0	  	
  Case Study (International Political Economy)
Hiwatari Nobuhiro
Summer 2012

Japan’s Dual-Track Free Trade Agreement in ASEAN: A study of Japan and Thailand

Suteera Sitong 51-118227
Graduate School of Public Policy
The University of Tokyo	
  Japan’s Dual-Track Free Trade Agreements in ASEAN: A study of Japan and Thailand

1	
  
	
  
Suteera Sitong

A. Introduction
The Association of Southeast Asia Nations (ASEAN), established in 1967, currently comprises often member states; Indonesian, Malaysia, Philippines, Singapore, Thailand, Brunei Darussalam, Viet
Nam, Lao PDR, Myanmar, and Cambodia. The economic integration of ASEAN has made this Southeast
Asia region fascinating market with its high population of 590 million people and income of 1,496 US$
billion in 2009.
ASEAN state members have high dependency on the international trade, which is expressed by
the high ratio of trade to GDP. Comparing the ratio of the commercial exports of merchandise to GDP of
ASEAN and the world, ASEAN’s ratio at 55.3 percent is greater than other Asia counties and the world.
ASEAN member countries established the ASEAN Free Trade Area (AFTA) in 1992 which was in effectin 1993 to eliminate intra-regional tariffs among ASEAN member states through the Common Effective
Preferential Tariff (CEPT) scheme. As for the economic goal, ASEAN has a plan for regional economic
integration to become the ASEAN Economic Community (AEC) by 2015. In this regards, the ASEAN
economic community blueprint states that AEC will make ASEAN become a single market andproduction base, a highly competitive economic region, a region of equitable economic development, anda region fully integrated into the global economy. ASEAN is still the largest of ASEAN exports. In 2010,
ASEAN’s important export markets are ASEAN, 27-European Union state members, China, Japan, USA,
Korea, India, Australia, Hong Kong, and Taiwan, where as ASEAN, China, Japan, and 27-European
countries are the largest source of ASEAN imports. Japan is considered one of the largest export andimport markets of ASEAN. (Table 1)
	
  

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Table	
  1	
  :	
  	
  ASEAN	  and	  trading	
  partners	
  in	
  2010	
  	
  

2	
  
	
  

	
  

	
  

Source:	  	
  ASEAN	  Trade	
  Statistics	
  Database	  Country-Regional Trade Agreements
Regional Trade Agreement (RTA) is defined by World Trade Organization as an agreement
concluded between countries which are not necessary to be in the same geographical region. There has
been an increasing trend of RTAs around the world since 1990s. The intra-regional merchandise trade in
Asia at 2,464 Billion dollars or 52.6 percent of the trade in Asia, which is the highest share compared to
the rest of the world, reflects the importance of intra-Asia trade. From this fact, it can be expected that
there would be more RTAs in this Asian region. In this study, any trade agreements of ASEAN and nonASEAN economy are therefore considered as RTAs while any trade agreements of ASEAN-state
members are considered as Bilateral Trade Agreements (BTAs). The current FTA of ASEAN and thethird country can be summarized in Table 2.

Table	
  2	
  	
  	
  :	
  	
  Country-­‐ASEAN	
  Free	  Trade	
  Agreements	
  	
  

3	
  
	
  
1	
  Jan	  1993	
  1	
  Jun	
  2007	
  •ASEAN	
  Free	  Trade	
  Area	  	
  •ASEAN-­‐People’s	
  Republic	
  of	
  China	
  Comprehensive	  Economic	  CooperaJon	
  Agreement	
  •ASEAN-­‐Korea	
  Comprehensive	  Economic	
  CooperaJon	
  Agreement	
  1	
  Dec	
  2008	
  •ASEAN-­‐Japan	  Comprehensive	  Economic	
  Partnership	  1	
  Jan	  2010	
  •ASEAN-­‐Australia	
  and	  New	
  Zealand	
  Free	  Trade	
  Agreement	
  1	
  Jan	  2010	
  •ASEAN-­‐India	
  Comprehensive	  Economic	
  CooperaJon	
  Agreement	
  1	
  July	  2005	
  Under	  Nego*a*on:	
  	
