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ITUC Asia Pacific Labour Network APLN Meeting Sydney 30/31 August 2007 Regional Trade and Free Trade Agreements

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I. Asia-Pacific: Trade and production Platform

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Asia-Pacific: accounts for 20% of the world GDP. generates 25% of global trade. receives 18% of FDI.

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Asian regional trade and production platform - Highlights : Significant presence of intra-industry trade in intra-Asian exchanges. Supported by significant vertical integration of the value chain with participation of multinational companies. The trade boom occurs on the fringe of free trade regional agreements. China’s central role as point of origin and destination of trade flows. RTAs/FTAs reinforce this trend.

Asia-Pacific’s Presence in the World Economy: 

Asia-Pacific’s Presence in the World Economy Source: ECLAC

Strong productive transformation and realignment of Asian economies around China’s expansion: 

Strong productive transformation and realignment of Asian economies around China’s expansion Headed by China, Asian countries are entering the distribution chains of large multinationals that have settled in the region due to its low labor costs and China’s large potential market. For these companies, China is an option not only in the low-tech product sector but also in that of new state-of-the-art technology products.

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Current status of the process that started 15 years ago 2010, #1 world power, displacing the USA and Germany. 2015, accountable for 50% of world trade. US pressure for adjustment of the Chinese currency exchange rate in order to reduce its trade gap. USA filed WTO complaint against China for violations of intellectual property rights and trade restrictions. Trade presence linked to multinational companies settled in China (EU, USA, Japan). Nearly 450 of the 500 largest multinationals in the world have made investments in China. It is estimated that 2/3 of foreign businesses in China have made profits and that 2/5 of multinational companies have had profit margins larger than their global average. 60% of all Chinese exports are handled by these multinationals; in the case of technology products, this number rises to 90%.

China and India Economic and Strategic Influence: 

China and India Economic and Strategic Influence Key factor in significant changes in the global demand level and structure. China is the largest manufacturer in the world and the most rapidly growing market. India is a world vendor of business processes, services and information technology. Significant source of financial resources to maintain international balances. Offer financing for infrastructure and energy. In the world map of EAP: 2000-2010: 10 million in Brazil and Mexico 62 million in China 93 million in India

China has turned into an export platform for its neighbors targeting the USA and EU : 

China has turned into an export platform for its neighbors targeting the USA and EU Source:: ECLAC LA & C compete with ASEAN, Australia and NZ China accumulates large surpluses in manufactured products with the USA and EU Machinery, electronic equipment and precision instruments associated with information technologies Source: ECLAC

Asia-Pacific: Source and Destination of a Large Portion of Latin American Regional Trade: 

Asia-Pacific: Source and Destination of a Large Portion of Latin American Regional Trade Source: ECLAC

Latin America: Main Products Exported to China (% of total exports per country): 

Latin America: Main Products Exported to China (% of total exports per country) Source: ECLAC Exports concentrated in natural resources except Mexico and CA

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II. Regional and Free Trade Agreements

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Facts and Figures: The proliferation of RTAs/FTAs can be attributed, among other factors, to: the slow progress of WTO negotiations, the relative sluggishness of regional integration processes and the bilateral search for market diversification: 325 RTAs/FTAs worldwide have been registered with the GATT / WTO. Of these more than 200 have been signed over the last eleven years.  The WTO estimates that in 2005 more than 51% of the world’s goods were traded under preferential agreements.

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RTAs/FTAs Worldwide Source: WTO

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Asia-Pacific Region Early ’90s: the only existing preferential agreements were regional arrangements in the form of FTAs (ASEAN, ASEAN+3, Bangkok Agreement), customs unions (MERCOSUR) and the GSP. 1990-1995: intra-regional trade was gradually liberalized within the framework of LAIA agreements in the Americas, ASEAN and APEC plurilateral agreements, and multilateral agreements (Uruguay Round). 1995-2000: emergence of agreements with extra-regional trade partners such as the United States and Canada. 2000-2006: dynamic growth of preferential trade and investment agreements: FTA: United States-Australia-New Zealand, China, Japan, Singapore,India and Chile were the most active ones. RTA: ASEAN+China, ASEAN+USA, Japan’s proposal was to create the Comprehensive Economic Partnership in East Asia (CEPEA), ASEAN+India. At intra- and extra-regional level, basically the countries that were not dependent on trade with the USA. Different trade structures impact on regional blocs 40 RTAs/FTAs in APEC Region.

