第 1 セッ ショ ン 経 済統 合の 現状

Economic Integration in Asia

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47

第 1 セッション
経済統合の現状 Economic Integration in Asia
セッションチェア
浦田 秀次郎(拠点サブリーダー・早稲田大学大学院アジア太平洋研究科教授)
それでは準備ができましたので、第 1 セッションに移りたいと思います。第 1 セッション
では、「経済統合の現状」というテーマのもと、東アジアの経済統合が現在どうなっているのか、どういう形で進んでいるのか、というような論点を中心に議論を進めたいと思います。
ちなみに、経済統合を推進する力としましては、市場と制度という異なった要因があると言われています。
最初の報告では、市場メカニズムによる地域統合の現状について発表していただき、２番目の報告では FTA（自由貿易協定）といったような制度的な枠組みのもとでの地域統合の進展、そして 3 番目に FTA などの制度的な枠組みが国際的な形でできた場合、国内の制度にどのような変化が必要になってくるか、という問題について発表して頂きます。このセッションでは、まず論文を発表していただき、それに対してコメントをいただくという形で進めたいと思います。
それでは、こちら側から、私に向かって近いほう、皆さまから向いまして左側の発表者、その次に討論者をご紹介したいと思います。まず最初にシンガポール国立大学准教授のShandre Thangavelu（シャンドラ・サンガベル）教授であります。続きまして、木村福成慶
応義塾大学経済学部教授、木村先生は東アジア・ASEAN 経済研究センターのチーフエコノ
ミストという役職も兼務されております。続きまして、ソウル国立大学教授であります安徳根（アン・ドングァン）さんです。よろしくお願いいたします。
この 3 人の方が発表者です。その発表者による発表のあと、討論者ということで 3 人の方にお願いしております。最初の討論者が早稲田大学商学部准教授の横田一彦さんです。続きまして、経済産業省通商政策局経済連携課の課長であります三田紀之さんです。続きまして
横浜国立大学大学院国際社会科学研究科教授、荒木一郎さんです。よろしくお願いいたします。皆さまの略歴は配布物の中にありますので、時間の関係もありますので、お名前だけをご紹介させていただきました。
それでは、論文ごとに発表そして討論に移りたいと思います。できるだけ聴衆の皆さまからの質問を受けるという形で進めたいと思います。全体が 2 時間ですから各々の論文に 40分使えるわけですけれども、報告者に 15 分から 20 分くらいで発表していただきます。その後討論者から 10 分討論いただき、残った時間をオープンにして、皆さまのほうから質問をお願いしたいと思います。最後に数分で発表者の方に回答していただくとこういう形で進めたいと思います。

49

【報告】

Trade, FDI and Regional Integration in East Asia
「東アジアの貿易、投資、そして地域統合」

Shandre M. Thangavelu1(Associate Professor at Department of Economics, National University of Singapore)First Preliminary Draft
November 2009
Please do not quote
Abstract
The paper examines the long-run relationship between trade, FDI and GDP growth in
the East Asia region employing panel integration and cointegration techniques for a
dynamic heterogeneous panel of 20 East Asian countries over the period 1980 to 2007.
The paper also explores the long-run impact of FDI and trade among ASEAN, ASEAN
plus 3 and ASEAN plus 6 groupings in the panel framework. The long- and short-run
relationships are examined in a vector-autoregressive error correction model using thepooled mean group (PMG) estimation of Pesaran et al. (1996). Our findings support theexistence of long-run relationship between trade, FDI and GDP growth for ASEAN and
ASEAN plus 3 groupings. The panel unit roots test indicates that the panel series are
stationary after first differencing. The panel cointegration tests of Pedroni (1999) clearly
indicate the existence of long-run relationship between trade, FDI and GDP for East
Asia, AESAN plus 3 and ASEAN. However, we found little evidence of long-run
relationship for ASEAN plus 6 groupings from the panel cointegration analysis and
PMG estimation. The direction of the causality clearly indicates that FDI is the key
variable driving the trade and regional integration in East Asian region.
1

Introduction

Given the increasing trend of trade and investment around the world, countries have not
only increased their integration regionally but also globally. Moreover, despite having
bilateral and multilateral trade agreements, most of the countries are also linked directly
or indirectly as members of regional trade blocks. Each regional grouping has
different characteristics due to interplay of the forces of regionalism and regionalization.
1

Corresponding author: email: ecssmt@nus.edu.sg

50Due to these two phenomena, the production networks have more extensive spread in
the East Asian region compared to other regions (Gill et al, 2007). Ando and Kimura(2003) describe the production networks in East Asia as vertical intra-industry trade
phenomena that involves back and forth links where by several countries participate invarious stages of the production chains compared to horizontal intra-industry tradepattern in Europe. The European intra industry trade model involves the two directionalflows of finished goods varieties. Besides having similar intra industry trade models inother regions, each region may present different characteristic due to competing forcesof bilateral and multilateral trade agreements. So in any economic turbulence whether it
is in the form of common shock or idiosyncratic shock, the business cycles of thecountries are exposed to different transmission mechanisms that may originate throughbilateral, regional or multilateral ties.
Economic integration also leads to greater volatility from global shocks. If theeconomic turbulence is originating from a country specific or idiosyncratic shock, mostof the research is focused on finding out whether other countries or regions aredecoupled from it. However, if the disturbance is global in nature that is affecting all thecountries at same time, the studies focus on finding out correlations among themacroeconomic variables on country or regional levels. In all these studies, the focus ison the outcome, whether a country or regional business cycle has co-movements withthe output of the crisis affected country or region. By not considering the transmission
mechanism, the task of designing the policy for dampening the effect of shock on acountry or region output becomes quite cumbersome.
The impact of trade integration presents two opposing effects on the businesscycle co-movements. Some empirical research findings support positive relationshipbetween trade integration and business cycle movements (Frankle and Rose, 1998;
Kenen, 2000; Imbs, 2004; Baxter and Kouparitsas, 2005; Sato and Zhang, 2006;
Kumakara, 2006; Arndt, 2006). However, there are other findings that presents an
opposing view that trade integration leads to more specialization based on comparativeadvantage in the production of goods and importance of asymmetric or sector specificshocks increases with economic integration thereby leading to idiosyncratic businesscycles (Krugman 1993).
Similarly, there are other factors such as the financial integration may also leadto business cycle co-movements through wealth effects if a country’s financial markets
trigger negative wealth effects in other countries (Imbs, 2004 and 2006; Inklaar et al,2008; Kose et al., 2003). On the contrary, international diversification of portfolios may
allow consumption smoothening due to risk sharing that may not require diversificationin production bases and may lead to greater specialization and less co movements in51

business cycles (Kalemli-Ozcan et al, 2001). In addition, empirical research have also
found evidence in support of inter group convergence within industrial countries andwithin emerging countries, while it found no support for worldwide convergence ofbusiness cycles, thereby suggesting decoupling between industrial countries andemerging countries (Fidrmuc et al, 2008; Kose et al, 2008). Regarding exchange rate
volatility, some empirical evidences have failed to show any systematic link between
short term exchange rate volatility and volume of bilateral and multilateral trade (Leung,1997). However, some evidence suggests that pattern of trade could be affected by theexchange rate volatility and that currency invoicing of trade matters. Despite theavailability of currency hedging for managing exchange rate volatility, studies havefound support for common currency standards among close trading partners (McKinnon,
2000; Mundell, 2000). Similarly the fiscal convergence can also lead to business cycles
co-movements (Inklaar et al., 2008; Darvas et al., 2005).
Economic integration could also occur through investment and trade.
Macroeconomic studies which examine the causality between FDI and growth using
aggregate FDI inflows and growth data in a cross country framework, generally, suggestthat FDI inflows positively affect economic growth. Zhang (2001) finds that FDI
strongly Granger-cause GDP growth in a sample of 11 countries. Choe (2003) finds abi-directional causality between economic growth and FDI in a sample of 80 countries
over the period 1971-1995. However, their results also show that the causality is rather
more apparent from growth to FDI than from FDI to growth. In a sample of 32 countries
that includes OECD and non-OECD countries and using a single-country time series
regression framework, De Mello (1999) find that the long-term effect of FDI on growthis heterogeneous across countries. He does not find firm evidence for the positive effectof FDI on growth in a panel of non-OECD countries. Nair-Reichert and Weinhold(2001) find that FDI on average has a significant positive impact on growth though therelationship is highly heterogeneous across countries. There are many studies that
attempt to draw conclusions on FDI-growth causation by controlling for human capital,
openness of the economy and different stages of growth. Blomström et al. (1996) findthat FDI inflows are an influence on growth rates for high income developing
economies, but not for lower income ones as it depends more on domestic factors suchas secondary education, changes in labour force participation, and infrastructure.
Balasubramanyam et al. (1996) find that FDI promotes economic growth in a sample of
46 developing economies during the period 1970-1985. Their results further revealed
that FDI inflows are more productive in countries with export promoting trade andinvestment strategies than with import-substituting strategies. Basu, Chakraborty andReagle (2003) also emphasize trade openness as a crucial determinant for the impact of52

FDI on growth. By revisiting these findings in the context of more recent cross-sectionaldata, Greenaway et al. (2007) confirm the robustness of the impact of FDI on economic
growth.
The heterogeneity of the results of these macro level studies indicate
different country-specific effects and also points to various specification issues inmodels. There are arguments that these studies do not fully control for simultaneitybias, country-specific effects, and the lagged effects of dependent variables in growth
regressions (Carkovic and Levine 2005). By addressing these issues in data, Carkovic
and Levine (2005) find that the exogenous component of FDI does not exert a robust
and positive influence on economic growth. Hansen and Rand (2006) using mean group
estimator find a strong causation from FDI to GDP, and their results indicate that FDI
appears to be growth enhancing much in the same way as domestic investment.
In this paper, we examine the long-run relationship between trade, FDI and
GDP growth in the East Asia region employing panel integration and cointegration
techniques for a dynamic heterogeneous panel of 20 East Asian countries over theperiod 1980 to 2007. Given that the economic growth in the East Asian region is driven
more by the production networks, it is appropriate to examine the impact of FDI on
output growth with a view of regional integration in East Asia. In this respect, the paper
also explores the long-run impact of FDI and trade among ASEAN, ASEAN plus 3 and
ASEAN plus 6 groupings in the panel framework. The long- and short-run relationships
are examined in a vector-autoregressive error correction model using the pooled meangroup estimation of Pesaran et al. (1996).
The short-and long-term effects of FDI and exports on the region growth havebeen considered in a Panel VAR framework to account for country-specific and reverse
causality issues. We considered the major regional grouping such as East Asia, ASEAN,
ASEAN plus 3, and ASEAN plus 6. We used Pooled Mean Group estimator (PMG) thatwas proposed by Pesaran et al. (1996) to establish the long-run equilibrium in our model.
The advantage of PMG is that it is very flexible to allow for the short-run responses tobe different but the long-run coefficients are restricted to be equal across the
cross-sections. This allows us to test for the long-run relationship among our key traderegions or groupings. Our empirical results indicate the existence of long-run
relationship from FDI and trade with GDP growth for East Asia and key groupings of
ASEAN plus 3 and ASEAN. However, we do not find any long-run impact of FDI and
trade on GDP growth for ASEAN plus 6 groupings.
The plan of paper is as follows: Section 2 highlights the key trends of the FDI,
export and GDP in East Asia. Section 3 discusses the Pooled Mean Group estimation
methodology adopted in the study. Section 4 presents the results of the panel unit root,53

cointegration tests and Pooled Mean Group estimator. We provide the conclusion insection 5.
2

Key Trends of FDI, Export and GDP in East Asia

Although the Asian crisis had a dampening effect on output growth in East, there isstrong recovery in the region in the post-crisis period (see Table 1). The direct impactof the Asian crisis that swept across the region was the drastic fall in output growth inmost of the Asian countries. Except for China, Taiwan and Vietnam, all the other
Asian economies being studied in this paper experienced negative growth rates in 1998.
Thereafter, the countries affected by the crisis were also hit by several other external
shocks – such as the September 11 attacks, the slowdown in the US and global
economies, and SARS – which resulted in more volatile output growth in the post-crisis
period.
Table 1: Real GDP Growth Rate for Selected Asian Economies from 1995 – 2007
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

China

10.9

10.0

9.3

7.8

7.6

8.4

8.3

9.1

10.0

10.1

10.4

11.1

11.9

Hong Kong

2.3

4.2

5.1

-6.0

2.6

8.0

0.5

1.8

3.0

8.5

7.1

7.0

6.4

Indonesia

8.2

7.8

4.7

-13.1

0.8

4.9

3.8

4.3

4.8

5.0

5.7

5.5

6.3

Korea

9.2

7.0

4.7

-6.9

9.5

8.5

3.8

7.0

3.1

4.7

4.2

5.1

5.0

Malaysia

9.8

10.0

7.3

-7.4

6.1

8.9

0.5

5.4

5.8

6.8

5.0

5.9

6.3

Philippines

4.7

5.9

5.2

-0.6

3.4

4.4

1.8

4.4

4.9

6.4

5.0

5.4

7.2

Singapore

8.2

7.8

8.3

-1.4

7.2

10.1

-2.4

4.2

3.5

9.0

7.3

8.2

7.7

Taiwan

6.5

6.3

6.6

4.5

5.7

5.8

-2.2

4.6

3.5

6.2

4.2

4.9

5.7

Thailand

9.2

5.9

-1.4

-10.5

4.4

4.8

2.2

5.3

7.1

6.3

4.5

5.1

4.8

Vietnam

9.5

9.3

8.2

5.8

4.8

6.8

6.9

7.1

7.3

7.8

8.4

8.2

8.5

Source: Asian Development Bank

But despite the economic volatility, there appears to be a strong recovery in the
post-crisis period converging to pre-crisis levels.2 The average growth rate of thecrisis-affected South-East Asian countries of Indonesia, Malaysia, Singapore, thePhilippines and Thailand was around 5% in the post-crisis period of 1999-2007, ascompared to 6.8% over the period 1995-1997. Two crisis-affected economies,
Thailand and Hong Kong, actually grew at a higher average annual rate of 5.0% each inthe post-crisis period, compared to 4.6% and 3.8% respectively in the pre-crisis period.
2

Even though the Asian crisis struck in the later part of 1997, the impact of the crisis on real GDP,
FDI and exports was only felt in 1998 for most of the crisis-affected countries. Hence, for the
purpose of this paper, the pre-crisis period includes the year 1997, while the post-crisis period starts
from 1999.

54

The GDP growth experienced by Asian economies in the post-crisis period was
supported by strong export growth. From Table 2, it is clear that the Asian crisis andsubsequent external shocks had negatively affected export growth in the region.
However, export growth rates have since recovered and appear to be returning topre-crisis levels. The importance of exports for the economic growth of South-East
Asian countries is also reflected by their high export to GDP ratios. In the post-crisis
period, most of the South-East Asian countries have seen a rise in their export to GDP
ratios. For instance, the export to GDP ratios for Malaysia and Singapore rose from
94% and 187% respectively in 1995 to 110% and 230% respectively in 2007, therebyreflecting their increasing reliance on exports. Export growth is also emerging as animportant source of output growth for Indonesia, the Philippines and Thailand, which
saw their export to GDP ratios rise from 26%, 36% and 42% respectively in 1995 to
29%, 43% and 73% respectively in 2007. Just as in South-East Asia, export growth too
is becoming an important component of growth in the East Asian economies. China’s
export to GDP ratio doubled from 20% in 1995 to 41% in 2007.
Table 2: Export Growth for Selected Asian Economies
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

China

23.0

1.5

21.0

0.5

6.1

27.8

6.8

22.4

34.6

35.4

28.4

27.2

25.7

Hong Kong

14.9

4.0

4.2

-7.4

0.1

16.6

-5.8

5.4

11.7

15.9

11.4

9.4

9.2

Indonesia

13.4

9.7

7.3

-8.6

-0.4

27.7

-9.3

1.5

9.4

11.5

22.9

17.5

13.3

Korea

30.3

3.7

5.0

-2.8

8.6

19.9

-12.7

8.0

19.3

31.0

12.0

14.4

14.1

Malaysia

20.2

6.5

12.1

29.7

12.2

16.1

-10.4

6.9

11.3

21.0

10.9

10.3

2.7

Philippines

29.4

17.7

22.8

16.9

18.8

8.7

-15.6

9.5

2.9

9.5

4.0

14.9

6.4

Singapore

13.7

5.2

5.3

-1.0

5.7

22.4

-8.3

2.7

12.1

20.5

14.0

12.8

4.4

Taiwan

20.1

7.7

9.6

8.0

6.0

18.6

-10.0

9.8

10.8

17.9

4.5

14.2

11.1

Thailand

23.6

0.4

27.9

24.4

-1.4

25.2

4.0

1.4

13.7

16.5

14.6

11.4

6.4

Vietnam

34.4

33.2

26.6

1.9

23.3

25.5

3.8

11.2

20.6

31.4

22.5

22.7

21.9

Source: Asian Development Bank

The pre-Asian crisis era was characterized by increasing net FDI inflows into
the East and South-East Asian regions (Thangavelu et al., 2009). This can clearly beseen from changes in the region’s share of total World FDI inflows after the crisis (seeFigure 1). As before, Figure 1 shows that the Asian crisis in 1997 had no immediate
impact on the share of FDI inflows into Asia. Its impact only became obvious in 1998
when a sharp decline in the shares of FDI inflows into East and South-East Asia wasobserved. Since 1998, South-East Asia’s share of total World FDI inflows has

55

continued to languish at relatively low levels; East Asia’s share appears to have pickedup after the crisis before tapering off in more recent years. Over the period 1999-2007,
South-East Asia’s share of total World FDI inflows averaged 3.3%, a level that was only
slightly higher than Africa’s share of 2.4% for the same period, and a far cry from the
7.7% it enjoyed during 1992-1997. Although most other regions also saw theirpost-crisis shares of total World FDI inflows decline, the fall in South-East Asia’s share
was one of the most drastic.
Table 3 provides the average shares of total World FDI inflows for selected
South-East and East Asian economies during the pre- and post-crisis periods. Amongthe South-East Asian countries, Singapore’s post-crisis average share of total World FDI
inflows was the highest at 1.7% in the post-crisis period, although this was still below
its pre-crisis average of 2.6%. The post-crisis shares of the other South-East Asian
countries too remained below their respective pre-crisis levels. Malaysia, thePhilippines and Indonesia, in particular, experienced a large decline in their respective
shares in the post-crisis period.
As for the situation in East Asia, Hong Kong, South Korea and Taiwan havebecome less important than China in attracting FDI inflows from the early 1990s
onwards. Following the Asian crisis in 1997, net FDI inflows into East Asia weremainly driven by inflows into China, and to a much lesser extent, Hong Kong and South
Korea. China’s status as a magnet for FDI since the mid-1990s is underscored by thefact that between 1994 and 2004, net FDI inflows into China nearly doubled from
US$33 billion to US$56 billion. With the opening up of China’s economy, MNCs
have found China to be an attractive investment destination, given its promisingly large
market and pool of cheap labor. It is thus not surprising that out of the 10 Asian
economies studied, China received the largest share of FDI inflows at 10.5% of total
World FDI inflows before the crisis (see Table 4). This share fell to 6.2% after thecrisis. A decline in share was also observed in Taiwan, while South Korea and Hong
Kong saw an increase in their respective shares.