  	
  5	
  May	
  2007	
  Proposed:	
  13	
  Aug	
  2009	  •ASEAN-­‐EU	
  Free	  Trade	
  Agreement	
  •ASEAN-­‐Pakistan	
  Free	  Trade	
  Agreement	  	
  Source:	  	
  Asian	  Development	  Bank	  The FTA option was first initiated by Singapore as a major instrument of its trade strategy,
causing the move toward in BTA for Thailand and other ASEAN member states. (Chirathivat, 2006).
There are five Free Trade Agreements (FTAs) that ASEAN has undertaken with non-ASEAN state
members, comprising of China, Korea, Japan, Australia and New Zealand, and India. ASEAN pioneered
her first FTA together with China by signing the ASEAN-People's Republic of China Comprehensive
Economic Cooperation Agreement which was in effect on 1 July 2005, followed by ASEAN-Korea
Comprehensive Economic Cooperation Agreement on 1 July 2005, ASEAN-Japan Comprehensive
Economic Partnership on 1 December 2008, ASEAN-Australia and New Zealand Free Trade Agreementon 1 January 2010, and ASEAN-India Comprehensive Economic Cooperation Agreement on 1 January
2010. ASEAN is under the process of FTA negotiation with European Union and Pakistan.
However, ASEAN state members have also undertaken to build 26 Bilateral Trade Agreements with nonASEAN states. Singapore has the engaged in 10 in-effect BTAs which is almost half total BTA in
ASEAN. It is noticed that some of ASEAN state members have engaged in the BTA with a country thathas an existing RTA with ASEAN. In other words, ASEAN state members have FTA with some
Table	
  3	
  	
  	
  :	
  	
  FPAs	  in	
  ASEAN	  Agreements and Year In EffectBrunei•Japan-Brunei Free Trade Agreement (2008)

Indonesia•

Japan-Indonesia Economic Partnership Agreement (2008)

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Malaysia•

Japan-Malaysia Economic Partnership Agreement (2006)•

Malaysia-Pakistan Closer Economic Partnership Agreement (2008)•

Malaysia-India Comprehensive Economic Cooperation Agreement (2011)

Philippines••

Malaysia-New Zealand Free Trade Agreement (2010)
Japan-Philippines Economic Partnership Agreement (2008)

Singapore•

Japan-Singapore Economic Agreement for a New-Age Partnership (2002)•

European Free Trade Association-Singapore Free Trade Agreement (2003)•

India-Singapore Comprehensive Economic Cooperation Agreement (2005)•

Korea-Singapore Free Trade Agreement (2006)•

New Zealand-Singapore Closer Economic Partnership (2001)•

People's Republic of China-Singapore Free Trade Agreement (2009)•

Singapore-Jordan Free Trade Agreement (2005)•

Singapore-Panama Free Trade Agreement (2006)•

Singapore-Peru Free Trade Agreement (2009)•

United States-Singapore Free Trade Agreement (2004)•

Japan-Thailand Economic Partnership Agreement (2007)•

People's Republic of China-Thailand Free Trade Agreement (2003)•

Thailand-New Zealand Closer Economic Partnership Agreement (2005)•

Thailand-Peru Free Trade Agreement (2011)•

Laos-Thailand Preferential Trading Arrangement (1991)

Vietnam••Thailand-Australia Free Trade Agreement (2005)
Japan-Viet Nam Economic Partnership Agreement (2009)

Lao PDR•

Laos-Thailand Preferential Trading Arrangement (1991)

ThailandSource: ADB

non-ASEAN state members through both the RTA and BTA. Thailand and Singapore had started theeconomic relationship with China through People's Republic of China-Thailand Free Trade in 2003 andPeople's Republic of China-Singapore Free Trade Agreement in 2009, respectively. Nevertheless,Thailand and Singapore are also under the Agreement of ASEAN and China in ASEAN-People's
Republic of China Comprehensive Economic Cooperation Agreement, which was signed in 2005. This
dual track FTA not only happened with the China but also with Korea, Japan, New Zealand, and India as
can been seen from Table 3.