The “Noodle Bowl” Process in Asia-Pacific (expanded): 

The “Noodle Bowl” Process in Asia-Pacific (expanded) Strongest momentum in the mid-90s, though it did not originate in Asia. Several countries stop being reluctant to sign preferential agreements and join trade blocs: China, Japan, Rep. of Korea and the Taiwan Province of China start entering into bilateral and plurilateral agreements within and outside Asia-Pacific. 1976-2006, over 150 trade agreements of different kinds recorded (Asia-Pacific, East Asia, Southern Asia and former Soviet Union countries). Except Mongolia, all Asia-Pacific countries have participated in at least one agreement.

The “Noodle Bowl” in Asia-Pacific Causes: 

The “Noodle Bowl” in Asia-Pacific Causes The need to speed up liberalization vis-à-vis the slow progress made in WTO and APEC negotiations. In APEC, no progress is made towards the Bogor goals and there are institutional weaknesses, such as: non-binding commitments, blurred objectives, too many members, too long an agenda, secretariat’s dysfunctional structure and now new competitors at a regional level (ASEAN+3 and the East Asia Summit, made up by ASEAN+6) Results from the “chain reaction”: any agreement involving one of the three giants (Japan, China and the Republic of Korea) will change the relative competitiveness of the companies exporting to signatory countries. This encourages exporting businesses from non-member countries to put pressure on their respective governments to join in the FTA race. The “chain reaction” is well illustrated by China’s proposal to sign an agreement with ASEAN, which was followed by similar offers to establish broad economic alliances by Japan, the Republic of Korea, India, Australia and New Zealand.

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Trends Growing agreement diversification: FTA/RTA/TIFA/TEF Map of agreements in Asia-Pacific: 12 regional/plurilateral agreements 57 FTA in force (TIFA, TEF, CER) 27 agreements with completed negotiations 39 under negotiation. 18 under consideration North-South Agreements: FTA/TIFA/TEF: United States, Australia, New Zealand and Japan actively involved in the signing of trans-Pacific agreements with Thailand, Canada, South Korea, Chile, Peru, Mexico. RTAs: no progress in USA-ASEAN agreement; ASEAN agreements with China, India and South Korea; progress in ASEAN- Japan;

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South-South Agreements: FTA: Chile-Japan, Peru-China (FTA under consideration), Taiwan (2 FTAs with Honduras and El Salvador), Singapore (3 FTAs), Philippines, Thailand, Korea, China (has signed or is negotiating with 27 countries), India (agreements with Chile and MERCOSUR). Proposal to create a Latin American Pacific free trade area made up by CAN countries and Chile. Chile signed a FTA with Peru and invited it to join the P4 (Trans-Pacific Strategic Economic Partnership Agreement- Brunei/Singapore/New Zealand). Chile is also finalizing negotiations with Colombia and has accepted to join CAN as an associate member. Ecuador has stated its interest in joining APEC and has received support from Chile, Thailand, Malaysia and Indonesia. Costa Rica-China approach with a view to becoming an APEC member; broke off relations with Taiwan. RTA: Chile-CAN, Chile-MERCOSUR, Russia-MERCOSUR, India-MERCOSUR, SACU-MERCOSUR; ASEAN strengthens links within its own free trade area and with MERCOSUR.

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Impact of complex WTO negotiations: EU shows interest in negotiating with Asian countries (India) and APEC members: South Korea (2nd neg. round) with China, Japan and 10 Southeast Asian countries. Switzerland begins studies for future negotiations with China, Japan, Canada and Thailand. India signed FTA with New Zealand, Thailand, Japan (2nd negotiation round), South Korea (began talks for a CEPA), Singapore, Sri Lanka, Canada and ASEAN. Also announces future agreements with China, Mexico, Brazil and South Africa. Countries that have signed FTAs with the USA and are APEC members move closer to the US position on NAMA.