56

Figure 1: FDI Inflows to World Total
FDI Inflows (%), 1970-2007
60.0%

50.0%

40.0%

EuropeAfrica30.0%

Latin America
East Asia
South Asia

20.0%

South-East Asia
North America

10.0%-10.0%

1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006

0.0%

Average FDI to World FDI Inflows (%)
1992-1997
38.06%
2.09%
9.73%
13.94%
0.77%
7.71%
21.29%
6.41%

EuropeAfricaLatin America
East Asia
South Asia
South-East Asia
North America
Others
Source: UNCTAD

1999-2007
48.75%
2.40%
7.17%
10.33.%
1.06%
3.34%
19.68%
7.28%

Table 3: Average FDI Inflows to Total World FDI Inflows (%) for East Asia, 1992-2007
China
Hong Kong
Indonesia
Korea
Malaysia
Philippines
Singapore
TaiwanThailand
Vietnam
Source: UNCTAD

1992-1997
10.52
2.56
1.12
0.39
2.05
0.45
2.58
0.48
0.77
0.50

1999-2007
6.22
3.14
0.11
0.65
0.40
0.14
1.68
0.32
0.63
0.20

57

2.1

FDI and Exports on Output Growth in East Asia

According to Gill et al. (2007), the production networks have more extensively spreadin the East Asian region as compared to other regions. The spread is due regionalism
and regionalization. Factors such as low trade barriers, efficient duty drawback regime
for exports, encouragement of export oriented FDI, good logistics and labour wage
differentials in the country can be the result of regionalism. In contrast, close proximity
to production networks, scale economies and other agglomeration economies that affectthe cost structure of intermediate inputs is mainly due to regionalization. Due to theseprocesses at work, the economies have become closely integrated and one country
income growth generates demands for parts and components in other countries in the
supply chain. Ando and Kimura (2003) describe the production networks in East Asia as
vertical intra-industry trade phenomena that involve back-and-forth links whereby
several countries participate in various stages of single production chains compared tohorizontal intra industry trade pattern in Europe. The European intra-industry trademodel involves the two directional flows of finished goods varieties. Kimura et al.
(2007) further describes the vertical intra- industry trade in East Asia that unit prices ofexports and imports differ widely where as Krugman (1980) and Helpman and Krugman(1985) well established model of intra- industry trade is based on horizontal productdifferentiation and fits the mechanics of intra- industry trade among developed countries
such as the core EU countries.
The key trends of FDI, export and GDP growth for East Asia3 are given below
in Figures 2 and 3. The relationship between FDI inflows and GDP growth for the East
Asian countries is given in Figure 2. It is clear from Figure that there is a marginal
positive trend (the sloped of the trend line is given as 0.14) between GDP growth and
FDI inflows (in logs) in the East Asian region. However, we do not see similar positive
trend between export and GDP growth in Figure 2. In fact, we do observe a marginal
negative relationship between export and GDP for the East Asian countries. The
marginal effects of FDI and export on the GDP growth in East Asian region might bedue to the heterogeneity of economic development and hence the different growth
directions of the countries in the region. This indicates that the heterogeneity in theregion have to be accounted for to have a better understanding of the economic
integration in the East Asian region.

3

East Asia includes China, Korea, Cambodia, Hong Kong, Indonesia, Japan, Malaysia, Laos,
Myanmar, Philippines, Singapore, Thailand, and Vietnam.

58

Figure 2: GDP Growth and FDI
Inflows in East Asia (excluding
Taiwan) from 1980-2007
20
GDP Growth (%)

15
10
5
0
-5 0

-5

-10
-15

5

10

15

y = 0.1402x + 5.0505
Log FDI Inflows R² = 0.0072

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.

Figure 3: GDP Growth andExport in East Asia (excluding
Taiwan) from 1980-2007
GDP Growth(%)

30
20
10
0
-10
-20

0

5

10
Log Export

15
y = -0.0624x + 6.403
R² = 0.0015

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.
The key trends for ASEAN (Cambodia, Indonesia, Loas, Malaysia, Myanmar,
Philippines, Singapore, Thailand, and Vietnam) plus 6 countries (Australia, China,
Korea, Japan, India and New Zealand) are given in Figures 4 and 5. Although weobserve a positive relationship betweem FDI inflows and GDP growth, the impact isless significant as compared to the overall East Asian region. This might be due to the59inclusion of countries that have less FDI reliance such as Australia, New Zealand andIndia, which might reduce the overall impact of FDI on output growth in the region. The
impact of export on GDP growth is again not very significant for the ASEAN plus 6
groupings and this might be due to greater heterogeneity in economic development andless reliance of export for output growth for certain countries in the grouping.

Figure 4: GDP Growth and FDI
Inflows in ASEAN plus 6 from1980-2007
20
GDP Growth(%)

15
10
5
0
-5 0

-5

-10
-15

5

10

15

y = 0.0969x + 4.9642
Log FDI Inflows
R² = 0.0034

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.

Figure 5: GDP Growth andExport in ASEAN plus 6 from1980-2007
GDP Grwoth(%)

30
20
10
0
-10
-20

0

5

10
Log Export

15
y = -0.0618x + 6.0595
R² = 0.0014

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.

60

The impact of FDI and export on GDP growth for ASEAN plus 3 countries(China, Korea and Japan) are given in Figures 6 and 7. It is very clear from Figure 6 that
FDI inflows have greater impact in this grouping as compared to the previous ones. In
particular, there is significantly greater positive impact of FDI inflows on GDP growthin ASEAN plus 3 groupings. This might suggests greater production network and trade
linkages among these countries as compared to ASEAN plus 6 grouping. As with theprevious groupings, we also observe a marginally negative impact of export on GDP
growth, however this seems to be of less significance as compared to East Asia and
ASEAN plus 6 countries.

Figure 6: GDP Growth and FDI
Inflows in ASEAN plus
Countries from 1980-2007
GDP Growth(%)

20

-5

15
10
5
0
-5 0
-10
-15

5

10

15

y = 0.1838x + 4.8535
Log FDI Inflows R² = 0.0123

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.

61

Figure 7: GDP Growth andExport in ASEAN plus 3Countries from 1980-2007
GDP Growth(%)

30
20
10
0
-10

0

5

-20

10
Log Export

15
y = -0.0461x + 6.2862
R² = 0.0009

Source: UNCTAD and World Development Indicators (WDI). The fit of the trend line isgiven in the Figure.
It is not surprising to see the positive impact of FDI inflows on GDP growth in
the East Asian region and in particular among the ASEAN plus 3 countries, which isincreasingly becoming an important production network in the global economy.
However, the negative impact of export on GDP growth raises several questions on the“export-led” paradigm in the East Asia region and if trade is the key driver for economic
integration in the region. It is important to highlight that the impact of export might nothave a direct impact on output growth as there might be other positive externalities interms of productivity improvements from global competition and also greater
technology transfer export driven firms that might have more indirect impact on output
growth (Greenaway et al., 2007). It is also very likely that there might be greater direct
and indirect interaction between FDI and export that might be the key factor for output
growth in the region, which might be driven by production networks and global
value-chain. Thus it is of interest and of great importance to understand the long-run
relationship of FDI and export in a more extensive and rigorous framework. The paper
adopts a panel VAR framework as suggested by Pesaran et al. (1996) using the Pooled
Mean Group estimation (PMG) to understand the long-run relationship between FDI,
export and GDP growth.
3

Empirical study on the Long-Run Relationship of FDI, Export and GDP

3.1

Data and Methodology

62

The data for the study is collected from UNSTAT and UNCTAD Handbook 2008. All
the variables are defined in real values (US$) by deflating to 1990 prices using the GDP
deflators of the respective countries in the sample. We used annual data that covers aperiod of 1980 to 2007. All variables are expressed in logs. We believe that the 27
observations are sufficient time series for this study to detect both the short- andlong-run relationships of the FDI, exports and GDP growth.
The panel of countries in our study are grouped into four key groupings: East
Asia (13 countries), ASEAN plus 6 (15 countries), ASEAN plus 3 (12 countries) and
ASEAN (9 countries). Given that the time series, T, in our sample is greater than the
cross-section dimension, N, it is likely that pooled dynamic heterogeneous models
generate estimates that are inconsistent even in large samples (Pesaran and Smith, 1995).
However, Pesaran et al. (1996) propose estimation by pooling the long-run parameters,
if the data allows, and estimating the model as a system, which they defined as Pooled
Mean Group estimator (PMG). PMG estimation combines the efficiency of pooled
estimation, while avoiding the inconsistency of the heterogeneity in the dynamic
relationships. The advantage of PMG estimator is that the long-run coefficients areconstrained to be the same across the cross-sections, while the short-run responses areallowed to be different across the panel.
The unrestricted specification for the system of ARDL equations for t = 1, 2, ...., T and i= 1, 2, .., N is given as
∑
∑
,
,
,
(1)
where xi,t-j is the (k X 1) vector of explanatory variables for group i and µi are the fixed
effects. The above could be reparameterised as a VECM system.
∆

,

,

∑

∆

,

∑

∆

,

(2)

where
are the long-run parameters andare the equilibrium (or error) correction
parameters. The pooled mean group restriction is that the elements ofare common
across the cross-section, thereby given as follows:
∆

,

where

and

,

∑

∆

,

∑

∆

,

(3)

are the short-run dynamic coefficients. We could test for the

existence of long-run relationship by testing the null hypothesis of
0 against thealternative that
0. The long-run equilibrium is also substantiated by the negative
sign of , the error correction terms, which indicates the dynamic adjustment of thevariables towards the long equilibrium. The joint statistical significance of
0 and
0 will establish the existence of long-run equilibrium. Pesaran et al. (1996)

63

propose a maximum likelihood estimator for the above. Pesaran et al. (1996) alsosuggest a Hausman test or “poolability test” based on the group parameter restrictions.
This is based on the result of the long-run parameters derived from the mean group of
the individual N regressions. The test is based on a Chi-square distribution. However,Pesaran et al. (1996) highlight that PMG estimator is consistent even underheterogeneity but it is more efficient if the parameters are homogeneous.
4

Results of Pooled Mean Group Estimation

4.1

Panel Unit Root Tests

As we embark on the estimation of the long-run equilibrium using the PMG estimation,
we must first try to establish the stationarity of our data series. We adopt the panel unit
roots approach of Im, Pesaran and Shin (2003) and Levin, Lin and Chu (2002) toestablish the stationarity of the variables. The test proposed by Levin, Lin and Chu(2002) (LLC) allow for individual specific intercepts, time trends along with error
variance and permitting patterns of higher order serial correlations to vary amongindividuals. The null hypothesis in this test considers each individual time series having
a unit root against the alternative that each time series is stationary. In contrast, Im,
Pesaran and Shin (2003) (IPS) propose an alternate testing procedure that is based on
averaging of individual (augmented) Dickey-Fuller (Dickey and Fuller, 1979) statistics
computed for each group in the panel that has standard normal distribution so long as
T>5. They also suggest more general test statistics where errors may be seriallycorrelated with different serial correlation patterns across groups, panel with T and N
dimensions sufficiently large and to unbalanced panels and dynamic panels withintercepts and trends.
The results of the panel unit-root tests for the key regional groupings are given
in Table A1 in the Appendix. The unit-root tests are conducted for FDI, GDP and export
at both the levels and first-difference. The results indicate that all the variables are
non-stationary at the levels but they are stationary after differencing.
4.2

Cointegration Tests

Once the stationarity of the variables are established, we apply the panel cointegration
techniques developed by Pedroni (1994, 1999) that test spurious regressions inheterogeneous panels. The Pedroni (1999) framework allows one to test for the presenceof long-run equilibrium in a heterogeneous panel. Pedroni (1999) derives the asymptotic

64

distributions and explores the small sample performances of seven different statistics4
for testing the null-hypothesis of no cointegration. Panel v -Statistic, Panel ρ -Statistic,
Panel t-Statistic (non-parametric) and Panel t-Statistic (parametric) are commonlyreferred to as within-dimension or panel cointegration test. The remaining three test
statistics - Group ρ -Statistic, Group t-Statistic (non-parametric) and Group t-Statistic(parametric), are based on pooling along the between-dimension or group mean panel
statistics.5 (see Pedroni (1999) for the detail derivation of the various tests).
The results of panel cointegration test by regional groupings are given in Table 2A in the
Appendix. Due to brevity, we only report the Panel v -Statistic, Panel ρ -Statistic,
Panel t-Statistic (parametric), Group ρ -Statistic, and Group t-Statistic (parametric).
For each of the four test statistics, the test statistics diverges to a negative infinity under
the alternative hypothesis, and consequently the left tail of normal distribution is used toreject the null hypothesis. In this case, for any of these six test statistics, a large negativevalue implies that a null of no cointegration is rejected. The test statistics for Panel ρ-Statistic, Panel t-Statistic (parametric), Group ρ -Statistic, and Group t-Statistic(parametric) rejects the null hypothesis of cointegration at 5 percent level of statisticalfor East Asia, ASEAN plus 3 and ASEAN region. This provides strong support for the
proposition that there is a strong correlation between FDI, export and output growth inthese regions in the long-run. However, the results for ASEAN plus 6 groupings indicatethat all of the above test statistics could not reject the null hypothesis of no cointegrationin the panel, except for Group t-Statistic (parametric) at 10 percent level of statisticalsignificance. This indicates that there is little or no long-run relationship among theASEAN plus 6 groupings in our sample.
4.3

Pooled Mean Group Estimation

The results for PMG estimation is given in Table 3A in the Appendix. The results
clearly support the impact of FDI and export on GDP growth in East Asia, ASEAN plus
3 and ASEAN, as the long-run coefficients and the error-correction term are statisticallysignificant. In fact, the long-run coefficients for both FDI and GDP are positive and theerror-correction terms are negative for East Asia, ASEAN plus 3 and ASEAN regions.
The joint statistically significance of long-run coefficients and error-correction termstrongly rejects the non-causality hypothesis in these groupings. We also observe the4

See Pedroni (1999), pp 659-662 for the testing procedure and the complete formulation of test
statistics.
5
The within dimension statistic are constructed by summing numerator and denominator terms over
the N dimension in the test statistic separately, whereas the between-dimension statistics areconstructed by dividing the numerator by denominator prior to summing over N dimension.