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The fact that ASEAN state members conducted the dual-track FTA has raised the question in theexternal policy of ASEAN in choosing RTA with the trading partner. This study therefore attempts to
explore the determinant for ASEAN in acting as a Region to build a Free Trade Agreement with a nonASEAN state member when the Bilateral Trade Agreement exists. In other words, the reason why
ASEAN adopts the dual-track policy in FTA would be explained. The study will focus on the case of
FTA between Japan and Thailand with the assumption that that the content in RTA would not appear in
the FTA, which made ASEAN acts regionally. In order to investigate this, the study will be conducted bycomparing ASEAN-Japan Comprehensive Economic Partnership (AJCEP) to Japan-Thailand Economic
Partnership Agreement (JTEPA) to address the difference of AJCEP from JTEPA in order to describe thedual-track trade integration. The paper will also examine the reason for ASEAN’s regionally acting
through studying in both the trade pressure and political pressure to ASEAN by analyzing the differenceof RTA and BTA, and studying the international political pressure in Asia to address the ASEAN strategy
in FTA.
This paper will be divided into four parts. The first section is the introduction of the Free Trade
Agreements in form of RTA and BTA in ASEAN. This will be followed by the literature review in thesecond section to introduce the literature in the area of political economy viewpoint, FTA in ASEAN, andFTAs between Japan and Thailand which are AJCEP and JTEPA. The study framework andmethodology will be explained the third section with the introduction of dependent and independent
variables used in the study to derive the characteristic of AJCEP as a RTA of Japan and Thailand. The
comparison of AJCEP and RTA will be analyzed in the fourth part, followed by the conclusion and policy
recommendation in the last section.

B. Literature Review

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Many studies examine the FTA through the Regional Trade Agreements and Bilateral Trade
Agreements. In reviewing the literatures, the review will be divided into two parts; the FTAs in ASEAN,
and Japan and Thailand Free Trade Agreements.
Mikic (2009) analyzed the role of BTA of ASEAN member countries and the trade bloc
Agreement of ASEAN. ASEAN’s lack of regional coordination in building the RTA makes ASEAN state
members have many overlapping BTAs. This has increased complexity of the intra-regional trade relationin ASEAN. The extra-ASEAN regionalism can be divided into two tracks; (1) the group-acting trade
agreements of ASEAN and the third parties, and (2) the individual trade agreements of ASEAN state
members and the third parties. The regional integration of ASEAN attracts many trading partners andregional blocks, which includes both fast growing developing countries and mature industrialized
economies. ASEAN state members have been actively seeking the BTAs with other countries. Around50-80 per cent of average trade of selected countries in ASEAN is done with the trading partners that thetrade agreements exist, but less than 30 per cent of that is done with the ASEAN+3 (China, Japan andRepublic of Korea). There is insufficient consultation among the member states for the regionalism. This
lack of common approach towards negotiating trade agreements resulted in a noodle bowl syndrome,
which brought RTA to the lower utilization of negotiated concessions. The AECB will be a step forward
in consolidating these agreements because the member states have to consider the interests of ASEAN in
the BTA which is a part of external economic relations.
Aoki-Okabe, Maki (2008) analyzed the Economic Partnership Agreement (EPA) between Japanand Thai to examine the relation of two countries by scrutinizing the features of EPA and reviewing thenegotiations to describe the building of Japan-Thailand Economic Partnership Agreement (JTEPA). The
author found that JTEPA is the apex of the Japan-Thai relation, and designed to be ready for the future
integration with CLMV and other ASEAN state members. Besides, EPA contains the cooperation partwhich is the assistance for capacity-building in the host country and is a part of Japanese’s Official
Development Assistance (ODA). JTEPA as a BTA was a part of a Japan-ASEAN economic partnership

7	
  
	
  
system (Maki,2008, p.7) and contains context for considering the “roll-up rules of origin between Japanand ASEAN countries to be discussed in the future negotiation”. (Maki,2008, p.6). The Japan-ASEAN
Comprehensive Economic Partnership (JACEP) contains the agreement in applying “roll-up” rules oforigin and enlarging trade items, but the appearance of detail of rules of origin in JTEPA made JTEPA
become an arrangement for the ASEAN and Japan level. In addition, cooperation measure is used tobargain in the negotiating process. This can be seen from the negotiation on JTEPA that cooperation forhuman resource was used for exchanging for tariff elimination in steel products in Thailand.

