The freshly launched European Centre for International Political Economy (ECIPE) has posted its first working paper, “FTAs and the Prospects for Regional Integration in Asia” by Razeen Sally (pdf). The paper surveys FTAs that countries in the region have pursued. Here are some highlights I found interesting:

The predictable results of foreign-policy-driven FTA negotiations light on economic strategy are bitty, quick-fix sectoral deals… These FTAs hardly go beyond WTO commitments, deliver little, if any, net liberalisation and pro-competitive regulatory reform, and get tied up in knots of restrictive, overlapping rules of origin. Especially for developing countries with limited negotiating capacity, resource-intensive FTA negotiations risk diverting political and bureaucratic attention from the WTO and from necessary domestic reforms…

It is already apparent that China’s FTAs are driven more by “high politics” (competition with Japan to establish leadership credentials in east Asia; securing privileged influence in other regions) than economic strategy. The latter is barely evident in China’s seeming readiness to negotiate (economically nonsensical) PTAs outside east Asia. This contrasts with China’s engagement in the WTO. In the latter, its approach is clearly linked to national economic policies that have a single-minded focus on growth. Commercial realities are front and centre in what China does in the WTO…

Thailand provides a better indicator than Singapore of FTAs in southeast Asia and beyond. Its FTAs have been rushed: careful preparation has been conspicuously lacking. Too many negotiations have been launched, and they have proceeded too fast. High-level policy direction to negotiators has been lacking… This trade-light approach has resulted in weak FTAs that will make little positive difference to competition and effi ciency in the Thai economy, but will create complications in the process (not least with a bewildering array of ROO requirements). The US-Thai FTA is likely to be the sole exception due to American demands for wide and deep commitments (though it will add to Thailand’s ROO noodle bowl). But negotiations have run into serious domestic opposition in Thailand, which threatens to derail them altogether…

India’s approach to FTAs outside south Asia is mostly about foreign policy, with little economic sense or strategy… The India-Thailand FTA is intended to be comprehensive, but is to date limited to an early-harvest that has eliminated tariffs on just 82 products, with very restrictive rules of origin imposed by the Indian government. ASEAN-India negotiations have also been bedevilled by India’s insistence on exempting swathes of economic activity and on very restrictive rules of origin for products covered…

Japan was the last major trading nation to hold out against discriminatory trade agreements, preferring the non-discriminatory WTO track instead. This has changed decisively in the past five years… The Japan-Thailand FTA is indicative of Japan’s overall approach to FTAs. It is a weak agreement born of mutual defensiveness. Thailand has long transition periods for phasing out tariffs in steel and auto parts; and it has exempted large passenger cars from the agreement. In agriculture, Japan has exempted rice, cassava, beef, dairy, sugar and some other products, and agreed to limited tariff liberalisation in other products. Rules of origin are very restrictive on agricultural and fisheries products – at Japanese insistence…

Japan calls its FTAs “economic partnership agreements” (EPAs) – to indicate that they go beyond traditional FTAs in goods and have comprehensive coverage of trade and investment-related issues in goods and services. That is misleading. EPAs are euphemisms for weak and partial FTAs. In essence, Japan seems to be reacting to China’s FTA advance, but without a real strategy…

APEC’s heyday was when it was a cheerleader for non-discriminatory unilateral and multilateral liberalisation in the early-to-mid 1990s. It has lost its way since the Asian crisis: its membership is too diverse and unwieldy for there to be any meaningful trade-policy consensus; its agenda has become impossibly broad and unfocused; and attention has shifted to bilateral and plurilateral FTAs (Scollay, 2001: 1144; Ravenhill, 2000: 322, 324-325). APEC’s vaunted Open (i.e. non-discriminatory) Regionalism is dead in the water; and these days it is driven by shallow conferencitis and summitry. It cannot be expected to contribute anything serious to regional economic integration…

The heart of the matter is that within and across south, southeast and northeast Asia, cross-border commerce is throttled by the protectionist barriers that developing countries erect against each other. The type of FTAs that are being negotiated do not presage a return to 1930s-style warring trade blocs. But they are highly unlikely to make a big dent in existing barriers and thereby spur regional economic integration. They might complicate east-Asian intra-regional production networks (the Factory Asia phenomenon), and distract attention from further unilateral liberalisation and domestic reforms. These FTAs have the hallmarks of trade-light agreements. Some might even come close to being “trade-free” agreements…

More fundamentally, trade policy matters more than trade negotiations. Governments in the region, however, are acting as if it were the other way round. They are relying too much on trade negotiations – particularly FTAs – while neglecting sensible trade-policy reforms at home. This is a reversal of pre-Asian crisis reliance on (non-discriminatory) unilateral liberal- isation. What might change this picture is the mind-concentrating effect of faster unilateral reforms in China and India – China in particular. The Chinese engine of unilateral freer trade might just induce a fresh spurt of liberalisation and structural reform elsewhere – but perhaps largely outside trade negotiations. Only with such market-based reforms at home do FTAs make sense – not least to minimise the effects of trade diversion.