65

long-run impact of FDI in ASEAN and ASEAN plus 3 countries are much stronger thanin the East Asia region. This clearly indicates greater economic integration in theseregions due to the stronger impact of the production network and value-chain in
ASEAN plus 3 and ASEAN region.
We also observe positive long impact of export on the GDP growth of East Asia,
ASEAN plus 3 and ASEAN regions. In fact, there is a stronger impact of export on
GDP growth in the ASEAN plus 3 countries, thereby supporting the “export-led”
growth paradigm in the region. The positive long-run impact of export on output growth
supports the conjecture that there trade is an important component in driving economic
integration in these regions.
The PMG results also indicate FDI and the error-correction terms for ASEAN
plus 6 groupings are not statistically significant, thereby rejecting the existence oflong-run equilibrium in this region. Based on the PMG estimation, we could not reject
the null hypothesis of no long-run causality in ASEAN plus 6 groupings.
6

Conclusion

The paper investigates the causal linkages between FDI, export and GDP growth in the
East Asian region. The results support a positive and statistically significant equilibrium
relation between FDI and export on GDP growth. In fact, we found greater positive
impact of FDI and export on output growth in ASEAN plus 3 grouping and ASEAN
countries. This clearly indicates greater investment and trade integration in these regions.
The investment and trade integration in these regions might be due to the presence of
intra-industry trade, thereby supporting the production network and value-chain
production structure. In fact, the East Asia East Asia region is now trading more
intraregional than interregional.
However, we do not find any long-run relationship between FDI and export on
GDP growth in the ASEAN plus 6 grouping in both the panel cointegration tests andalso in the PMG estimation. This might be due to greater disparity in national income
and heterogeneity in the economic development of the ASEAN plus 6 countries. Given
that ASEAN plus 6 region will provide a large market for trade and investment, there ispotential to create production and trading linkages in the region. Thus it is important theregion focuses on increasing investment and trade integration by reducing barriers intrade and foreign investment, thereby allowing greater flow of international activities
across the region.
The results of the paper clearly support the “export-led” growth in the East
Asian region. The importance and sustainability of “export-led” growth in the region is
becoming an important topic of discussion given the current global crisis. Given the66

large and dynamic nature of domestic market in the East Asian region, the export
growth in the region is sustainable. With growing consumerism and income in theregion, the intra-regional trade in the region is expected to grow. The development ofinternational brands in the region will be crucial to maintain the export competitivenessin the region. In particular, the ASEAN countries have to develop key international
brands and locally linked multinational companies that drive greater trade andinvestment in the region.
The importance of FDI for the long-term growth of the East Asian region isclearly indicated in the study. Given that most of the R&D activities and newtechnologies are concentrated in the developed countries, FDI forms an important
conduit for transfer of technologies to the region. However, it could be argued that given
the proprietary nature of FDI activities, there is less incentive for multinationals totransfer key technologies to the domestic economy. It becomes more imperative that theregion develops key technologies to complement the FDI activities in the region. As thedevelopment in the region reaches a sustainable level, the region has to develop strong
indigenous technologies to complement the flow of foreign technology into thedomestic economy through FDI activities.
The paper provides strong evidence that FDI and trade are important drivers of
economic integration in the region. Given there is strong evidence for long-term growthin the regional through FDI and trade, it is important to reduce the barriers for greaterflow of trade and FDI in the region. In particular, there should strong emphasis to
reduce not only trade barriers but also to address the behind the border issues such astechnical barriers to trade and institutional barriers. This will enhance greater regional
integration through FDI and trade.

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Appendix
Table1A:

Results of Panel Unit Root Tests for East Asian Countries
Levels
LLC

Difference
IPS

LLC

IPS

East Asia (13 countries)
GDP-1.014

5.304-7.495*-8.159*FDI-1.381-0.584-15.520*-16.533*

Export

0.894

5.986

-13.349*-13.061*

ASEAN plus 6 (15 countries)
GDP

1.893

2.188

-6.417*-8.770*FDI-1.493-0.809-17.325*-18.587*

Export

1.815

6.890

-13.887*-13.847*

ASEAN plus 3 (12 countries)
GDP

1.226

5.502

-6.844*-7.581*FDI-1.235-0.610-15.545*-16.626*

Export

1.123

6.042

-12.923*-12.698*

ASEAN (9 countries)
GDP

2.572

6.305

-6.505*-6.570*FDI-0.474-0.313-15.915*-15.031*

Export

1.210

5.081

-10.487*-10.695**- 1 percent level of statistical significance
Table 2A: Results of Panel Cointegration for East Asian Countries
East Asia

ASEAN plus 6

ASEAN plus 3

ASEAN

Panel v-statistic-0.656-1.3990.007-0.647

Panel p-statistic-3.454*-0.573-3.360*-3.277*

Panel t-statistic-5.823*-1.412-2.027*-2.560*Group p-statistic-3.718*-0.560-3.713*-3.714*

Group t-statistic-2.773**-1.986***-2.728**-4.119**- 1 percent level of statistical significance, **- 5 percent level of statistical significance, ***- 10
percent level of statistical significance
Table 3A: Pooled Mean Group Estimation for East Asia
East Asia

ASEAN plus 6

ASEAN plus 3

ASEAN

FDI

0.810*

1.030

2.110*

2.540*

Export3.780*

2.770*

5.680*

5.310*-0.0001-0.0006**-0.0008*

Error Correction Te -0.0002***- 1 percent level of statistical significance; **- 5 percent level of statistical significance.

71

【Power Point】
Trade, FDI and Regional Integration in East Asia
Shandre M. Thangavelu(Associate Professor at Department of Economics, National University of Singapore)

72

73

74

75

76

77

78

79

【討論】

Trade, FDI and Regional Integration in East Asia
討論者:Kazuhiko Yokota(Associate Professor at School of Commerce, Waseda University)

Thank you, Mr. Chairman. And thank you, Professor Thangavelu, for a very interestingpresentation. Let me start by summarizing your paper.
His paper was on a study of evolution of trade, FDI, and GDP growth in the
ASEAN region over the past 27 years. Then it also studies a causal relationship between
international trade and GDP growth, using a time-series technique, actually panel andtime-series technique.
Then the paper shows that exports, FDI, and GDP growth in all groups areintegrated of order 1, I(1), and also are cointegrated with one another. That means thatthese three variables have a long-term relationship.
However, the most interesting point in his paper is that the long-term
relationship is identified only for ASEAN and ASEAN Plus Three but not for the
ASEAN Plus Six countries.
Hence, the paper concludes that there are large impacts of exports and FDI on
GDP growth for ASEAN and ASEAN Plus Three. The paper suggests the importance ofa production network, as well as supply-chain networks, in this area.However, in thecase of ASEAN Plus Six, the study finds no evidence of any long-term relationships
among international trade, FDI, and GDP growth.
So the author suggests that it might be due to a large difference in national
income and the difference in development stages in these areas.
The paper also suggests that exports and FDI are important factors in driving
economic growth and East Asian integration.
So now I would point out some missing issues in this paper. The first thing isthat I would like to see detailed data and a description, which is particularly importantwhen doing a time-series analysis. Second is information. I would also like to see an
explanation about processes by empirical studies, such as information or lag length
when he uses unit-root tests and causality tests. But these two are relatively minor
points among my comments.
The third one, which is a very important point, is that the economic story that isunderpinning the empirical study is not perfectly clear to me. So the story to explain thecausal relationship among international trade, FDI, and economic growth is important toclarify the characteristics of ASEAN regional integration.

80

Next, I would show several important points whenever we consider the East
Asian region and integration. The first graph shows the trends of FDI stock. It shows
world trends and East Asian trade of FDI stock. You can clearly see that it shows that
the FDI stock in East Asia has become 34 times larger in 2007 than in 1980, while it has
become 20 times larger worldwide over the same period.
Next is the trade data. What do the trade data tell us? This one shows world
trade, and this one is East Asian trade. You can see from these figures on East Asian
trade that we have a unique characteristic, which is a large amount of trade ofintermediate goods.
These facts suggest that a large number of MNEs in East Asia have createdvertical production networks, as Dr. Thangavelu suggested, mainly between home andhost countries.
Finally, I would like to show an important point when we consider the East
Asian region, that is the leading sector in trade of intermediate goods is the electricalmachinery sector. Actually, the trade volume in intermediate goods in the machinery
sector became more than 100 times from 1980 to 2007. .
So if we consider this unique characteristic of East Asia, we have a hypothesisthat FDI induces trade in intermediate goods in East Asia, because of the verticalproduction networks or supply-chain networks, as Dr. Thangavelu suggested. And theactivities of MNEs expand production and the trade in intermediate goods in East Asia,
especially in ASEAN countries and China.
But at the same time, we have to address two important issues about East Asia.
The first is that the key industry is electrical machinery, and the second is that China
and Japan play major roles in this area, especially in trade in intermediate goods.
Taking these points into consideration, I would like to give a brief conclusion.
This paper tackles a very interesting topic. However, to reinforce the conclusion of thepaper, you may have an attractive hypothesis that can explain the relationships amonginternational (especially intermediate) trade, FDI, and economic growth.
And in that case, the hypothesis should contain the differences in type ofinternational trade, such as intermediate goods, primary goods, and consumption
goods (final goods), as well as industry characteristics, since we have seen that theleading sector in this area is the electrical machinery sector.
The last one is country-specific factors, especially with regard to China andJapan. China and Japan are major players in the East Asian region and have a large
amount of trade in intermediate goods.
So, these are the comments I should raise today. I guess time is up now, and I
should stop here.Thank you.

81

【Power Point】
Trade, FDI and Regional Integration in East Asia
討論者:Kazuhiko Yokota(Associate Professor at School of Commerce, Waseda University)

82

83

84

85

【質疑応答】
浦田：

どうもありがとうございました。今、発表者と討論者の議論をお聞きになって、かなりアカデミックな議論が行われているなという印象を持たれたかと思います。実際、経済学、特に国際経済学では、今お 2 人がお話になったようなことが一番フロンティアのテーマとして議論、また研究されております。そのような理由で、かなりアカデミックなように聞こえたかと思います。ただ、ここで分析しようと思っているのは、どういう形でアジアの統合が起きているかということです。東アジアでは貿易、貿易の中でも、特に中間財、部品が非常に活発に取引されているのですが、その背景には多国籍企業による直接投資があるわけです。そのような関係が存在し、それが経済成長をもたらしているのかどうかということを Shandre さんは検証をして、ASEAN+3 と ASEAN ではそういった関係が認められるけれども、ASEAN+6 ではまだそういった関係が見られていないという話です。
先ほど約束しましたように、議論をオープンにして皆さまのほうからの質問を受けたいと思います。時間の関係でお 1 人しか受け取れないと思いますが、どなたか質問がある方、挙手をお願いします。発言の前にご所属をお願いいたします。簡潔に質問をお願いいたします。

フロア：

Thank you, Mr. Chairman. I have a question on Figures 2, 5, and 7 of thepresenter’s draft. These figures show that there is almost no statistical
relationship between GDP growth and exports.
But I think that it’s a little bit strange. Economic theory and ourexperience show that export is one of the most important driving forces ofgrowth. So what is the problem with this chart?
I think the horizontal line should be replaced with the growth rateof exports, not the total value of exports. I recommend that growth rate ofexports year by year is more appropriate because we know that the growthrate of GDP mostly depends on the growth rate of exports each year, foralmost all countries. Thank you very much.

浦田：

どうもありがとうございます。それではもう少し質問したい方がいらっしゃる
かもしれませんけれども、時間の関係がありますので、シャンドラさんのほうから答えられるものについて答えてください。特に、観察されたデータの裏にどういうストーリーがあるのか、どういうシナリオがあるのか、どういうことが起きているのかということを統計学的というよりはディスクリプティブに、話してもらえるといいかなと思います。

86Shandre： Thank you for the comments.
Yes, with regard to the data on inter-industry and intermediate
goods trade, it important to think about the impact of intermediate goods
trade on integration. However, it is difficult to obtain consistent trade dataover a very long period of time. It is also difficult to obtain disaggregatedexport and FDI data by industry and countries.
But the story in terms of how integration is occurring and how
integration is occurring in medium- to long-term is a very important issue.
The focus of the paper is to study the medium and long-term economic
integration. The paper collects time-series data and study the impact ofdifferent country groupings on economic integration in panel data
framework.
With respect to the data and the exports, the graphs simply show
the level effects on growth. The growth effects are just as important as thelevel effects.
The dynamics of exports is based on the conglomerate effects oftrade and how each country is trying to increase the level of exports anddrive growth. The level effects are as important as the growth effects.
These are shown in the graphs.
In fact, it is important to highlight that the level effects are longterm effects on output growth and this clearly shown in my econometricmodel. The results show that there is a long-term relationship that comesfrom FDI and export growth. So the study quite nicely separates all thegrowth and the level effects.
So let me conclude with one last comment, which is that theregion itself is very much driven by FDI. And although FDI in machineryand electrical goods are equally important, there are only one or two
countries such as Japan and Korea that are actually driving thetechnological development. China is just emerging and starting to develop
its own technology. But China is going to take a very long time to develop
its technology.
The countries that are really driving technology in the region are
Japan, Korea, and Taiwan. And again, the technology they are driving isvery much applied, end-of-the-cycle kind of technology, whereas most of
the important technology is still technology from the developed countries.
So if you really to discuss about economic integration, the region
itself has to develop very strong technology. I still think that the key

87countries that are going to drive the integration in the region in terms ofinter-industrial trade and in terms of keeping export momentum going areJapan, Korea, and Taiwan. Thank you.
浦田：

どうもありがとうございました。最後のコメントである、技術的な面での開発とかを地域内で行っていく必要があると、そうでなければ本格的な地域統合は進んでいかないのではないかという指摘は重要であると思います。

88

【報告】

The New Wave of Regional Integration and East Asia
「地域統合の新たな潮流と東アジア」

Fukunari Kimura(Professor, Faculty of Economics, Keio University
Chief Economist, Economic Research Institute for ASEAN and East Asia (ERIA)

Very preliminary draft
Abstract
This paper provides an overview on the recent development of FTA networking in
extended East Asia and assesses the quality of FTAs with novel information on theutilization of FTAs, rules of origin, WTO plus elements, and others. It finds that East
Asian FTA networking has been an effective driving force of promoting freer trade andinvestment, particularly through further activating international production networks.
The paper also provides an overview of recent explosive increases in intra-regional andinter-regional exports by East Asia, which suggests the possibility of evaluation of FTA
networking in a wider scope. The paper concludes that East Asia and Asia-Pacific may
become a focal point of multilateralizing regionalism.

Key words: regionalism, free trade agreements, rules of origin, the World Trade
Organization, political economy of trade policies
JEL classification: F13, F15

89

1. Introduction
The year 2009 became an epoch-making year. In February, the agreement
establishing ASEAN-Australia-New Zealand Free Trade Area was signed. In August
2009, ASEAN-India Trade in Goods Agreement was also signed. These set thecompletion of ASEAN+1 FTA networking in extended East Asia that includes
ASEAN10 + 6. The next step of East Asian economic integration must surely be
accompanied with FTAs among Japan, Korea, and China, which is likely to take time
for a while. It is thus a good timing to evaluate what has been accomplished.
Economists’ views on overlapping bilateral FTAs have recently changed
drastically. In the past, the complication due to overlapping bilateral FTAs wasemphasized as a major shortfall of regionalism, and the necessity of FTA consolidation
was strongly claimed. However, a number of recent empirical evidences suggest thatthe complexity of trade regime may not necessarily deter international trade, and theeffect of promoting trade liberalization by the sequence of FTA negotiations starts being
rather appreciated. FTA networking in an open setting may now link to a new wave ofregionalism, and “multilateralizing regionalism” (Baldwin (2006)) is not regarded as
impossible dream anymore.
FTAs in East Asia are more practical and pragmatic than those in other parts of
the world. There exists a strong background in de facto economic integration, namely
the unprecedented development of international production networks. The FTA
networking in East Asia could be a predecessor of the new wave of regionalism withnew development strategies.
This paper tries to assess the accomplishment of FTA networking along the lineof possible multilateralizing regionalism in the future. It first provides an overview on
the current status of FTA networking in East Asia and Asia-Pacific. Then it reviewsthe existing evaluation of FTA networking from a practical viewpoint. After than, asketchy observation on recent international trade data is presented in order to set up a
possible new approach of evaluating FTA networking with a wider scope. Concluding
remarks follow.
2. Current status of FTA networking in extended East Asia and Asia-Pacific
FTA networking in extended East Asia, i.e., ASEAN+6, is a relatively recent
phenomenon. Table 1 presents the evolution of FTA networking in this region,
showing the years of FTA conclusion as well as those when the FTAs became effective.
Although the contents of these FTAs widely vary, the hub-and-spoke system of FTAs
centered by ASEAN is now completed; six countries, i.e., Japan, Korea, China, India,
Australia, and New Zealand, are connected with ASEAN by FTAs.