C. Framework of the Study
Dependent Variable
There is one dependent variable in this study, which is ASEAN’s decision in building the RTA
with Japan, in other words, AJCEP. This RTA between Japan and ASEAN was conducted when some
BTAs between Japan and ASEAN member states exist.
Independent Variables
From the view of ASEAN, there are two independent variables that may affect ASEAN to act
regionally in Free Trade Agreement with Japan. These variables are (1) ASEAN’s interests in thecharacteristics of AJCEP that are difference from the JTEPA, both in economic and cooperation measuresappearing in AJCEP, and (2) ASEAN’s external relation policy in the new transitional power in Asian,which pushes ASEAN to RTA to balance power among the powerful countries in Asia.
Controlled Variables
It is assumed that the ASEAN still have a goal in economic integration aiming at AEC by 2005 in
the study.

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Methodology and Hypothesis
The intention of the study is to derive the determinant of the independent variables that haveeffect on the regional act of ASEAN in FTA with Japan. In order to analyze this, the hypothesis is
assumed that the content in AJCEP, or the RTA of ASEAN and Japan, does not appear in the JTEPA, or
the BTA of Japan and Thailand.
H0 : the content in AJCEP (RTA) ≠ the content in JETPA (BTA)
The comparative analysis between the AJCEP and JTEPA will be conducted to indicate the distinction ofboth agreements. The result of comparison of both agreements will be utilized to address the significanceof each determinant of the regional acting of ASEAN in FTA.

D. Comparison of AJCEP and JTEPA
Principles and Objectives
Article 2 of AJCEP addresses the principles of the AJCEP through other bilateral or regional
agreements or arrangements. The Principles of AJCEP states that it will involve Japan and all ASEAN
Member States focusing on liberalization, facilitation and economic cooperation. They also mention about
the integration of ASEAN special treatment to newer ASEAN Member States, measures in favour ofleast-developed countries, addressing the sensitive sectors, and technical assistance and capacity buildingin the economic cooperation.

9	
  
	
  

	
  
Table	
  4	
  	
  	
  :	
  	
  Principles	
  of	
  AJCEP	
  	
  
AJCEP
JTEPA
(a) the AJCEP shall involve Japan andall ASEAN member States(b) the integrity, solidarity andintegration of ASEAN shall bemaintained in the realization of the
AJCEP(c) special and differential treatment is
accorded to ASEAN Member States,
especially the newer ASEAN Member
States, in recognition of their different
levels of economic development;
additional flexibility is accorded to thenewer ASEAN Member States(d) recognition shall be given to theprovisions of the ministerial declarationsof the World Trade Organization on
measures in favour of least-developed
countries(e) flexibility should also be given toaddress the sensitive sectors in Japan andeach ASEAN Member State and(f) technical assistance and capacity
building are important elements ofeconomic cooperation provided under
this Agreement.
Source: Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast
Asian Nations
Principles

AJCEP and JTEPA share the same objectives in liberalise and facilitate trade in goods andservices of the Parties as stated in Article 3(a) of AJCEP and Article 1(a) of JTEPA. They also have
objective in improving the investment and protection for investments. In addition to AJCEP, JTEPA
contains more eight objectives which appear in Article 1(b) (c) (e) (f) (g) (h) (i) and (j). These includes
the promotion of paperless trading, the facilitation of mutual recognition of the results of conformity
assessment procedures for products or processes, the movement of natural persons, the protection of
intellectual property, the cooperation in government procurement, the promotion of fair and freecompetition, the establishment of a framework for future bilateral cooperation, and the promotion oftransparency.

10	
  
	
  
Table	
  5	
  	
  	
  :	
  	
  Objective	
  of	
  AJCEP	
  and	
  JTEPA	  JTEPA
Article 1(a) liberalise and facilitate trade in goods
and services between the Parties(b) realize and promote paperless trading
between the Parties(c) facilitate the mutual recognition of
the results of conformity assessment
procedures for products or processes(d) encourage and promote investment
and ensure protection for investments
and investment activities in the Parties(e) facilitate the movement of natural
persons(f) ensure and enhance adequate,
effective and non-discriminatory
protection of intellectual property topromote trade and investment between
the Parties(g) enhance cooperation for mutual
benefit of the Parties in the field ofgovernment procurement(h) promote fair and free competition byproscribing anti-competitive activities
and cooperate in the field thereof(j) promote transparency in theimplementation of laws and regulations
respecting matters coverd by thisAgreement.
Source: (1) Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association ofSoutheast Asian Nations, (2) Agreement between Japan and the Kingdom of Thailand for an Economic Partnership
Objectives

AJCEP
Article 3
The objectives of this Agreement are to(a) progressively liberalise and facilitate
trade in goods and services among theParties:(b) improve investment opportunities
and ensure protection for investments
and investment activities in the Parties(c) establish a framework for theenhancement of economic cooperation
among the Parties with a view tosupporting ASEAN economic
integration, bridging the development
gap among ASEAN Member States, andenhancing trade and investment among
the Parties.