China: 

China 2001,started developing its trade agreements network with the signing of the Bangkok Agreement. 2006, concluded agreements or held negotiations with 32 countries in Africa, Latin America, Asia and the Southern Pacific. Applies a pragmatic strategy; there is no one single model for all agreements. Agreements with Hong Kong and Macao incorporate disciplines and concrete rules, serving as instruments of trade diplomacy, as the “one country, two systems” model. Agreements with Australia and New Zealand incorporate general commitments regarding cooperation issues. Agreements with Pakistan, India, Chile and South Africa seen as diplomatic efforts to build or consolidate strategic alliances and guarantee the supply of natural resources.

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ASEAN- China agreement seen as a diplomacy instrument to mitigate the growing competition between ASEAN countries and China in the field of trade and investments. Stepped enforcement: starting with the “early harvest” program and followed by the inclusion of other disciplines such as services, investment and trade facilitation measures, as in the agreement with ASEAN or with Chile. Several agreements exclude sensitive products and sectors such as the protection of intellectual property, sectoral liberalization, and labor and environmental issues. An important objective is to be recognized as a market economy by the FTA signatory countries.

Two Proposals Regarding the Creation of Large Economic Areas in Asia : : 

Two Proposals Regarding the Creation of Large Economic Areas in Asia : Pros Proposed by ABAC (Chile 2004). Responds to the slow progress made in WTO negotiations, Responds to the “Noodle Bowl” effect, Tries to boost compliance with the Bogor Principles, Answers to the intra-regional agreements that would discriminate against Non Asian countries Tries to avoid polarization between Asia-Pacific countries. Cons No consensus regarding its political feasibility. Would imply an agreement with China. Changes in APEC: move to binding liberalization commitments. Contradicts the principle stated in Busan in 2005 regarding the fact that APEC should not be an inward-looking trade bloc but a bloc oriented to global free trade. China and Japan interested in Asian regionalism. Different approaches to the FTA scope. P4 (Chile/Singapore/Brunei/New Zealand) example of a trans-Pacific FTA, try to bring Mexico, Malaysia, Peru and Thailand on board). Free Trade Area of Asia-Pacific within the sphere of APEC (FTAAP), supported by the USA, Australia, Canada, Japan, Chile and Mexico.

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The second proposal relates to the creation of an intra-regional economic community: ASEAN+3 (the 10 ASEAN members plus China, Japan and the Republic of Korea). ASEAN+6 (Australia, New Zealand and India).

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ASEAN Agreements to establish a closer economic partnership with its most important trade partners (Australia, China, India, Japan, New Zealand and the Republic of Korea). Signed agreements that gave rise to various free trade areas, such as the broader economic partnership agreements with China, India, Japan and the Republic of Korea. 2004,established a Southern Asia free trade area that is expected to be fully operational by 2016. In 1997, regional economic cooperation was established for Central Asia. Currently negotiating an Asia-Pacific trade preference agreement to replace the 1975 Bangkok Agreement (Asia-Pacific Trade Agreement). the ASEAN+3 or ASEAN+6 agreements are considered to be a second wave of preferential trade agreements. AUGUST 24, MERCOSUR-ASEAN were working in Brasilia.

NETWORK OF FREE TRADE AGREEMENTS IN ASIA-PACIFIC : 

NETWORK OF FREE TRADE AGREEMENTS IN ASIA-PACIFIC

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FTA/RTA: Early ´90s Source: WTO

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FTA/RTA: Early ´90s Source: WTO

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FTAs/RTAs and Economic Cooperation Forums in the Asia-Pacific Region 2007 APEC China SACU DR-CAFTA NAFTA CSN MERCOSUR SICA CARICOM CAN EU ASEAN P4 ChilePeru NZ,Brunei Singapore Peru Japan Thailand more than 51% of the world’s goods were traded under preferential agreements TIFAs Korea Singapore Philippines Taiwan Vietnam GCC

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11 Regional Agreements associated with the Asia-Pacific Region

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Bilateral Agreements

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Non APEC Member

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Thanks

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