90

ASEAN has taken a lead in the process by trying to stay in the driver’s sear of East
Asian economic integration. ASEAN concluded ASEAN Free Trade Area (AFTA) in
1992 and accelerated trade liberalization after the Asian currency crisis in the latter halfof the 1990s. Tariff removals among six original members will be completed in
January 2010 with very few exceptions. ASEAN now seeks deeper economic
integration under the initiative of ASEAN Economic Community (AEC).
A big gap is the lack of FTAs among Japan, Korea, and China though we do not see any
sign for immediately initiating FTA negotiations. Both EAFTA (“East Asian Free
Trade Area” consisting of ASEAN+3) and CEPEA (“Comprehensive Economic
Partnership in East Asia” including ASEAN+6) study groups submitted their final
reports to their Economic Ministers Meetings in August 2009, which decided to upgrade
these initiatives to track 1 (G-to-G level). However, the timing of initiating formal
negotiations was not specified. The enthusiasm of consolidating overlapping FTAs is
now obviously weakened at least temporarily, and the current hub-and-spoke system islikely to be preserved at least in the coming few years.
Asia-Pacific, partially overlapped with extended East Asia, is also an active region of
FTA networking. Figure 1 shows a current status of FTA networking among nine
APEC (Asia-Pacific Economic Cooperation) countries; they include seven OECD
(Organisation for Economic Co-operation and Development) countries, Singapore, and91

Chile. Out of 36 bilateral combinations, 20 pairs are connected by FTAs, and 9 pairs
are negotiating over FTAs. In the recent APEC meetings, US-proposed FTAAP(APEC-wide FTA) has been on agenda. In addition, the Trans-Pacific Partnership(TPP) initiative was started by P4 countries (Brunei, Chile, New Zealand, andSingapore; an FTA among them was being effective in 2006), and the Obama
Administration in the US announced (confirmed) to participate in the negotiation in
November 2009. The TPP negotiations, involving Australia, Brunei, Chile, New
Zealand, Peru, Singapore, the US, and Vietnam, are now supposed to have the firstmeeting in Australia in early 2010. Furthermore, the Prime Minister of Australia,
Kevin Rudd proposed a new model for expanded regional cooperation called Asia
Pacific Community in November 2009.

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Table 2 presents the progress of Japanese negotiations over FTAs. As of
November 2009, eleven FTAs have been concluded and entered into force, which coverseven individual ASEAN countries, ASEAN as a whole, two Latin American countries,
and Switzerland. Negotiations are going on with GCC, India, Australia, and Peru.
Negotiation with Korea has been suspended since November 2004. The completion of
FTA networking with ASEAN countries in a short period was a notable accomplishment.
However, further extended FTA strategies in Asia-Pacific are in serious difficulty
because of agricultural protection; with keeping the current level of protection, there is
no hope of concluding FTAs with major countries such as Australia, the US, andCanada.

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3. 3. The evaluation of FTA networking in extended East Asia
Let us now examine and evaluate the contents of FTAs in extended East Asia.
First, we will review the background of FTA networking in the region, particularly fromthe historical viewpoint of the interaction between de facto and de jure economic
integration. We will then assess various aspects of the liberalization of trade in goods
and other policy modes. At the end, the interpretation in the context of political
economy will be presented.
(1) De facto and de jure economic integration in East Asia
In East Asia, de facto economic integration head-started before de jureeconomic integration. The most significant event on the side of de facto economic

94

integration was the formation of international production networks from the beginningof the 1990s. Although cross-border production sharing and off-shoring/outsourcing
to less developed countries (LDCs) are observed in the US-Mexico nexus, theWestern-Eastern Europe, and other regions, international production networks in East
Asia are distinctive in (i) their significance for each economy in the region, (ii) theirextensiveness in covering many countries and regions at the same time, and (iii) their
sophistication in combining various types of intra-firm and arm’s length (i.e., inter-firm)transactions.6
The formation of international production networks was backed up by richseries of piecemeal policy reform. In the mid-1980s, Thailand and Malaysia during arecession made a significant step of policy changes for inward foreign direct investment(FDI). Other ASEAN countries followed them with time lags of several years. In
order to attract FDI, these countries openly listened to various requests raised bymultinationals for trouble-shooting and accumulated piecemeal investment
liberalization and facilitation. In addition, the initiative of information technology
agreements (ITA) supported by APEC and WTO realized free trade insemiconductor-related electronic parts and components in the latter half of the 1990s.
Note that these policy reforms were not based on regionalism but primarily on unilateralliberalization. AFTA was concluded in 1992 but provided a mere advertisement effectin attracting FDI in order to compete with China emerging as a strong FDI attractor.
The actual trade liberalization based on AFTA was minimal until the end of the 1990s.
Regionalism in East Asia went up to a center stage after the Asian currency
crisis. ASEAN started to make a collective effort to keep incoming FDI byaccelerating its integration process and to incorporate latecomers in ASEAN. East
Asia as a whole acted together to establish an anti-crisis vehicle in international
financial cooperation and ended up with the establishment of the Chiang Mai Initiative.
The effort of forming FTAs was launched by the Japan-Korea talk in 1998, followed by
the formation of Northeast Asia and ASEAN FTAs. The last three countries inextended East Asia, namely Australia, New Zealand, and India, also recently deepened
their relationship with ASEAN.
FTA negotiations were largely motivated by the existing de facto economic integrationin the region. In the negotiation process of these FTAs, major agenda became (i) the
restructuring of import-substituting industries such as automobiles, domestic electric
appliances, iron & steel, and petrochemicals by removing remaining trade barriers and(ii) the further activation of intra-regional production networks by conducting trade/FDI
6

As for the characteristics of East Asian production networks and the background policy
environment, see Ando and Kimura (2005) and Kimura (2006).

95liberalization and facilitation.
FTAs in the region.

These will reflect the contents as well as the usage of(2) Liberalization of trade in goods
Liberalization coverage
One of the obvious criteria for evaluating the quality of FTAs is the degree ofthe cleanness of liberalization for trade in goods. Reflecting the hub-and-spoke system
of FTAs centered by ASEAN, the liberalization coverage of FTAs varies with AFTA thehighest.
AFTA was concluded as a FTA under the enabling clause of the WTO and did
not follow all the disciplines that the WTO imposed. A major deficiency is the lengthof interim agreement. The WTO asks countries to complete substantially all the tradeliberalization within ten years.7 In the case of AFTA, since the initiation of tariff
reduction in the early 1990s, already more than 15 years have passed. However, theliberalization coverage of the Common Effective Preferential Tariff (CEPT) scheme of
AFTA that specifies gradual tariff reduction schedule is pretty high. Under the CEPT
scheme, each member country classified traded commodities into the inclusion list (IL),the temporary exclusion list (TEL), the general exception list (GEL), and thesensitive/highly sensitive list (SL/HSL) and gradually moved items from TEL, GEL, or
SL/HSL to IL. By now, the original member countries, i.e., Brunei, Indonesia,
Malaysia, the Philippines, Singapore, and Thailand, have eliminated TEL and haveretained GEL and SL/HSL only for very limited commodities (less than 1%).
Commodities in IL are now with 0-5% tariffs, which are also supposed to be zero by
2010.8 Although AFTA has been criticized as a lenient FTA for long, it turns out to bea clean FTA in terms of the liberalization coverage.9 In addition, ASEAN recently
harmonized traded commodity classification up to the most detailed level.
ASEAN-China FTA (ACFTA) and ASEAN-Korea FTA (AKFTA) apply similar
tariff reduction scheme to CEPT though they are less clean than AFTA in theliberalization coverage. ACFTA started lowering tariffs under the interim agreement
7

1947 GATT XXIV5(c) stated “reasonable length of time,” which is further specified as “10 years”
by the Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs andTrade 1994.
8
Latecomers of ASEAN, i.e., Vietnam, Laos, Myanmar, and Cambodia, are supposed to eliminate
tariffs for almost all commodities by 2015 or 2018.
9
As of August 2008, the percentage of tariff lines with zero tariffs is 85.4% in Brunei, 80.0% inIndonesia, 82.6% in Malaysia, 82.9% in the Philippines, 100% in Singapore, and 80.0% in Thailand,
which clear the interim target of 80%. The average tariff rates are 1.95% for ASEAN10 and 0.97%
for ASEAN6 in 2008. See JETRO (2009, p. 24).

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in July 2005 while the so-called Early Harvest Program for agricultural and fisheryproducts (HS01-08) was implemented from January 2004. The interim agreementclassified commodities other than those under the Early Harvest Program into (i) normal
track 1, (ii) normal track 2 (within 150 items), (iii) sensitive track (less than 400 items
and less than 10% of trade values), and (iv) highly sensitive track (less than 100 items
and less than 40% of items in the sensitive track). The due dates for tariff elimination
are 2010 and 2012 for (i) and (ii), respectively. For (iii), the existing tariffs can beretained until the end of 2011, will be reduced to less than 20% by 2012 and 0-5% by
2018. As for (iv), tariffs should be reduced to less than 50% by the beginning of 2015.
Items classified in sensitive and highly sensitive lists differ across countries thoughsome important electric machinery and transport equipment are included. AKFTA has
a resembled scheme and the similar level of liberalization coverage.
Japanese bilateral FTAs with ASEAN countries set up a higher standard for
ASEAN countries than ACFTA or AKFTA. For Japanese bilateral FTAs with Brunei,Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, the zero-tariffcoverage after ten years in terms of trade values on the ASEAN side is 99.94%, 90%(96% including iron and steel for specific use), 99%, 97%, 100%, 97%, and 88%,
respectively. The zero-tariff coverage after ten years on the Japanese side is often
lower though: 99.99%, 93%, 94%, 92%, 95% (97% after the five-year review), 92%,
and 95%, respectively.10 The lower liberalization coverage on the Japanese side is dueto heavy protection on agriculture-related commodities. 11
The asymmetricliberalization commitments are the reflection of Japan’s negotiating power in Southeast
Asia as well as the existence of side payments in the form of investment promotion andeconomic/technical cooperation from the Japanese side.
The recently concluded ASEAN-Japan FTA (AJCEP) applies the CEPT-styletariff reduction scheme. On the Japan side, 90% of commodities (in terms of tradevalues) will have immediate tariff removals, additional 3% will have within-ten-year
gradual tariff removals, and the rest will be excluded from liberalization or have certain
reduction of tariffs. As for ASEAN6, 90% (in terms of both trade values and the10

These figures are obtained from the homepage of the Ministry of Foreign Affairs, Government ofJapan (http://www.mofa.go.jp/). Note that the measurement of liberalization coverage in terms oftrade values is sensitive to the trade pattern in the base year, which may not properly reflect highspikes of protection. Kuno and Kimura (2008) show that the liberalization coverage of somebilateral FTAs concluded by Japan in terms of the number of tariff lines is substantially lower than
the announced figures based on trade values.
11
As for the agricultural protection in FTA negotiations by Japan, see Ando and Kimura (2008) and
Mulgan (2008a, 2008b). Kuno and Kimura (2008) analyze the nature of heavily protected
agricultural products focusing on their geographical concentration of production in Japan. Low
coverage of liberalization for agricultural products becomes an obvious obstacle to Japan’s further
extending FTA strategies.

97

number of tariff lines) will have immediate tariff removals or within-ten-year gradualtariff removals, and the rest will be excluded from liberalization or have certain
reduction of tariffs. ASEAN latecomers will have a looser schedule of tariff removals
or reduction.
In summary, AFTA is now completing a clean FTA in terms of the liberalization
coverage for trade in goods, but other FTAs in East Asia still include dirty aspects.
Although manufactured goods are widely covered in liberalization schemes, somespecific items, particularly agriculture-related commodities in Japan, retain substantial
protection. The recent entry of Australia and New Zealand in the game of FTA
networking in the region has provided a certain pressure on protectionism thoughcompletely clean trade liberalization in East Asia as a whole is yet to come.
FTA utilization
Tariff reduction or removal does not automatically mean freer trade. Only
after utilizing preferential tariffs, trade liberalization effects are realized. FTAs in East
Asia, particularly AFTA, have for long been criticized for their low levels of utilization.
The situation, however, has drastically changed these days.
Thailand and Malaysia disclose the data of FTA utilization on the official
customs data basis. Table 3 presents two countries’ exports with utilizing the CEPT
scheme of AFTA. As of 1998, CEPT was barely utilized, which confirms the oldcriticism. However, the utilization ratios have substantially increased since then. In
2007, 31% of Thailand’s intra-ASEAN exports and 19% of Malaysia’s intra-ASEAN
exports utilize CEPT where exports to Singapore are excluded because MFN-applied
import tariffs in Singapore are zero for almost all products. These ratios are not small
because the denominator, total intra-ASEAN exports, includes exports of commodities
for which MFN import tariffs are already zero or very low particularly under ITA andfor which duty-drawback system is applied as investment incentive.

98

Table 4 tabulates exports utilizing various FTAs by Thailand and Malaysia.
ACFTA and AKFTA do not seem to be well utilized so far, perhaps due to the slow
liberalization process or the low public awareness. On the other hand, theThailand-Australia FTA and the Early Harvest Scheme items in the Thailand-India FTA
present very high utilization ratios, 66% and 98% respectively in 2007.

Japan External Trade Organization (JETRO) annually conducts an extensive
questionnaire survey on foreign affiliates of Japanese firms, which recently starts

99including questions related to FTA utilization. The new results (JETRO (2009, p.
22-30)) show that among manufacturing affiliates of Japanese firms in ASEAN
conducting exporting activities, 23.0% use FTAs, and 23.3% consider using FTAs.
Among those with importing activities, 19.7% use FTAs, and 24.4% consider using
FTAs. The questionnaire further asks affiliates not even considering using FTAs forreasons why. Among exporting affiliates without any intention of utilizing FTAs,
37.6% of them say “duty-drawback system on the import side exists,” 22.9% claim“there does not exist a FTA with trading partners,” and 19.9% state “MFN tariffs at
destination are low so that FTAs are not advantageous.” Very small proportion ofexporting affiliates raises troublesome administrative procedures or their ignorance of
FTAs as reasons for not utilizing FTAs. Similarly, among importing affiliates without
any intention of utilizing FTAs, 48.9% of them say “duty-drawback system for imports
are applied,” 13.4% claim “domestic sales on which tariffs are imposed is small,”
13.1% state “there does not exist a FTA with trading partners,” and 12.8% advocate“MFN tariffs are already low.”
The questionnaire also asks some additional questions. One is the minimal
preferential margin with which exporting affiliates stop using MFN tariffs and startutilizing FTAs. The average margin across exporting affiliates located in ASEAN is
5.2%. Another is the preferential tariff rate equivalent to the administrative cost ofobtaining duty-drawback system. The average across importing affiliates located in
ASEAN is 1.9%.
Hayakawa, Hiratsuka, Shiino, and Sukegawa (2009) employ the micro data of
JETRO survey and regress the utilization of FTAs on individual affiliates’
characteristics. They find that the utilization of FTAs or the intention to utilize FTAs
is positively associated with the size of affiliates and negatively associated with thenumber of commodity items with zero tariffs. The relationship with the proportion of
local procurement presents an inverted-U pattern.
Overall, considering other policy arrangements to avoid being taxed such as
zero MFN tariffs, duty-drawback system, and others, the utilization of FTAs seems to be
fairly high in ASEAN. However, further facilitation ion utilizing FTAs may berequired, particularly for small and medium enterprises.
Rules of origin (RoO)
Possible negative consequences of RoO are one of the major concerns inregionalism. So-called spaghetti bowl or noodle bowl phenomenon refers to trade
deterrent effects that are generated by the complication of trade regime, particularly
regarding RoO, due to the unorganized proliferation of bilateral/plurilateral FTAs.

100

However, the logic of trade deterrence due to additional FTA is not very clear. Adding
another FTA on the top of existing FTAs would certainly enhance the complication of
trade regime. However, if private people think a new preferential tariff system toocomplicated, they will simply continue to use MFN tariff system or other FTAs. It isvery unlikely that additional FTA reduces trade; instead, the issue we concerned should
be whether additional FTA promotes trade or not. In that sense, RoO may indeed work
as a counteracting force against trade liberalization by FTAs. Strict and unfriendly
RoO may act for protectionism by nullifying the usage of preferential arrangements.
Estevadeordal, Harris, and Suominen (2007) provide an extensive survey on
RoO in FTAs in the world. They conclude that RoO in intra-Asian FTAs tend to beless restrictive and complex than their counterparts in Europe and the Americas.
Sample firm surveys in East Asian countries conducted by Kawai and Wignaraja (2009)
suggest unexpectedly little Spaghetti/noodle bowl phenomena though further facilitation
seems to be needed. We are accumulating evidences that RoO in FTAs in East Asia
does not work as a major obstacle to promoting freer trade.
Medalla and Balboa (2009) carefully examine RoO in FTAs in East Asia,
review best practices in applying RoO, and propose a direction for improvement. First,
they claim that alternative or co-equal system of RoO is less restrictive than otherarrangements and is thus to be promoted. RoO is classified by the testing
methodology in identifying the origin of goods. Frequently used tests are thevalue-added measure test, the tariff heading criterion test, the specified processes test,
and the combination of these, “both” or “either.” The value-added measure test looks
simple in text but is not user-friendly for some products such as machineries consistingof numerous parts and components. A practical way of avoiding unnecessary user cost
as well as saving the cost of negotiation is an alternative or co-equal system in which
meeting one of the designated tests, for example, either the value-added measure test or
the tariff heading criterion test, may suffice.
Table 5 tabulates the number of tariff lines applying various types of RoO in
AFTA, ACFTA, AKFTA, and AJCEP. ACFTA reflects an old style of RoO that applies
the value-added measure test or regional value content (RVC) test for large number oftariff lines. AFTA used to have a similar pattern but recently switched to a co-equal
system applying either RVC test or tariff heading criterion test (CC, CTH, or CTSH in
the table) for a large number of tariff lines. AKFTA and AJCEP also apply co-equal
system extensively.