AJCEP and JTEPA in broad view
In a broad comparison, Trade in Goods in AJCEP is not greater than Trade in Goods in JTEPA(Department of Trade Negotiations, 2011). Trade in Services and Investment in Chapter 6 and Chapter 7of AJCEP appear no disciplines, and states that the ASEAN member states and Japan will continue todiscuss and negotiate provisions for services and investment, while JTEPA contains the results ofnegotiation in both services and investment. As for service in JTEPA, Thailand committed to allow Japanto establish business and provide services in 14 subcategories obligated under the World Trade
Organization covenant, while Japan did allow Thais to establish business and provide services, and/or
work to provide services in Japan in 65 subcategories (Thirawat, 2009). As for investment in JTEPA,
Thailand allowed Japan to hold equity in automotive firms up to 50 per cent, while Japan agreed to

11	
  
	
  
liberalize all area of investment for Thai investors except industries involved in pharmaceuticalproduction, space and aeronautics, petroleum, energy, broadcasting, mining, fisheries, agriculture,
forestry, and related basic industries (Thirawat, 2009).
Figure 1: AJCEP and JTEPAAJCEP	  •••JTEPA	  •Tariff	  elimination/reduction	
  	
  of	
  70	
  
goods	  are	  in	
  effect	
  faster	  than	  JTEPA.	
  	
  	
  
•
Allow	
  accumulation	
  of	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
•
Cooperation	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
Rules	  of	
  Origin	
  from	  more	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
than	
  two	
  ASEAN	
  States.	
  Cooperation	  -­‐Transportation	  and	
  Logistics	
  	
  	
  
-­‐Competition	
  Policy	
  Allow	
  accumulation	
  	
  of	
  
Rules	  of	
  Origin	
  from	  Japan	  and	
  Thailand.	
  	
  Cooperation	  -­‐Education	
  -­‐Financial	
  Services	
  -­‐Science,	
  Technology	
  -­‐Trade	
  and	
  Investment	  Promotion	
  

	
  

-­‐	
  Business	
  Environment	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
-­‐	
  Energy	  -­‐	
  Information	
  Communication	
  Technology	  -­‐	
  Human	
  Resource	  Development	  -­‐	
  Small	
  and	
  Medium	
  Enterprises	  -­‐	
  Tourism	
  and	
  Hospitality	
  	
  
-­‐	
  Agriculture,	
  Fisheries	
  and	  Forestry	  -­‐	
  Environment	  Source: Compilation from (1) Agreement on Comprehensive Economic Partnership among Japan and Member Statesof the Association of Southeast Asian Nations, (2) Agreement between Japan and the Kingdom of Thailand for an Economic
Partnership, and (3) Department of Trade Negotiations, Ministry of Commerce, Thailand

There are three main different characteristics of AJCEP, which are the reduction of duration of
the tariff reduction/elimination in effect, the greater number of countries that can be accumulated in Rulesof Origin, and the cooperation measures in transportation and logistics, and competition Policy. JTEPA isdifferent in providing the results of negotiations in both services and investment, allowing only two
countries (Japan and Thailand) in accumulating the ROO, and the cooperation measures on education,
financial services, science and technology.
Cooperation

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From the context of AJCEP and JTEPA, although both agreements share some resemble fields ofcooperation, the differences of both trade agreements appear in their type of cooperation, principles, fields
of cooperation, and the implementation. The differences in their principle mainly ensure the difference
between two agreements.
AJCEP’s cooperation is focused more on economic area while the JTEPA provides the broadcooperation. The principle JTEPA states to facilitate and expand trade and investment, and promote
quality of life for the people in Japan, ASEAN, and the Greater Mekong Subregion, and Asia. Unlike
JTEPA, AJCEP acts regionally in promoting the well-being only in ASEAN and Japan, but in addition, its
cooperation is stressed more on liberalization which is limited to Japan and ASEAN.

