannot advance without becoming globalized; North Korea's self-sufficiency policy, it knows, is an infantile denial of reality. As part of China's "it's the economy, stupid" approach to almost everything these days, Beijing put a stunning offer to the 10-member Association of Southeast Asian Nations that can hardly be refused.

The deal: China will begin opening its gargantuan domestic market to Southeast Asian exporters a few years before it expects ASEAN markets to be opened to Chinese exporters.

Cleverly, Beijing is trying to calm the nerves in Southeast Asia of local farmers and manufacturers who fear being overwhelmed by waves of cheaper Chinese exports. By proposing that China go first in reducing protections for its own growers and manufacturers, the Jiang Zemin government is offering a multi-year window of opportunity for ASEAN's exporters.

Clever and helpful, or ominous?

"I began thinking it was all nonsense — or, worse, that the ASEAN was buying into a bad deal," admits a former top State Department official in the Clinton administration. "But it is ASEAN's attempt to draw closer to China, in reflection of China's rapidly growing power. They feel they have no choice but to look to China."

So the proposed Free Trade Area "is more political in nature than economic."

It's also a bold bid by Beijing to fill the growing geopolitical and economic gap created by a still-stagnant and stalemated Japan. Tokyo, however nervous about China, really has only itself to blame. Wily Singapore has been trying to lead Japan down the garden path to a large-scale Free Trade Area by negotiating an unprecedented bilateral deal. But it only got halfway — Japan refused to put its all-important agricultural sector on the table. ASEAN noted that Tokyo, like France, protects its farmers like crossing guards hovering over kindergartners.

If Japan is cut out of the new Free Trade Area, its decision to stay local rather than go global could prove a blunder — and serve to reinforce the growing assumption in the region that Japan is shrinking in more ways than one. Many believe that Japan's economy will never become what it was in the '80s and '90s: the locomotive for Southeast Asian growth.

Can China fill that role in decades to come? ASEAN's answer: Who else?

If the "Greater China" Free Trade Area can actually be put together, the impact on the United States and its trade allies is unclear. Anything that draws China further into Asia economically, it could be argued, reduces Beijing's incentive to react to disagreements militarily — and thus everyone benefits.

"There is too much of a tendency to view these kinds of developments as a zero-sum game," comments a U.S. trade expert. "The fact is that the more you have a flow of capital, goods, ideas and services sloshing between ASEAN and China, the more likely you are to have more stability in the region."

Then how could that be bad for the United States? Well, if at the end of the day the architecture of the China-led Free Trade Area does somehow manage to include the economies of Japan, not to mention Korea, then Beijing will have conjured into being its deep vision of a powerful West Pacific Economic Zone to compete against the European Union and a U.S.-led NAFTA.

C. Fred Bergsten, director of the Washington-based Institute for International Economics, suggests: "This is only the latest of a series of regional trade agreements being negotiated without the United States, and it could eventually become the basis of a comprehensive East Asia Free Trade Agreement. The result could be a significant discrimination against U.S. trade and the onset of a three-bloc world that could threaten global politics as well as economic stability."

Anybody worried yet by this Orwellian nightmare of colliding tectonic trade plates? Perhaps this scenario (and the recession) was behind the congressional focus on the issue of giving free-wheeling, fast-track negotiating authority to President Bush that has been foolishly withheld. The United States needs to regain the world-trade negotiating lead it lost soon after the 1999 debacle in Seattle.

Tom Plate, a columnist with The Honolulu Advertiser and the South China Morning Post, is a professor at UCLA. He also has a spot on the Web.