101

Second, Medalla and Balboa recommend wider application of de minimis
principle. This principle specifies a maximum percentage of non-originating material
to be used without affecting origin, which can substantially reduce the cost of proving
the origin of products in the value-added measure test. Third, although RoO in East
Asia seem to be relatively simple and liberal, they recommend further facilitation in theprocedure to obtain the certificate of origin.
In summary, RoO is certainly important in order to capture the benefit ofliberalization effort in FTAs, and there still exists room for further facilitation.
However, negative consequences of the complication of RoO seem to be limited in East102

Asia.
Regionalism promoting multilateral liberalization
There has been a long-lasting debate on whether trade liberalization inregionalism is a building block or a stumbling block for worldwide trade liberalization.
Various political economy models can justify both stories, and the issue is thus
empirical. In this context, the paper by Estevadeordal, Freund, and Ornelas (2008a,
2008b) is a path-breaking work. It employs extensive time-series data set of tariff
levels in selected Latin American countries, both on the FTA basis and the MFN basis,and rigorously proves that tariff reduction in FTAs tends to be followed by tariff
reduction at the MFN level. Calvo-Pardo, Freund, and Ornelas (2009) replicate theexercise for ASEAN and find the same pattern. Trade liberalization in FTAs seems topromote multilateral trade liberalization.
As pointed out by Ando (2007), we observe in East Asia and other parts of theworld that MFN-based liberalization often surpasses gradual liberalization in FTAs sothat the utilization of FTAs loses its sense at least temporarily. Trade liberalization on
the FTA basis seems to be an effective trigger for trade liberalization at the MFN level,
particularly in East Asia.
(2) Liberalization in other policy modes
Taking advantage of their flexibility, FTAs in the world have increasingly
included various policy modes other than policies on trade in goods. Trade in services
is a natural extension on which GATS Article V imposes certain discipline. The actual
liberalization of trade in services in intra-East-Asian FTAs, however, is relatively
modest because countries in the region do not have strong international competitivenessin most of the services sectors.
ASEAN has ambitiously set the target of ASEAN Economic Community(AEC) in 2015, and the liberalization of trade in services is one of the major efforts.
ASEAN Framework Agreement on Services (AFAS) was signed in December 1995, andwith seven sequential rounds of negotiations between 1996 and 2009 under the purview
of ASEAN Economic Ministers (AEM), the path of liberalization toward “substantiallyeliminating restrictions to trade in services among ASEAN countries” has gradually
been specified. Air travel, healthcare, e-ASEAN (telecommunications and IT services),and tourism as well as logistics are set as priority sectors to realize liberalization earlier,and all the other sectors will follow by 2015 with services negotiations in every two
years. As a result, ASEAN is supposed to achieve a free flow of services by 2015 withflexibility. In addition, seven mutual recognition agreements (MRAs) have been103

concluded for professional services. The effort of ASEAN is certainly ambitious
though how far the actual liberalization is realized is still to be tested.
ACFTA and AKFTA include agreements on trade in services, both of whichwere signed in 2007. However, the structure of the articles closely resembles to GATS,
and the contents do not extensively explore GATS plus. Bilateral FTAs between Japanand ASEAN member countries include a number of GATS plus due to sector-by-sector
negotiations. However, agreements are not entirely comprehensive, which reflects
relatively weak services sectors in Japan.
As for investment, ASEAN concluded the ASEAN Comprehensive Investment
Agreement (ACIA) in February 2009, which is an upgraded version of ASEAN
Investment Area (AIA) in 1998, as a part of the comprehensive efforts toward AEC.
ACIA includes liberalization, promotion, facilitation, and protection with applying anegative list approach for reservations. How far the reservations will be eliminated is
not sure at this moment though.
ACFTA and AKFTA are supposed to include investment after additional
negotiations though the contents have not been disclosed yet. As for Japan, although
AJCEP does not include a meaningful article on investment, bilateral FTAs between
Japan and ASEAN countries as well as bilateral investment treaties with Cambodia(signed in June 2007) and Laos (signed in January 2008) deal with investment. They
intend to explore investment liberalization including pre-entry and post-entry national
treatment, ban on some performance requirements, and investment facilitation in
addition to investment protection. These obviously reflect interests of Japanese firms
extending business all over East Asia.
Other elements in intra-East-Asian FTAs reflect development stages andprivate sector’s interests of each country in the region. ASEAN has pursued AEC
under the scheme of AEC Blueprint (ASEAN (2008)) in which various policy areas andtopics other than policies on goods, services, and investment are listed (Table 6). We
observe that the contents that seem to be workable are highly practical and relevant topolitical and economic conditions of ASEAN.

104

FTAs concluded by Japan in the region are also highly pragmatic. For
example, the Japan-Indonesia EPA concluded in August 2007 as well as related
documents include practical items, in addition to trade in goods, services, andinvestment, such as energy and mining resources, movement of natural persons andrelated cooperation, customs procedure, government procurement, competition, andintellectual property rights, and cooperation. ACFTA and AKFTA also reflect thestatus of international relations as well as industrial connections; economic cooperationis always an important sub-element in FTAs.
In East Asia, WTO+ works strongly. However, the context is not for pursuing105the legal comprehensiveness of economic integration. Rather, the motivation of
introducing WTO+ is pragmatic for serving diplomatic purposes or responding torequests of private sector extending international production networks. In the end,
facilitation and cooperation are often emphasized more than liberalization.
4. Further evaluation in a wider scope: preliminary thought with trade data
The former section summarized the standard set of post evaluation of FTA
networking. Such a framework is not, however, entirely satisfactory because
economic effects, either static or dynamic, either direct or indirect, are not fullymeasured yet. In the period of FTA networking, particularly after the year 2001, theinternational trade pattern in East Asia was changed truly drastically. To judge how far
the change is accrued from FTA networking requires a careful study, which the paper
does not cover. We, however, would like to provide an overview on drastic changes ininternational trade pattern and infer possible contributions of FTA networking.
Figure 2 presents changes in by-destination shares of exports by East Asian
countries.12 In 2001-2007, explosive increases in exports, both intra-East Asia exports
and exports to the rest of the world, are observed. Particularly, intra-East Asia exports
grew at the pace of 18.5% per annum and 15.0% per annum in 2001-2005 and2005-2007, which is by far faster than GDP growth rates. It means that the trade
openness index defined as (exports+imports)/GDP increased. Figure 3 shows thatexports of both machinery parts and components and machinery finished products grewat the same pace. Table 7 provides more detailed changes in exporting pattern.

12

East Asian countries here include Japan, Korea, China, Hong Kong, Indonesia, Malaysia, thePhilippines, Singapore, and Thailand.

106

107

108

Possible reasons for such a drastic increase in exports by East Asian countries
are listed for future detailed research as follows: first, there exist direct effects of theremoval of trade barriers on intra-East Asia trade, which may particularly be important
for among ASEAN countries under the AFTA scheme. Second, intra-regional trade
may increase if the reshuffling of production sites proceeds for constructing more
efficient production/distribution networks. Table 8 provides an interesting observation
where the number of production sites of Japanese electric companies in ASEAN isdecreased as economic integration proceeds.

109Third, more than proportional growth of demand for traded goods may enhance
trade. Particularly in the case of consumer goods, the preference is not “identical andhomothetic” as the standard Heckscher-Ohlin model would set up. In East Asia, weobserve a rapid growth of “middle class” (see Figures 4-613). The disproportional
growth of middle class may not be surprising if we consider rapid economic growth.
One important implication is a shift in demand structure. The demand for traded
goods such as domestic electric appliances may be expanded more than proportionallyas income goes up.

13

Figures 4-6 are constructed by using the World Bank’s PovcalNet where estimates ofincome-level-wise population after the adjustment of prices is conducted by income class(http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPROGRAMS/E
XTPOVRES/EXTPOVCALNET/).

110

111

Of course, these are not due to FTA networking. However, it is true that FTA
networking and intra-East Asia export growth go forward hand in hand.
5. Where to go from now on
Unlike the European integration, economic integration in East Asia has notbeen driven by a unified political will of governments in the region. Unlike economic
integration in North America, there does not exist a single dominant hegemon or leader
in East Asia, either. Decentralized forces of political economy have pushed forward
FTA networking in East Asia, and an open-end FTA system has been formulated.
Functional deepening of economic integration is likely to continue in order to further
activate international production networks. The mechanics of international production
networks would work for narrowing development gaps across countries and regions inEast Asia, which would present a successful case of inclusive or pro-poor growth. If
we calmly review the accomplishment of economic integration so far, East Asian-wideconsolidation of FTAs does not seem to be impossible, at least for trade in goods andsome elements of functional WTO+. For the coming ministerial meetings in August
2009, study groups of EAFTA (ASEAN+3) and CEPEA (ASEAN+6) are preparing topropose possible paths of FTA consolidation in East Asia.
However, due to the lack of FTAs among Japan, Korea, and China, an East
Asian-wide consolidated FTA does not seem to be realized in the coming few years.
Rather, the move of Asia-Pacific FTA networking is likely to proceed earlier. FTAs in
Asia-Pacific, possibly led by TPP initiative, would have characteristics different from
East Asian FTAs; they tend to have higher coverage of trade liberalization and morerule-oriented. Singapore, Australia, New Zealand, and possibly Korea seem to beready to be on board. If such an initiative goes forward, how will Japan, China, and
ASEAN respond? New forces of political economy will certainly emerge in such acase.
All in all, FTA networking has developed in an open setting in East Asia andAsia-Pacific. The development has been backed up by the logic of political economy.
With economic dynamism, East Asia and Asia-Pacific are likely to become a focal pointof multilateralizing regionalism.

112References
Ando, Mitsuyo. (2007) “Impacts of Japanese FTAs/EPAs: Post Evaluation from theInitialData.”
RIETI
Discussion
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07-E-041.
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Ando, Mitsuyo and Kimura, Fukunari. (2005) “The Formation of International
Production and Distribution Networks in East Asia.” In Takatoshi Ito and Andrew K.
Rose, eds., International Trade in East Asia, Chicago: The University of Chicago Press:
177-213.
Ando, Mitsuyo and Kimura, Fukunari. (2008) “Japanese FTA/EPA Strategies andAgricultural Protection.” Keio Business Review, Vol. 44, No. 1: 1-25. The former
version is in http://www.coe-econbus/keio.ac.jp/data/DP2006-024.pdf.
The Association of Southeast Asian Nations (ASEAN). (2008) ASEAN Economic
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Baldwin, Richard E. (2006) “Multilateralising Regionalism: Spaghetti Bowls as
Building Blocs on the Path to Global Free Trade.” The World Economy, 29, No. 11(November): 1451-1518.
Calvo-Pardo, Hector; Freund, Caroline; and Ornelas, Emanuel. (2009) “The ASEAN
Free Trade Agreement: Impact on Trade Flows and External Trade Barriers.”
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Estevadeordal, Antoni; Freund, Caroline; and Ornelas, Emmanuel. (2008b) “Does
Regionalism Affect Trade Liberalization toward Nonmembers?” Quarterly Journal of
Economics, 123(4) (November): 1531-1575.
Estevadeordal, Antoni; Harris, Jeremy; and Suominen, Kati. (2007) “Multilateralizing
Preferential Rules of Origin around the World.” Presented at WTO/HEI/NCCR
Trade/CEPR Conference “Multilateralizing Regionalism” on 10-12 September 2007,
Geneva,Switzerland.
Availableat
http://www.wto.org/english/tratop_e/region_e/conference_sept07_e.htm.
Japan External Trade Organization (JETRO). (2008) 2008 White Paper on International
Trade and Foreign Direct Investment. Tokyo: JETRO (in Japanese). Also see
http://www.jetro.go.jp/en/news/releases/20080807699-news.
Japan External Trade Organization (JETRO). (2009) Zai Azia Oseania Nikkei Kigyo
Katsudo Jittai Chosa 2008 Nendo Chosa (2008FY Survey on Foreign Affiliates ofJapanese Firms in Asia and Oceania). 08-ORF 70F-213FB 11. Tokyo: JETRO (inJapanese; The English version is in process).
Kawai, Masahiro and Wignaraja, Ganeshan. (2009) “The Asian “Noodle Bowl”: Is It
Serious for Business?” ADBI Working Paper Series No. 136 (April).

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Kimura, Fukunari. (2006) “International Production and Distribution Networks in East
Asia: Eighteen Facts, Mechanics, and Policy Implication.” Asian Economic Policy
Review, 1, Issue 2 (December): 326-344.
Kuno, Arata and Kimura, Fukunari. (2008) “Northeast Asia and FTAs: Issues andPerspectives.” ERINA Report, Vol. 82, July, 2008: 3-14.
Medalla, Erlinda M. and Balboa, Jenny. (2009) “ASEAN Roles of Origin: Lessons andRecommendations for Best Practice.” ERIA Discussion Paper ERIA-DP-2009-17.
In http://www.eria.org.
Mulgan, Aurelia George. (2008a) “Japan’s FTA Politics and the Problem of Agricultural
Trade Liberalization.” Australian Journal of International Affairs, 62, No. 2 (June):164-178.
Mulgan, Aurelia George. (2008b) “Where Japan’s Foreign Policy Meets Auricultural
Trade Policy: the Australia-Japan Free Trade Agreement.” Japanese Studies, 28, Issue
1: 31-44.
Sukegawa, Seiya. (2009) “Hajimarouto shiteiru higashiajia sangyou saihen no dai 2
maku (The second act of East Asian industrial restructuring is about to start).”Forthcoming in Jiji-Tsushin-sha Ajia Tenbou. In Japanese.

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【Power Point】
The New Wave of Regional Integration and East Asia
Fukunari Kimura(Professor at Faculty of Economics, Keio University
Chief Economist at Economic Research Institute for ASEAN and East Asia (ERIA))

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121

【討論】
The New Wave of Regional Integration and East Asia
討論者:三田 紀之(経済産業省通商政策局経済連携課課長)

はい、経済産業省の三田です。本日はこのような機会をいただきましてありがとうございます。日本人の方が多いということで今日は日本語で話をさせていただきます。本日私は唯一の政府からの参加と思いますので、現実に交渉あるいは運用している者として、学術的議論というよりはむしろ現場の実感をお伝えするという趣旨でコメントしたいと思います。
まず、基本的には、木村先生の今回の発表は、私どもの現場の実感に非常に沿ったもの
だというふうに考えています。その上でコメントさせていただきます。
まず、東アジアの FTA における日本政府、我々の基本的視座をご説明させていただきます。これは大きく 2 つあります。1 つはまさに先ほどからお話があった生産ネットワークの重視。2 番目はこの数年間に起こってきている状況ですけれども、FTA の利用といったその
ライフサイクルの重視、この 2 点です。
1 点目の生産ネットワークの重視ということは言い方を変えると、この地域、あるいは日系企業の生産ネットワークの競争力をなるべく強化しようという方向です。具体的には、例
えば関税の交渉であれば、部品の関税の撤廃というのを重視する。あるいは、原産地規則についてもなるべく生産者にとって使いやすい規則を提案するということで、今お話のあった
co-equal ルールというのは日本から提案したものです。
また、日系企業のアジアへの投資というのを重視していますので、投資環境の整備ということを重視していて、投資のルール、あるいはビジネス環境の整備といった枠組みを重視しています。また、日本企業の生産ネットワークは別に日本とアジアの国の二国間の間で貿易をしているだけではなくて、この地域全体に及んでいますので、日本と相手国の FTA だ
けではなく、第三国間の FTA にも強い関心があり、また原産地規則の累積といった点も重視しています。そのような点が、単に二国間 FTA だけでなく、広い広域の地域統合への関心が強いという最大の理由です。
2 点目の FTA のライフサイクルの重視ということですが、東アジアの FTA は今お話があったように、例えば ASEAN+1 の FTA が今年全部交渉が終わったように、交渉の段階か
らこれを現実に活用していくという段階になっております。我々も交渉のときには予想もしなかった事態も結構多くて、発効後にきちんとこの FTA が使われるようにしていく、あるいは改善していくということが重要だと思っています。我々、これを「ライフサイクル」というような言い方をしていますが、運用（implementation）、そして利用（utilization）、特に普及活動をきちんとして企業が利用できるようにする。そして利用実態をきちんと把握する。
そして最後にこれを踏まえて改善をしていくといった、ライフサイクルの業務が今我々の最122