Table 6 : Cooperation in AJCEP and JTEPA

Type of Cooperation
Basic Principles

Fields of Cooperation

AJCEP
Economic cooperation
Liberalise and facilitate trade and investment
among the Parties, taking into account thedifferent levels of economic development
among ASEAN Member States.
(a) trade-related procedures(b) business environment(c) intellectual property(d) energy(e) information and communications
technology(f) human resource development(g) small and medium enterprises(h) tourism and hospitality

JTEPA
Cooperation
Facilitate and expand trade and investment,enhance tourism between the Parties and promotesustainable development and enhancement of better
quality of life for the peoples of the Parties.
(a) agriculture, forestry and fisheries(b) education and human resource development(c) enhancement of business environment(d) financial services(e) information and communication technology(f) science, technology, energy and environment(g) small and medium enterprises(h) tourism(i) trade and investment promotion

13	
  
	
  
(i) transportation and logistics(j) other fields of cooperation as may be agreed(j) agriculture, fisheries and forestryupon(k) environment(l) competition policy(m) other fields as may be mutually agreed
upon among the Parties
Implementation of
Activities shall involve Japan and at least two
Cooperation shall be conducted in accordance with
Cooperation
ASEAN Member States,
the laws and regulations of each Party. The costs of
It may also involve Japan and one ASEAN
cooperation shall be shared by the Parties.
Member State providing the aim of narrowing
the gaps of economic development among
ASEAN Member States or promote the wellbeing of the people in ASEAN towards
further integration of ASEAN.
Source: Compilation from (1) Agreement on Comprehensive Economic Partnership among Japan and Member States of the
Association of Southeast Asian Nations, and (2) Agreement between Japan and the Kingdom of Thailand for an Economic
Partnership

The principle of AJCEP is “to liberalise and facilitate trade and investment among the Parties andto promote the well-being of people in the Japan and ASEAN member states…and to promote regionaland sub-regional development through economic cooperation activities…” while JTEPA states its
principle in “to facilitate and expand trade and investment, enhance tourism between the Parties andpromote sustainable development and enhancement of better quality of life for the peoples of the Parties,
the Greater Mekong Subregion and Asia as a whole…. and to produce positive effects on the economic
and social development of the emerging markets markets in the region”
Besides, although both agreements have the cooperation in the fields of (1) agriculture, forestry
and fisheries, (2) human resource development, (3) enhancement of business environment, (4)information and communication technology, and (5) small and medium enterprises. However, AJCEP
has the additional fields of (1) trade-related procedures, (2) transportation and logistics, and (3)competition policy, while JTEPA has more fields of (1) education, (2) financial services, (3) science andtechnology, and (4) trade and investment promotion.
Lastly, the cooperation cost in JTEPA will be shared by Japan and Thailand, while that in AJCEP
states that the cooperation activities may involve (1) Japan and at least two ASEAN member states, and(2) Japan and one ASEAN member state. The latter case can be done when the activities help narrow the

14	
  
	
  
gaps of economic development or promoting well-being of people in ASEAN for the further integrationin ASEAN.

E. Determinant of AJCEP
Economic and Cooperation Measures
Not only Japan employs a multi-layer policy approach in building the FTAs with some ASEAN Member
States, but it also design both AJCEP and JTEPA as a dual-function Agreements by acting both as
economic policy tool and diplomatic policy tool. This has distinguished AJCEP from other FTAs andresulted in attracting ASEAN Member States to agree in building the regional trade agreement withJapan, given the existence of FTAs between Japan and ASEAN Member States.
For the economic reason, the attractiveness of AJCEP is that, firstly, AJCEP allows the Parties to utilize
the benefit from regional economic integration in ASEAN, which results in improving the exports of
ASEAN to Japan through lower production cost from flexibility in accumulating ROO. This allows
ASEAN Member States to accumulate the ROO from more countries, while the JTEPA allows only two
countries (the Parties in Agreement). This is because AJCEP allows ASEAN member states toaccumulate the local content that has the ROO from other ASEAN countries into the local content ofexporting country to Japan. This results in the flexible production, and lower cost of production than the
JTEPA, which allows accumulating of the local content from merely Japan and Thailand.
Secondly, AJCEP offers the economic cooperation as appeared in the Chapter 8 of Agreement on
Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast
Asian Nations. The intention of the cooperation is to liberalize and facilitate trade and investment
regionally of ASEAN, which includes the fields of trade, business environment, intellectual property,
energy, information and communications technology, human resource development, small and medium

