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March 7, 2006

Why a Community Rather Than an FTA?
By HATAKEYAMA Noboru
The 9th leaders’ meeting of the ASEAN+3 (Japan, China and South Korea) and the first East
Asia Summit (EAS) were held in Kuala Lumpur on Dec. 12 and 14, 2005, respectively.
The members of the EAS were not only the leaders of the ASEAN+3, but also those of India,
Australia and New Zealand. The participants in both meetings might have had difficulties infinding a clear distinction between these two meetings. There might have been a kind ofcompetition between the ASEAN+3 and the EAS as to which tasks were assigned to which
meeting. In terms of a task for a possible East Asian community (EAc), the ASEAN+3 might
have won the competition for being selected as “the main vehicle in achieving the goal of
realizing an EAc” (the Kuala Lumpur Declaration on the ASEAN+3 Summit), while the EAS
was only viewed as to “play a significant role in community building in the region” (the Kuala
Lumpur Declaration on the EAS). This “community building” can be interpreted as community
building in general. Since there was no specific mention of an EAc, the sentence could meanthat the EAS will “play a significant role” in building an ASEAN community, for example.
However, in my opinion, it does not matter whether the EAc issue is going to be discussed in theASEAN+3 or the EAS. In either case, an EAc will not be realized anyway even in the long run;
only an FTA can be concluded in this region. I would like to explain the reasons for my view byoutlining the differences between a community and an FTA.
Firstly, a full-fledged “community” normally has three pillars: an economic community, asecurity and political community, and a social and cultural community. However, an FTA only
covers economic activity. The EU, a typical community, consists of these three pillars. In theBali Concord II in 2003, ASEAN declared it would establish an ASEAN Community consistingof these three pillars in the future. On the other hand, NAFTA, a typical FTA, deals with onlyeconomic activity.
Many Asian countries, including Japan, have bilateral security arrangements with the UnitedStates. There is a high possibility that the regional security arrangements offered by an EAc willcontradict the existing bilateral security arrangements. Therefore, I think most Asian countries
are not yet ready at this stage to consider a full-fledged “community” with three pillars while
they might be seeking an economic community.

1The second difference between a community and an FTA is that a community often requires
concessions as part of its sovereignty. For example, member countries of the EU have conceded
their sovereignty over trade and competition policies.
However, the ASEAN countries are not ready to concede part of their sovereignty. The Bali
Concord II emphasized the importance of the principle of non-interference which seemed tocontradict the concept of a “community” that often accompanies concessions of part of acountry’s sovereignty to the community. A leader of one of the ASEAN countries even said thatthe ASEAN Economic Community (AEC) would be something like an ASEAN economic
partnership agreement, expanding the ASEAN FTA (AFTA) to include trade in services andforeign direct investment. But that expanded AFTA would be quite different from a“community.”
As of now, the relationships between Japan and China and between Japan and South Korea are
not so good. Therefore, none of these three countries would be able to take a leadership role informulating an EAc; ASEAN has to take that leadership. However, since ASEAN cannot create acommunity even among its members, it would be only natural to presume that ASEAN cannot
take a leadership role in EAc creation either. What the ASEAN can do would only be to establish
an FTA consisting of East Asian countries as would be the case with an ASEAN Economic“Community” which will turn out to be just an expanded AFTA.
The third difference is that it is necessary for each member to have a common value in thecreation of a community whereas there is no such need in the creation of an FTA.
In establishing a community, every member country has to share common values such as
democracy, transparency, rule of law and respect for human rights. However in the East Asianregion, we have communist countries as well as a country led by a military group which arerespecting different values and systems from democracy. The EU has not welcomed communist
countries as a member. That was why it took more than a decade for ex-communist countries
like Hungary and Poland to join the EU. On the other hand an FTA does not require a common
value among its member countries; it only requires a common interest regardless of eachcountry’s value.
All these three points indicate that East Asia needs to pursue an FTA instead of a community. I
wonder why most East Asian leaders seem to be aiming at an EAc rather than an East Asian Free
Trade Area (EAFTA).
(This is the text of an article by Mr. HATAKEYAMA Noboru, Chairman and CEO of theJapan Economic Foundation and Vice-President of the Council on East Asian Community,
which originally appeared in the March/April 2006 issue of “Economic, Culture & History
JAPAN SPOTLIGHT Bimonthly” (www.jef.or.jp/journal) )2