大の仕事となっています。
実は日本企業は、第三国間の FTA を含めた、アジアの FTA の最大のユーザーです。したがって、日本だけでなく、アジアの FTA も含めて、この FTA を改善していく、更には、
収斂（convergence）をしていくことについてのニーズが非常に多い。これがもう 1 つ我々が広域のリージョナルな FTA を進めようとしている理由です。
では、次にライフサイクルという観点から見た東アジアの FTA の現状についてです。
まず、木村先生のご発表では、企業の利用実態及びその企業活動への影響という点について、焦点が当てられておりました。まさにこれは我々も重視しています。ただその前に、まずそもそもの運用自体が現実には各国の能力等からきちんとできていないケースが結構多いということで、まず前提として東アジアの FTA は、運用をしっかりするということが最大の課題だなというふうに感じております。
その上で、お話のあった「利用」ですけれども、次第に使われてきているけど、まだまだ努力が必要だと思っています。この「利用」もやはり「自由化」の度合いによるところが大きくて、例えば「即時撤廃」が行われている、発効からすぐに撤廃が行われている分野の利用というのは非常に多い。ほとんど 100％近く利用されているのではないかと思います。逆に、長期間かけて関税率が下がっていく分野というのは利用がまだ少ないということが言えます。
すでに発効して 5 年がたったメキシコでは、有税品目の輸出をしている企業のうち、約 7割が使ってみようと思って税率を調べ、半分が FTA を使っているということを私どもの調査で発見いたしました。また、現地での進出企業の 6 割が FTA のメリットがあるということなので、ある程度 FTA が定常化してくれば使われるという状況はあろうかと思います。
またもう 1 点、第三国の FTA の活用意欲が高いということも言えます。2 年前の JETROのアンケートですけれども、使っている FTA のうち第 3 位に AFTA（ASEAN 自由貿易地域）が入っていました。また、今後の利用意向としては、上位 5 位のうち、2 位が AFTA、3 位
が ASEAN・中国、そして 5 位がタイ・インド、ということで非常に第 3 国間の FTA の利用についての意欲が高いということが言えます。
では現実に、FTA によってどういう影響があるか。木村先生の最後のチャレンジの部分
で、まさにこの点に焦点をあてていただいて非常にありがたいと思います。これは学術的には大変難しいと思うんですが、我々現実的にはかなりこういうふうに使われてきてサプライ
チェーンが変わってきているということを感じています。特に経済危機以降に、「選択と集中」という形で、サプライチェーンの集約が見られるなと思っています。
現実に起こっている例として 3 点、例をあげます。1 つはかなり中長期的なトレンドです
が、ASEAN の中の AFTA によって自動車産業のタイへの集中というのが起こっている。2点目ですが、タイ・豪州の FTA ができたことで、日系企業は豪州への自動車輸出を、日本からの輸出から、タイへの輸出に切り替えているということがあります。これは、タイからの輸出のシェアが増え、日本からの輸出のシェアが減っています。3 番目に、タイとインドの FTA、これはアーリーハベストが既に発効していますが、これによってかなりタイとイ123

ンド間の、日系企業の貿易がさかんになっています。例えば自動車部品を相互で輸出し合うという流れがあります。また、企業によってはインドの工場を閉鎖して、タイからの輸出に切り替えているような分野もあるというように聞いています。
次にこのようなライフサイクルから見た FTA の改善点ですけれども、木村先生からの指摘があったようにあまり RO が違うスパゲティボール現象で困っているような声をそれほど強くは聞いていない。1 つにはこれは、交渉時に 1 つ 1 つ利害関係を反映しているからだからだと思います。ただ一方で、例えば運用の問題、インボイスにどう書くかといった問題
や、手続き、証明制度といった点への関心は高くて、産業界あるいは執行側の当局、両方がこういった現実の運用に悩んでいるということで、こういった問題を解決していくことが広域的な FTA の 1 つの課題だと思っています。
最後に、今後の方向ですけれども、やはり今まで申し上げてきたように、ライフサイクルの視点から、活用をどうするか、そして問題点をどうしていくか、というのは広域的 FTAの最大のドライビングフォースだと思っています。生産ネットワークにとっての累積の重要性、あるいは既存 FTA の活用がされて、それでサプライチェーンが今言ったように変わってきたという観点、こういった点を重視する必要があります。特に、インド、豪州、ニュージーランドというのが東アジアのサプライチェーンに組み込まれてきたなという実感をしておりますのでそういった意味で、ASEAN+6 の FTA というのを中心に据えて推進していきたいと思っています。
これはまた、中間層の市場、肥えている中間層市場を持つ中国、インドを東アジア全体として取り込むという考えであります。また、現実的な問題としても、こういった広域的 FTAを進めるにあたってコンペティティブ・リージョナリズムの動きがあるな、という点は非常に強く実感しております。我々は、+3、+6 さらには日中間の FTA、この 3 つをある意味同時に走らせながら進めて行くというふうにしたいと思っています。
またもう 1 点、このような観点からは最終消費財の輸出として、アメリカといった点も重要なのでこの TPP（環太平洋戦略的経済連携協定）の動きにも非常に関心があり、これについても日本がどう関与するかというのを考えて行くということであります。以上です。

124

【質疑応答】
浦田：

どうもありがとうございました。では先ほどと同じように、聴衆の方から
お 1 人ご質問をお受けしたいと思いますが、どなたかご質問ある方がいらっしゃいましたら挙手をお願いします。質問の際にはご所属をおっしゃってから、お願いしたいと思います。いかがでしょうか。どうぞ。

フロア：

姫野でございます。今、財務省で仕事をしております。時間がありません
ので、問題意識を今お話することはやめまして、質問にすぐにいきたいと思います。木村先生のご報告で大変実情を踏まえつついろいろな動きがあるというお話があったんですが、今三田課長のお話にもありましたように、今までの ASEAN+ジャパンのような ASEAN+1 スタイルの FTA に加えて、広域の ASEAN+3 ですとか、ASEAN+6 という FTA に向かっていこうかという話があるわけですけれども、ASEAN の国にとって、ASEAN
がハブとなって FTA が出来る状況が変わって、ASEAN+3 になる、+6 になるということになりますと、ASEAN に対するインウォードの FDI に悪影響がでるんじゃないか、というようなこともあろうかと思いますが、データの面ですとか、経済的な分析の面、もしくは政策論議の中でこのASEAN がどういうふうに影響を受けるか、そしてどのようなポジションをとるかについて何か示唆いただければと思いまして、よろしくお願いし
ます。

浦田：

ありがとうございます。時間の関係ですみません、お 1 人からしか質問を受けられないことをお許しください。では木村さん、三田さんからのコメ
ントあるいは質問と、今の姫野さんからの質問に対して簡潔にお答えくだ
さい。

木村：

三田さんのコメントどうもありがとうございました。特にお答えすることはありませんが、こういうふうに FTA をどうやったらうまく使っていけるかっていうことをずいぶんきめ細かい取り組みがなされていまして、ひとあたりやっぱり日本人、日本企業がこう FTA に慣れていくっていう過程で、こういうプロセスってすごく大事なプロセスだと思うんですね。だからそういう意味で、協定できたら終わりっていうんじゃなくて、これからもっと使っていくっていう努力は確かに重要なことだというふうに理解しております。
フロアからのご質問ですけれども、おっしゃった通りのことがよく議論されて、陰に日向に議論されているというべきでしょうか。ASEAN は確

125

かに FTA ネットワークのハブになっているのですが、例えば北米でアメリカが中心にハブになっているとか、あるいは EU で西ヨーロッパがハブになっている、そういう意味でのハブと全く違う性質があって、1 つは経済規模が小さい、それから ASEAN 全体としてはどちらかというと途上国であって、投資をする側じゃなくて、投資をする側になっているということになりますから、通常の NAFTA とか EU で働いたようなドミノエフェ
クトっていうんですかね、そういうものが違うメカニズムでしか働かない
ような形になっている。だから ASEAN の立場からすると、とにかく投資をしてもらうことが FTA ネットワーキングをしている 1 つの大きな目標
だというふうに考えるとすると、例えば日中間、あるいはインドとの間、
そういう FTA ができてきて、あるいは広域 FTA になってくれば、自分たちの相対的な地位はもしかしたら下がるかもしれない、というのは確かにあり得る考え方ではあると思います。
ただ、ASEAN の中での議論としては、あまりオープンにそういう話はしていない。意図的にしていないというふうに理解しています。それは、
もう 1 つは広域のインテグレーションの場を提供しているというのがもう 1 つ ASEAN の大事なファンクションであると考えているからだと思うんですね。だから日中間の首脳会談、ついにこの間から ASEAN の外でやられるようになりましたけれども、それまでは ASEAN の会合があるとき
しかそういうものは開かれていなかった。そういう意味で、フォーラムを提供しているというのはハブの機能として大変重要な機能であるというふうに ASEAN が理解しているということもあるので、だから、必ずしもFTA をコンソリデートして大きくしていくということに情熱を傾けているということではないけれども、そういうことを話す場を提供するというのも自分たちの役割なんだというふうに考えているというのが現状かなというふうに理解しております。
浦田：

どうもありがとうございました。まだまだこのテーマにつきましても議論があるかと思いますけれども、時間の関係で次の 3 番目の論文に移りたいと思います。3 番目の論文はソウル国立大学の安先生から「韓国の FTA 政
策と制度的発展」というものであります。安先生、20 分以内で発表をお願いいたします。

126

【報告】

FTA Policy and Institutional Development of Korea「韓国の FTA 政策と制度的発展」

Dukgeun Ahn∗
(Associate Professor at Graduate School of International Studies, Seoul National
University)
1. Overview of Korea’s FTA Negotiation
Korea has been very active in promoting free trade agreement (FTA)
negotiations since the early 2000s. As indicated in Table 1, after the Korea’s FTAs
involving relatively small trading partners such as Chile, Singapore and EFTA enteredinto force, the Korean government has concluded in FTA negotiations with major
trading partners including, the United States, European Union, ASEAN and so on.
<Table 1. Summary of Korea’s FTA Negotiation>
FTA Partner
Chile
SingaporeJapan
EFTA (Switzerland, Norway,
Liechtenstein, Iceland)
ASEAN(Thailand joined in Feb. 2009)
India (Comprehensive Economic
Partnership Agreement)
US
EU
Canada, Mexico, Peru, New
Zealand, Australia, GCC
MERCOSUR, China, Turkey,
Russia, Columbia, Israel, SACU

Progress
Entry into force on April 1, 2004
Entry into force on March 2, 2006.
Formal negotiation began December 22, 2003. Negotiationsuspended since the 6th meeting on November 1, 2004.
Entry into force on September 1, 2006
Signed “Framework Agreement” on August 24, 2006
Agreement for Goods entered into force on June 1, 2007.
Services
May 1, 2009
Investment
Sep. 1, 2009
To be entered into force on Jan. 1, 2010
Concluded the negotiation in June 2007
Initialed on October 15, 2009
In negotiation
In preparation

These FTAs involving major economies are expected to have much more significant
economic impacts than the most of the previous FTAs. As shown in Figure 1, the FTAs
have been proliferating especially after the establishment of the WTO. But, Figure 2
demonstrates that the exponential increase of FTAs has not contributed much to∗Professor of International Trade Law and Policy; Director of Center for International Commerceand Finance, Graduate School of International Studies, Seoul National University. dahn@snu.ac.kr.

127improve the world trade, indicating<Figure 1. Trend of RTA>

<Source: R. Fiorentino et al., “The Changing Landscape of Regional Trade Agreements: 2006
Update” , 21 (WTO Discussion Paper No. 12)>.

<Figure 2. Trend of World Trade><Source: WTO, International Trade Statistics, 2006>
that potential trade creation by FTAs has not been substantial due to trade diversion.

128

Whether the recent FTAs by Korea involving, inter alia, the United States andthe European Union can make significant economic impacts to the world trade may be
an interesting indication to the question of whether FTAs can be a stumbling block or abuilding block. In particular, strategic reaction incurred by trade diversion problem ofthese FTAs may also induce facilitation of significant FTAs by Japan and China.
2. Special Features of Korea’s FTA Policy14
2.1. Simultaneous multiple FTA negotiation strategy
The Korean government publicly announced the “simultaneous multiple FTA
negotiation strategy”. In other words, the Korean government has sought as many FTA
negotiations as possible at the same time. This strategy is supposed to make up
relatively late participation into a FTA race. Also, it is to enhance bargaining leverage ofthe Korean government by having various alternatives for FTA negotiation. This FTA
strategy, however, required substantial expansion of FTA related government capacity.
On December 10, 2004, the Ministry of Foreign Affairs and Trade established new
bureau, “FTA Bureau”, led by a Director-General level official with four departments
where more than 30 officials were recruited. One of the problems of the “simultaneous
multiple FTA negotiation strategy” is caused by sequential, not simultaneous,conclusion of FTA negotiations. Sequential conclusion and thereby sequential
application of FTAs may entail vastly different economic consequences depending on
the order of FTAs, at least unless they are concluded within a relatively short span oftime.
2.2. Comprehensive “WTO plus” approach
Next, the Korean government generally adopts comprehensive “WTO plus”
approach for market liberalization undertaken by FTA negotiations. Since trade barriers
at borders of major trading partners are typically very low or scarce, Korea endeavors towork on non-tariff issues such as trade remedy system, investment, trade in services,
intellectual property protection, cooperation in science and technology. In this regard, it
is noted that the Korean government has adopted sui generis FTA trade remedy systems.
For example, the Korea-Chile FTA included special safeguard mechanism for

14

This part is mostly drawn from Ahn, Dukgeun. “Korea’s FTA Policy” in The New International
Architecture in Trade and Investment: Current Status and Implications, APEC, March 2007.

129

agricultural products.15 The Korea-Chile FTA generally resorts to the WTO Agreements
for its safeguard mechanism. Chapter 6 stipulates that both parties maintain WTO rights
and obligations concerning safeguard matters. Safeguard actions would be dealt with
exclusively by the WTO dispute settlement system. Notwithstanding Chapter 6, Article
3.12 sets forth a special safeguard system for agricultural goods in case an importincrease causes or threatens to cause serious injury or “market disturbance”.16 This
special agricultural safeguard provision substantially differs from the special safeguardmechanism under the WTO Agriculture Agreement that employs an automatic
triggering system. Moreover, although ‘material injury’ and ‘threat of material
injury’ are defined in line with the WTO Safeguard Agreement, the concept of‘market disturbance’ is not specifically stipulated and completely unprecedented.
The lack of clear definition on the latter element for safeguard actions in the Korean
statutory system may lead to serious controversy in actual application of the provisions
in a near future, unless it is elaborated with more specific guidelines or criteria.17
The exclusion of FTA parties from the WTO safeguard action, first adopted in
the NAFTA, has also been discussed and will soon appear in the formal text of the FTA
involving Korea. The FTA negotiation with India at the conclusion stage will include
the first case of NAFTA style safeguard exception clauses. Such clause is very likely tobe adopted in the KORUS FTA
The Korea-Singapore FTA adopted additional commitments for theanti-dumping mechanism: prohibition of zeroing and the “lesser duty” rule. Article
6.2 of the Korea-Singapore FTA stipulates that:3.
Notwithstanding paragraph 1, the Parties shall observe thefollowing practices in anti-dumping cases between them in order to enhancetransparency in the implementation of the WTO Anti-dumping Agreement:(a)when anti-dumping margins are established on the weighted
average basis, all individual margins, whether positive or negative, should
be counted toward the average; and(b)
if a decision is taken to impose an anti-dumping duty pursuant
to Article 9.1 of the WTO Agreement on Anti-dumping, the Party taking
such a decision, should apply the ‘lesser duty’ rule, by imposing a duty
15

For more general discussion on FTA trade remedy systems, see Dukgeun Ahn, “Trade Remedy
Systems for East Asian FTAs” in The WTO in the Twenty-First Century: Dispute Settlement,
Negotiations and Regionalism in Asia (Yasuhei Taniguchi, Alan Yanovich and Jan Bohanes eds.,
Cambridge University Press, 2006).
16
Laws on Investigation of Unfair Trade and Safeguard, Article 22.3 (Public Law 7093,
promulgated on Jan. 20, 2004).
17
Article 22.3 of the Law on Investigation of Unfair Trade and Safeguard was elaborated by Article
22.3 of the Implementing Regulation (Presidential Order 18565, promulgated and entered into force
on Oct. 21, 2004). But, the Implementing Regulation did not clarify the concept of “market
disturbance” either.

130

which is less than the dumping margin where such lesser duty would be
adequate to remove the injury to the domestic industry.
The above provisions are noteworthy in that they are the first kind of a modified FTA
trade remedy system adopted in the East Asia.
While the Korea-EFTA FTA retains basically all the rights and obligations
under the WTO Anti-dumping Agreement, it also adopted the above mentioned a“lesser duty” rule. In addition, the Korea –EFTA FTA stipulates that parties “shallendeavor to refrain from initiating anti-dumping procedures against each other” andconsult “with the other with a view to finding mutually acceptable solution”,
although it does not mandate any specific additional legal requirements. Interestingly,
the parties under the Korea-EFTA FTA shall review whether there is need to maintainanti-dumping measures after five years of application. On the other hand, theKorea-EFTA FTA requires at least a 30 day period for mutual consultation before parties
initiate countervailing investigations.
2.3. Special treatment for “internal trade” between South and North Koreas
Currently, South Korea is treating products from North Korea basically as
domestic products and does not impose any tariff or other trade measures applicable toimportation. In fact, South Korea enacted a special implementation law for WTO
Agreements in 1995 and declared that it would treat North Korean products as domestic
goods. Article 5 of the “Special Law on Implementation of World Trade Organization
Agreement”, subtitled “Intra-Nation Transaction”, provides that “the trade
between South and North Koreas constitutes an internal trading within an economy andas such shall not be regarded as that between countries”.18 Notwithstanding thisdomestic regulation, the exemption of tariffs and other trade measures may invoke
most-favored nation (MFN) treatment problems under the WTO system since North
Korea appears to satisfy all the legal requirements to be treated as “independent
customs territory”.19
As transaction between South and North Koreas grows especially using
Gaesung Industrial Complex, special North Korean district where South Korean
companies manufacture products for consumption or further processing in South Korea,
18

Public Law No. 4858. See also Moon-soo Chung, “Implementation of the Results of the Uruguay
Round Agreements: Korea” in Implementing the Uruguay Round (eds. by John Jackson & Alan
Sykes) 375 (1997).
19
Dukgeun Ahn, “Legal Issues for Korea’s ‘Internal Trade’ in the WTO System”, in Multilateral andRegional Frameworks for Globalization: WTO and Free Trade Agreements (eds. by Lim and Torrens,2005).