15	
  
	
  
enterprises, tourism and hospitality, transportation and logistics, agriculture, fisheries and forestry,
environment, competition policy, and other fields as may be mutually agreed upon among the parties.
The design of economic and cooperation measures in AJCEP are consistent with the plan ofregional economic integration of ASEAN or ASEAN Economic Community (AEC), which is an
economic goal of ASEAN by 2015. The cooperation measures in AJCEP which are different from JTEPA
appearing in transportation and logistics, and competition policy, which are the key areas of ASEAN in
preparing for AEC in the near future. However, the economic cooperation work programs, as indicated in
Annex 5 of AJCEP, are still limited to the Intellectual Property, and Agriculture Fisheries and Forestry.
In contrast, JTEPA contains more work programs in education, financial services, science andtechnology, trade and investment promotion. The work programs for all the nine fields of cooperation
have been addressed in the Implementing Agreement in JTEPA. Unlike conventional Official
Development Aid (ODA), cooperation measures in JTEPA can be used as a complementary tool for tradeliberalization, a bargaining chip in negotiations in sensitive sectors by offering cooperation measures toderive concession, and a chance for new cooperation through trade and investment (Maki, 2008). Someof cooperation fields in JTEPA are the sensitive sectors that are not ready for liberalization such as thefinancial services. JTEPA is therefore a more efficient way of Japanese ODA compared to AJCEP and a
way to prepare sensitive sector for the further liberalization.
External Relation
The international political consideration is another determinant in building RTA. For the case of
ASEAN-Japan RTA or AJCEP, the foreign relation strategy of ASEAN could have affect on this. Firstly,
ASEAN considered Japan as an important trading partner. Although the first RTA started by constructing
ASEAN-China Free Trade Agreements (ACFTA) in 2005, followed by ASEAN-Korea Comprehensive
Economic Cooperation Agreement in 2007, ASEAN-Japan Comprehensive Economic Partnershipinitiated in 2008 after the other RTAs with the East Asian Countries. However, a current Japan’s policy

16	
  
	
  
on Comprehensive Economic Partnership sets the target in achieving the strong economy and deepen
economic relationships with Asian. Japanese policy on Comprehensive Economic Partnerships states thatJapan will play a leading role in actively promoting bilateral Economic Partnership Agreements (EPAs)
within the Asia-Pacific region and broader regional economic partnerships (Ministerial Committee on
Comprehensive Economic Partnerships, 2010). The combination of economic and political measures of
EPAs make Japan not become only trading partner, but the development aid provider at the same time.
Another factor pushing ASEAN for RTA with Japan may be caused by the strategy in balance the powerwith other countries in Asia.

F. Conclusion
In the proliferation of Free Trade Agreements, Japan and ASEAN Member States run dual-track
FTAs through forming both a Country-Regional Trade Agreement and a Bilateral Trade Agreement.
Japan and Thailand also follow the same steps by pursuing Japan-Thailand Economic Partnership
Agreements (JTEPA) and Asian-Japan Cooperation Economic Partnership (AJCEP). Through comparing
AJCEP to JTEPA, it is found that AJCEP has an additional content of (1) Cooperation in the fields of the
trade-related procedures, transportation and logistics, and competition policy, and (2) the Rules of Origin,where as JTEPA has cooperation differences in the areas of education, financial services, and science andtechnology, and trade and investment promotion. This supports the hypothesis that RTA or AJCEP
includes the different content from BTA or JTEPA. It can therefore conclude that the dual-track FTA in
ASEAN causing by these additional contents in RTA or AJCEP, in other words, the determinant of
ASEAN for regional acting in FTA is the cooperation in the Japan and ASEAN member states towards
the future economic integration in ASEAN or Asian Economic Community and the external relation
strategy of ASEAN. The cooperation in JTEPA is viewed as a more efficient way of providing Official
Development Aid than AJCEP, and a result of failure in negotiation as it is the sensitive area of another

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Party. AJCEP and JTEPA reflect the Japanese’s fast approach in deepening the ASEAN Member Statesby a diplomatic tool and a trade policy tool in one agreement.

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