131

a counterpart for Korea’s FTA negotiation has raised a issue whether those products
should be benefited under the FTA arrangement. The Korea-Singapore FTA first made aformal recognition of “internal” trade between South and North Koreas. But,
transaction between South and North Koreas was not categorically recognized as“internal” trade. Instead, the following “outward processing” provision articulates
the specific conditions carefully designed to embrace products from Gaesung Industrial
Complex to render preferential treatment:
ARTICLE 4.4 : OUTWARD PROCESSING
1. Notwithstanding the relevant provisions of Article 4.2 and the
product-specific requirements set out in Annex 4A, a good listed in Annex 4C
shall be considered as originating even if it has undergone processes of
production or operation outside the territory of a Party on a material exported
from the Party and subsequently re-imported to the Party, provided that:(a) the total value of non-originating inputs as set out in paragraph 2 does notexceed forty (40) per cent of the customs value of the final good for which
originating status is claimed;(b) the value of originating materials is not less than forty-five (45) per cent of
the customs value of the final good for which originating status is claimed;(c) the materials exported from a Party shall have been wholly obtained or
produced in the Party or have undergone there processes of production oroperation going beyond the non-qualifying operations in Article 4.16, prior tobeing exported outside the territory of the Party;(d) the producer of the exported material and the producer of the final good forwhich originating status is claimed are the same;(e) the re-imported good has been obtained through the processes of
production or operation of the exported material; and(f) the last process of production or operation4-1 takes place in the territory of
the Party.
2. For the purposes of paragraph 1(a), the total value of non-originating
inputs shall be the value of any non-originating materials added in a Party as
well as the value of any materials added and all other costs accumulated
outside the territory of the Party, including transportation cost.
4-1
The last process of production or operation does not exclude thenon-qualifying operations stipulated in Article 4.16.
Goods listed in Annex 4C include plastics and articles thereof (HS Code Chapter 39),
nuclear reactors, boilers, machinery and mechanical appliances; parts thereof (Chapter
84), electrical machinery and equipment and parts thereof; sound recorders andreproducers, television image and sound recorders and reproducers, and parts andaccessories of such articles (Chapter 85), ships, boats and floating structures (Chapter89), optical, photographic, cinematographic, measuring, checking, precision, medical or
surgical instruments and apparatus; parts and accessories thereof (Chapter 90).

132

This provision was similarly adopted in the Korea-EFTA FTA. Annex I of the
Korea-EFTA FTA has the provision regarding the exemption for territoriality principle
as follows:
APPENDIX 4 TO ANNEX I
EXEMPTIONS FROM THE PRINCIPLE OF TERRITORIALITY
1. In accordance with Article 13 of Annex I, the acquisition of originating status
shall not be affected by working or processing carried out outside the territory ofa Party on materials exported from the Party concerned and subsequently
re-imported to that Party, provided that:(a) the total added value as set out in paragraph 5(a) does not exceed 10 percentof the ex-works price of the final product for which originating status is claimed;
and(b) the materials exported from the Party concerned shall be wholly obtained inthat Party or having undergone working or processing going beyond theinsufficient operations listed in Article 6 prior to being exported outside theterritory of that Party.
2. Notwithstanding paragraph 1, for products listed in the Table set out at the endof this Appendix, the acquisition of originating status shall not be affected byworking or processing carried out in an area, for instance an industrial zone,
outside the territory of a Party, on materials exported from the Party concernedand subsequently re-imported to that Party, provided that:(a) the total value of non-originating input as set out in paragraph 5(b) does notexceed 40 per cent of the ex-works price of the final product for which
originating status is claimed; and(b) the value of originating materials exported from the Party concerned is notless than 60 per cent of the total value of materials used in manufacturing there-imported material or product.
The product coverage under the above provision was expanded from that of the
Korea-Singapore FTA by including, inter alia, rubber products, articles of leather;apparel and clothing accessories, footwear, glass and glassware, precious metals,
articles of iron or steel, vehicles other than railway or tramway rolling-stock,
miscellaneous manufactured articles.
Although the above approach to treat products from North Korean territories
was accepted by Singapore and EFTA, other FTA negotiation partners such as Japanand the United States have vehemently opposed to the adoption of similar provisions.
The Korea-US FTA finally employed a different approach to this issue. It establishes“Committee on Outward Processing Zones on the Korean Peninsula”. 20 The
Committee is supposed to establish criteria to determine goods from any outward
processing zone as originating goods. These criteria include “progress toward the20

Annex 22-B, Korea-US FTA.

133

denuclearization of the Korean Peninsula; the impact of the outward processing zones
on intra-Korean relations; and the environmental standards, labor standards andpractices, wage practices and business and management practices prevailing in theoutward processing zone”, with due reference to the situation prevailing elsewhere in
the local economy and the relevant international norms. The Committee decision
reached by unified consent pursuant to the above criteria will be recommended to theParties, which are “responsible for seeking legislative approval for any amendments to
the Agreement with respect to outward processing zones”. This “Committee on
Outward Processing Zones on the Korean Peninsula” has been adopted similarly inAnnex IV of the Korea-EU FTA. It remains to be seen whether transaction between
South and North Koreas can be recognized, directly or indirectly, as “internal trade”
by other WTO Members in the future.
3. Institutional Development of Korea for FTA
3.1. Reform of Government Organization
The Ministry of Foreign Affairs and Trade (MOFAT), the main government
ministry in charge of trade negotiation, basically consists of offices of foreign affairs
and offices of trade. In February 1998, the former Ministry of Foreign Affairs wasaugmented to expand trade negotiation functions that were handled often by the
Ministry of Commerce, Industry and Energy (now Ministry of Knowledge Economy,‘MKE’).
On the other hand, Chapter 2 of the Foreign Trade Act explicitly provides thatthe promotion of trade is within the jurisdiction of the MKE. Thus, under the current
trading system in Korea, trade negotiation function is rendered to the MOFAT whereas
trade promotion function is still maintained by the MKE. The distinction of these twojurisdictions is often obscure and confusing even for officials at the ministries.
In fact, the confusion on the jurisdiction of relevant government ministries
becomes more acute when one considers the fact that the Ministry of Strategy and
Finance (MOSF) has the authority for general conciliation of foreign economic policies
including trade policies. On September 12, 2001, the Korean government promulgated
the regulation on “Ministerial Meeting on International Economy” for which the
Minister of Strategy and Finance Strategy and Finance becomes the chairman.21
The Korean government used to be one of the most ardent supporters of themultilateral trading system. The trade negotiation related division was structured to

21

President Order No. 17354.

134

focus on the WTO matters. But, the MOFAT reforms the governmental organization inorder to deal with increasing FTA negotiations. As of November 2009, the ministry of
trade in the MOFAT has five Divisions, among which two divisions were newly added
to specialize in FTA negotiations.
Also, as indicated in Figure 3, the Ministry of Trade has now two “Deputy
Minister”- one for trade in general and the other specifically for FTA. Seven divisions
in total were established under two FTA related bureaus, specializing in specific issues
such as sectoral negotiations for FTAs as well as FTA policy coordination andimplementation.
<Figure 3. Organizational Structure of Ministry of Foreign Affairs and Trade (MOFAT)>
Minister of Foreign Affairs
and Trade
Minister of Trade
Vice Minister of Foreign Affairs
and Trade- Deputy Minister for Trade- Deputy Minister for FTA
Multilateral Trade Bureau

Offices of Foreign Affairs

Bilateral Trade Bureau
International
Economic
Affairs Bureau
FTA Policy Bureau
1. Trade Dispute
Settlement Division
2. FTA Policy Planning
Division
3. FTA Negotiation
Coordination Division
4. FTA Implementation
Division
FTA Negotiations Bureau
1. FTA Goods Division
2. FTA Services andInvestment Division
3. FTA Trade Rules
Division

Whereas the external negotiation function was substantially improved bybeefing up the Ministry of Trade, the internal policy coordination and implementation135issues were assigned to the FTA Promotion & Policy Adjustment Authority (FTA PPAA)
established under the MOSF. The FTA PPAA consists of six divisions – Policy Division,
Education & Promotion Division, Analysis Division, Assistance Policy Division,
Industry Assistance Division, and External Cooperation Division. The FTA PPAA isadvised by the FTA Promotion & Policy Adjustment Council, which is composed of 13
private members representing industry, media, civil society and academics as well as 13
government officials who are mostly ministers or minister-level officers fromgovernment departments or agencies related to FTA works. The FTA PPAA’s mainrole is, however, to promote FTAs rather than to coordinate policy conflicts among
different ministries. As a result, the role of the FTA PPAA in relation to policy
coordination needs to be improved.
3.2. Trade Adjustment Assistance Program
The Korean government introduced the Trade Adjustment Assistance (TAA)
program in 2007 to provide assistance to the parties adversely affected by tradeliberalization. The “Act on Trade Adjustment Assistance for Manufacturing and Other
Industries (TAA Act)” that provides legal frameworks for TAA programs entered into
force on April 29, 2007.22 Specifically, loans, investments, and job placement support
for labor can be requested by manufacturers when sales or production fall by over 25%
due to import competition. In 2008, 32 billion won was budgeted for TAA compensation
although most of the budget was not actually spent due to the lack of applications.23
Whereas the Korean TAA benchmarked the US TAA system, it differs
considerably from the US system. First of all, the Korean TAA is primarily focused on
supporting small and medium size firms facing structural adjustment. Less emphasis isplaced on providing social protection and assuaging workers within the liberalized
trading order. This dissimilarity in objectives is manifest in the distribution of TAA
funds, as about 90% of $1 billion annual allotment under the US TAA program isreceived by displaced employees. Only 9% is allocated to farmers and 1% is extended
to firms. Meanwhile, according to a 10-year government plan issued in 2007 by the
Korean government, 92% of 2,845 billion won budget under the Korean TAA program
will go to firms while employees will be given less than 8%. This disproportionate
spreading of funds is troubling since firm-oriented support systems may be more
vulnerable under the WTO Agreement on Subsidy and Countervailing Measures (SCM
Agreement).
22
23

Public Law No. 8852.
WTO, Trade Policy Review: Republic of Korea 2008.

136

Secondly, the Korean TAA system requires the determination of the Korea
Trade Commission (KTC) on the injury caused by pertinent FTAs to become eligible for
the TAA support programs. Article 6.2 of TAA Act stipulates that the KTC should makea positive determination on (i) “serious injury” that is defined to mean 25% or more
reduction in total sales or production24 and (ii) causation requirement – imports of samekinds or directly competitive goods or services to be a primary cause of serious injury.
As of November 2009, three TAA measures were implemented based on
positive determination by the KTC. The brief summary information is given in Table 2.
<Table 2. Summary Information of TAA Implementation as of November 2009>
Product
Reason forApplication

FaucetSales
Reduction(Loss of
27%)

Wine
Sales
Reduction(Loss of45%)

Pork
ProductionReduction(Loss of
28%)

Watch
Sales
Reduction(Loss of
49.5%)

Pork
Sales
Reduction(Loss of
31.6%)

Importing
Country
KTC
Determination
Loan

Switzerland(EFTA)
Negative

Chile

Chile

Chile

Positive

Positive

Switzerland(EFTA)
Positive

KRW200
million(08.12. 1)
KRW16
million(‘09.1.2
2~4.30)For
marketingstrategydevelopm
ent

KRW100
million(09. 2. 3)
KRW16
million(‘09.3.2~12.12)
B2B
businessstrategydevelopm
ent

Consulting
Support

Positive

MackerelSales/Profit
Reduction(Loss of
19.5%/51%)
Norway(EFTA)
Positive

KRW100
million(09. 7. 14)<Source: Trade Adjustment Assistance Center, 2009>
It is noted that the very first application under the TAA system was actually
declined by the KTC on the basis of negative determination on injury. The KTC
determined that the main cause of alleged injury was not the import increase from the
FTA partner country but the substantial reduction of exportation by the applicant. The
first actual TAA measure was rendered to a local alcoholic beverage producer that
24

The TAA Act also permits kind of “threat” of serious injury to be a basis for injury requirement.
But, it provides that serious injury is certainly to occur, if not already occurred. The difference interms of legal criteria to distinguish these elements for injury determination is not clearly elaborated
in the Act.

137

produced products allegedly competitive to wine imported from Chile. Pursuant to thepositive determination of the KTC, the loan of the total 200 million won was granted tothis company. In addition, 16 million won was offered to assist consulting arrangement
for marketing strategy development. Since then, two additional TAA measures were
implemented to assist pork producing companies that claimed serious injury due to the
FTA with Chile. There are two more cases in which the KTC concluded positively on
serious injury in relation to the FTA with EFTA. But, concrete TAA measures were notyet finalized and implemented.
Although the KTC, the main trade remedy agency in Korea, is involved ininjury determination, the procedure and standards used for TAA system are not rigorous
as much as those for normal trade remedy procedures. In fact, all decisions for TAA
related injury were made through documentary review instead of having actual
deliberation meeting for trade commissioners. So far, the TAA implementation in Korea
is still at an inchoate stage. It will take much more real cases to articulate criteria for
injury determination and TAA measure development.
3.3. Regulatory Frameworks for Trade Negotiation and Legislation Procedure
1) General Procedure under the FTA Directive
The very first FTA negotiation for the Korean government with Chile raised
numerous issues regarding the authority for negotiation and policy coordination,
procedural legitimacy, and legislative process subsequent to the conclusion of FTA
negotiation. Based on the experience of the Korea-Chile FTA he Korean government
tried to make up some institutional and regulatory framework for FTA negotiation
procedure.
The Korean government must follow the procedures and requirements
stipulated in the “Presidential Directive on Procedures for the Conclusion of Free Trade
Agreements (FTA Directive)” when it handles FTA negotiations.25 The FTA Directive
governs the entire process of negotiations, including the pre- and post-negotiation stages,of an FTA the Korean Government undertakes.
Pursuant to the FTA Directive, the Ministers’ Meeting for External Economic
Affairs (MMEEA) has the authority to make decisions on major policy issues
concerning FTA negotiations such as the selection of FTA partners, the timing and themethod of such negotiations, and other relevant mandates for the negotiations. The FTA

25

Presidential Directive, No. 224 (Aug. 28, 2008).

138

Directive has required to establish three committees: the FTA Committee, theworking-level subcommittee, and the FTA Advisory Committee. These threecommittees are expected to undertake the key decision making for FTA negotiations
and implementation.
The FTA Committee, which is chaired by the Minister for Trade and consists of
Deputy Ministers of relevant ministries, is primarily responsible for making Korea’s
FTA policy, overseeing FTA negotiations, and undertaking any follow-up measures.
The FTA Committee is to be supported by the working-level subcommittee which
consists of Director-General level government officials from relevant ministries.
The FTA Advisory Committee, which is chaired by the Minister for Trade, andconsists of experts from academia and businesses, supports the Government in relation
to various issues covering basic strategy, position decision for individual negotiation
agenda, and other matters of FTA negotiations.
The Korean government often carries out a joint study with a candidate FTA
partner to examine the feasibility of an FTA before it starts negotiations.26 However, ajoint study is not mandatory under the FTA Directive. For example, the Korean
government launched negotiations with Chile merely after two preliminary
consultations. Also, the Korea-US FTA and the Korea-EU FTA were initiated without aformal procedure to adopt the joint study report. When the joint study report is preparedwith potential partners, such issues as the economic effect of the FTA, the scope andcoverage of the FTA, and negotiating modalities are normally discussed. When a joint
study or any other form of preliminary consultation ends with the conclusion that the
proposed FTA is expected to bring sufficient benefits to Korea compensating potential
injury to certain economic sectors, the FTA Committee recommends to the MMEEA thelaunching of FTA negotiations.
Sometimes, seemingly mere procedural steps can provoke quite controversial
disputes. For example, Article 12 of the FTA Directive requires that a public hearing
must be held prior to the MMEEA’s decision and the result of the public hearing
should be presented to the MMEEA at its deliberation. Considering the result from thepublic hearing along with many other data and information, the MMEEA decides
whether or not to launch the negotiations. As in many other administrative processes,
public hearing steps ensure that various interested parties and relevant sectors have achance to be heard by the Government before the Government makes any formal
decision on the launching of negotiations.
However, what should be done or achieved with public hearing procedures are
26

Cheong, I and J. Cho, “The Impact of Free Trade Agreements on Business in the Republic ofKorea”, ADBI Working Paper Series, No.156 (Oct. 2009).

139not articulated. For example, the public hearing meeting on February 2, 2006 for the
Korea-US FTA required under the FTA Directive could not be properly processed due tothe physical interference of the session by angry farmers and opponent groups. But
several hours later, the Minister of Trade announced that pursuant to the FTA Directive,
the FTA negotiation with the United States would formally begin. The opponent groupclaimed that the failure to conduct the public hearing session as planned constituted theviolation of Article 12 of the FTA Directive, while the Korean government explainedthat the opening of the public hearing session technically complied with the requirement
under the FTA Directive.
2) Law on FTA Negotiation Procedure
As demonstrated in Appendix, the legislative procedure in the National
Assembly after the conclusion of the Korea-Chile FTA raised huge concern forlegislative hurdle for trade negotiation. After the voting by the National Assembly
turned down the Korea-Chile FTA three consecutive times, the Korean government
needed to come up with the massive “Comprehensive Assistance Plan for Agricultural
and Rural Sector” that amounted to 119 trillion won basically to address the concern ofcongressmen from rural sectors. This experience led the Korean government to consider
the formalized procedure under which the legislative authority of the National Assembly
vulnerable to unlimited political abuse may be constrained in a similar manner to thetrade promotion authority (TPA) procedure of the US Congress.27
On the other hand, the opposing party also raised the need to establish theinstitutionalized procedure for initiating and concluding a trade agreement, including
FTA, which inevitably causes huge economic harms to a specific sector and too often isrubberstamped by the National Assembly allegedly for the sake of national interest. This
request was particularly strong after the Korea-US FTA was initiated despite the lack ofsocial consensus and procedural drawbacks. When the Korean government decided to
cut the existing screen quota down to the half – from 146 to 73 days and resume theimportation of the US beef before the formal FTA negotiation with the United States
began, the demand from the National Assembly to limit overly ambitious tradenegotiation undertaken by the administrative body increased.
So, multiple proposals were prepared to establish a formal procedure by which
the FTA negotiations could be guided. As of November 2009, the National Assembly
did not push forward any particular proposal, although they still agreed on the need to27

There is a fundamental discrepancy between Korean and US constitutional system that leads to.

140have a more formalized process.
The proposals in this regard share some of the key concerns highlighted fromthe recent experience of the FTA negotiations. Firstly, there are issues on what should besatisfied to initiate the FTA negotiation. How to ensure that a trade negotiation is
supported by certain level of social consensus remains a difficult question. Although the
National Assembly does not seem to have a constitutional authority to interfere with thedecision to initiate a FTA negotiation by the administrative body, many politicians
support the idea that there must be something more than a mere record of public hearing
and so-called economic analysis reports issued by government funded institutes. In
other words, legal requirements for due process especially at the stage of initiating a
FTA negotiation are raised as one of the core issues.
Secondly, it becomes very controversial how to meet transparency requirementin the course of a negotiation. Transparency often contradicts with confidentiality that is
also very important element of trade negotiation. In January 2007 at which the
Korea-US FTA negotiation was still at a critical phase, the confidential document
briefing the Korean government’s negotiation strategy prepared only for confidential
discussion between the Special FTA Committee of the National Assembly and theadministrative body was leaked to the press and published in a newspaper. The next day,the chief negotiator of the US delegation, Ms. Curtler made comments on the Korean
government’s negotiation strategy when she faced the Korean chief negotiator, Mr.
Jonghoon Kim. This incident highlights the importance of maintaining the right balance
between transparency and confidentiality. In fact, a significant portion of the criticism
towards the government regarding the Korea-US FTA negotiation was about
non-transparency. In response, the Korean government tried to improve communication
with relevant parties from a wide variety of sectors, particularly opposing sectors.
Inevitably, the contents of such communication were leaked to the public forum, notrarely but actually quite routinely. This problem becomes particularly acute because thepolitically opposing party often tries to and is able to abuse transparency requirement.
Although transparency is a critical element of any democratic legislative process, ittakes very rigorous scrutiny to decide what to share with whom, when and how often.
Thirdly, there is a controversy as to how the economic analysis report should be
prepared. Normally, a government funded research institute issues a report assessing the
economic impact of an FTA, typically relying on a computational general equilibrium(CGE) model. In Korea, this report is generally prepared by the Korea Institute forInternational Economic Policy (KIEP). However, a CGE result is very contingent on theassumptions the model imposes and thereby can vary a lot depending on what kinds of
economic assumptions are taken. This nature of econometric analysis routinely adopted

141

for FTA negotiations can provoke huge controversy when an FTA at issue is politicallysensitive. Because the result of economic analysis can vary considerably depending on
the assumptions for a model, who is doing how can be not just an economic issue but
also a political problem.
As indicated in Appendix 2, the US Congress also demands the economic
analysis report for any proposed FTA in the course of negotiation and ratification
procedures. This is done by the US International Trade Commission (ITC). Unlike othertrade remedy related agencies, the USITC has its own research capacity with significant
numbers of economists. A relatively strong credibility of the USITC report has been
supported by long experience of trade remedy works which have been protected fromdirect political influence. In Korea, however, a report by the KIEP often becomes atarget of criticism on the basis of neutrality, objectivity, and econometric sufficiency.
After the conclusion of the Korea-US FTA negotiation, the economic assessment report
was prepared collectively embracing all government funded research institutes. This
report, however, did not assuage the concern of opposing groups when they found thatnone of “their” economists were not included in the analysis works. So, a seemingly
neutral economic issue of how to analyze impact of an FTA still remains to be a very
political problem that relates to a fundamental issue whether or how much an FTA atissue is beneficial to a country.
Fourthly, what should be a precondition for ratification is also a difficult issue
the National Assembly has struggled. It is already a widely accepted notion in the
National Assembly that some kind of government measures to address marginalized or
injured sectors must be prepared before the ratification. But, how much or what kind ofassistance or compensation measures should be prepared is now the core issue of alegislative process in Korea. In this regard, the Korean government prefers the approachtaken in the TPA. What to be done for injured sectors by trade negotiations is addressed
during the negotiation through the consultation with the US Congress. After thenegotiation is concluded, how much a particular sector should be compensated is not amajor issue. Instead, they focus more on how the negotiation result should be arranged
to accommodate the difficult situations of sensitive industries. Close consultation
requirement under the TPA procedure contributes to reduce the burden for the USTR or
the President to come up with compensation programs to address injured sectors after
the conclusion of an FTA.
Unlike the US Congress that follows the TPA procedure, the Korean National
Assembly has to bargain with the administrative body in relation to an FTA ratification.
Having seen the controversy of the National Assembly related to the Korea-Chile FTA,
the Korean government now faces considerably bigger problems to deal with massive142market liberalization under the Korea-US FTA and the Korea-EU FTA.
Lastly, what should be the time schedule for ratification procedure has become
very important especially due to the Korea-US FTA. In principle, the US Congress must
make a decision whether to ratify an FTA or not within 90 days from the date it isformally submitted to the US congressional ratification procedure if the FTA wasconcluded pursuant to the TPA process. However, they do not have any limit about
when the FTA should be submitted to the congressional ratification procedure. In thecase of the Korea-US FTA, it was signed on June 30, 2007 but not yet submitted to the
US Congress. The prolonged delay in the US congressional ratification procedure led
the National Assembly to stop ratification process for more than two years. This madeanother bad example for the politicians in Korea, implying that political reasons can be
the basis to sacrifice “national economic interest” almost unlimitedly. The National
Assembly begins to discuss what should be the procedure for concluded FTAs tofacilitate timely ratification and prevent political maneuvering. The actual possibility for
the National Assembly to agree on the established time schedule for ratification process
is still very slim.
4. Conclusion
Korea has transformed from one of the most ardent opponents for FTAs into
the most aggressive FTA using country. Korea now becomes one of the very few
countries that establish FTAs with both the United States and the European Union.28
Moreover, it is seriously considering FTAs with Japan and even China. In the meantime,other countries such as India, Canada, Mexico, and Australia will be embraced under the
FTA coverage in the near future. Such an unprecedented level and scope of market
liberalization in Korea has inevitably induced various institutional reforms in respect oflegislative frameworks as well as trade policy implementation. Considering the current
stage of development, it is clearly premature to draw any conclusion. But, the Korea’s
experience may shed some light on how important role the institutional development oflegislative as well as administrative bodies plays to accommodate market liberalization
expedited by FTA negotiations.

28

The only other countries to have FTAs with the US and the EU simultaneously are Mexico,
Jordan and Chile.

143

References

Ahn, Dukgeun. “Legal Issues for Korea’s ‘Internal Trade’ in the WTO System”,
in Multilateral and Regional Frameworks for Globalization: WTO and Free
Trade Agreements (eds. by Lim and Torrens, 2005).
____________. “Trade Remedy Systems for East Asian FTAs” in The WTO in the
Twenty-First Century: Dispute Settlement, Negotiations and Regionalism inAsia (Yasuhei Taniguchi, Alan Yanovich and Jan Bohanes eds., Cambridge
University Press, 2006)____________. “Korea’s FTA Policy”, The New International Architecture in Trade andInvestment: Current Status and Implications, APEC, March 2007.
____________. “Foe or Friend of GATT Article XXIV: Diversity in Trade Remedy
Rules”, Journal of International Economic Law, 2008.
Asian Development Bank. Regional Cooperation and Integration Strategy. Manila:
Asian Development Bank, 2006.
Cha, Moon-Joong. “Korean Economy in the Era of Liberalization: Structural Policy
Issues.” Seoul: KDI, 2007 (in Korean).
Cheong, I and J. Cho, “The Impact of Free Trade Agreements on Business in the
Republic of Korea, ADBI Working Paper Series, No.156 (Oct. 2009).
Chung, Moon-soo, “Implementation of the Results of the Uruguay Round Agreements:
Korea” in Implementing the Uruguay Round (eds. by John Jackson & Alan
Sykes, 1997).
Destler I. M., American Trade Politics (4th ed. 2005)
Fiorentino R. et al., “The Changing Landscape of Regional Trade Agreements: 2006
Update” , 21 (WTO Discussion Paper No. 12).
Howard F. Rosen, “Reforming Trade Adjustment Assistance: Keeping a 40-Year
Promise”, 2002.
< http://www.piie.com/publications/papers/paper.cfm?ResearchID=450>.
_____________, “Strengthening Trade Adjustment Assistance”, IIE Policy Brief
08-2 (2008).
World Trade Organization. International Trade Statistics, 2006_____________________. Trade Policy Review: Republic of Korea; Stable Growth that
Continued Reform Can Help to Maintain. Geneva: World Trade Organization,
2008.

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Appendix 1. Procedural History of Korea-Chile FTA Negotiation

145

Appendix 2. US Trade Promotion Authority (TPA) Procedure
TimingPrior to Notification
At least 90 days before
initiating negotiations
Before initiating
negotiations on
agriculture, fish andshellfish and textiles
Before making a tariff offer
Before making a formal
offer on tariffs, non-tariffbarriers, service etc.

During negotiation
180 days prior to entering
into agreement
90 days prior to entering
into agreement
Before entering into
agreement
30 days after notificationof intent to enter
agreement
Just before initialing
After entry into
agreement(signature)
60 days after signing
At time to be determinedin consultation with
Congress

ActionConsult Trade Committees, Congressional Oversight Group (COG) and otherCommittees as deemed appropriate.
Transmit written notification of negotiations to Congress, including specificnegotiating objectives.
Complete general agriculture tariff assessment & consult with Trade andAgriculture committees.
Sensitive agriculture products: Identify products & consult Congressional
committees; request ITC report; after receipt of ITC report notify Committees
of products for which USTR will seek tariff cuts and reasons.
Consult Trade, House Resources, & Senate Commerce Committees on fish &shellfish.
Complete assessment on textile tariffs & consult Trade Committees.
Request and receive ITC probable economic effects report.
Hold TPSC hearing and receive summary of views.
Take into account advice from ITC, private sector advisory committees, andTPSC.
Transmit meaningful labor rights report on negotiating partners to Congress.
Conduct environmental impact review and employment impact review.
Report to Trade Committees on environmental impact review and employment
impact review.
Report to Trade Committees on trade remedies proposals that could require
amendments to U.S. laws and how these proposals relate to TPA objectives.
Notify Congress of intent to enter agreement; publish notice in Federal Register.
Provide ITC details & request report on agreement’s likely impact on U.S.
economy & specific industry sectors.
Consult with Trade & other Committees with jurisdiction, COG on (1) nature ofagreement, and (2) how and to what extent the agreement will achieve theapplicable purposes, policies, priorities and objectives.
Private sector advisory committees provide reports to Administration andCongress on the agreement.
Consult Trade & Agriculture Committees & Congressional Oversight Group.
Transmit copy of agreement to each House of Congress with statement of
reasons for entering into agreement.
Provide each Member of Congress with a summary of information submitted toeach House.
Submit to Congress a list of changes to existing laws necessary to comply withthe agreement.
Submit to Congress: (1) copy of final legal text of agreement; (2) draft
implementing bill; (3) statement of any administrative action; (4) explanation of
how bill & administrative action affect existing law; and (5) statement assertingthat agreement makes progress in achieving applicable TPA objectives. Submit
implementation plan.

House Ways and Means
45 daysCommittee
House Floor
15 days
Finance Committee
15 days
Senate Floor
15 daysNote: TPA also imposes continuing requirements to consult with and inform Congress, including
the Congressional Oversight Group, as well as the private sector advisory committees.

146

【Power Point】"FTA Policy and Institutional Development of Korea"

Dukgeun Ahn(Associate Professor at Graduate School of International Studies,
Seoul National University)

147

148

149

150

【討論】
FTA Policy and Institutional Development of Korea
討論者：荒木一郎(横浜国立大学大学院国際社会科学研究科・教授)
私も日本語でコメントさせていただきます。最初に他のスピーカーの方々と同様に、こういう機会を与えていただいたことについて大変ありがたいことだと思っております。安先生
から韓国の FTA 政策について興味深いお話があったわけなので、私としてはまず最初に日本と比べてみようということを考えたわけであります。慌てて作ったスライドですので、お配りした資料の中にも入ってないんですけれども、日本が FTA に向かってどういう政策のポジションを形成しているかということについては、例えばこれは経産省の資料をそのまま借りてきたわけですが、こういうことで、アジアとの相互の繁栄であるとか、天然資源の確保であるとか、新しい時代の EPA 作りというふうなことを目指してやっていくという、これは皆さんよく聞かれるお話だと思いますし、それから先ほどの三田課長のお話にもいろいろ出ていたと思います。
ひとつ気がつくのは、安先生のお話と、こういう日本の政府の説明と比べて何が違うかというと、名前が違うということです、つまり協定の名前が違うということであります。韓国
では「FTA」と言っていて、これはアメリカを中心にしている 2 国間の貿易協定もみんな
FTA と呼ばれておりまして、アメリカ標準かなという気がするわけです。日本ではこれをFTA と呼ばず、「EPA」というふうに呼んでいるということです。名前だけ見るとこれはヨーロッパスタイルなわけです。EU がいわゆる ACP 諸国、旧植民地諸国との間で結んでいる FTA のことは Economic Partnership Agreement と呼ばれていて、EPA と呼ぶと何となくと単なる貿易の自由化だけではなくて、開発の次元、開発というものが含まれているというニュアンスがなんとなくあるんですね。私は日本政府がどうしてこういう用語を使ったのかはつまびらかには知りませんが、おそらく単なる貿易自由化だけではなく、開発であるとか、貿易の円滑化であるとか、そういうより大きな政策目標を含んでいるという、少なくともそ
ういう象徴的な意味があるんだろうなというふうに思うわけであります。
それはそれで結構なことなんですが、皮肉な物の見方の人に言わせると、これは先ほど木村先生のお話にもあった農業の分野でなかなか日本が自由化できないということとの見返りであって、
単に貿易を自由化するだけではアジアのパートナーに対しても魅力的なパッケージを提供できないので、より大きなものにせざるを得なかったというふうな違いがあるのかもしれません。この点は韓国はそれほど大きくするということではなくて、割と直に FTAということでやっているということのように見受けられます。
それから、日本の場合は行程表というものがございまして、これは新政権でどういうふうになっているかというのはちょっとよく分からないんですが、少なくとも最新の行程表というのが 2008 年 6 月 27 日の閣議決定で決められております。面白いことに、ここには一種の151数値目標が入っておりまして、2010 年までに日本の貿易総額に占める EPA 相手国との貿易の割合というものを 25％以上にするという目標が掲げられております。現状で計算してみ
ますと、このちょっと表が崩れていますけれども、青で書いたところですね、トータルでまだ今のところ 15％ぐらいしかいっていないから、来年までに 25 にするというのはなかなか
厳しいんですが、もちろん韓国でありますとか、湾岸諸国、インド、オーストラリア、こういうところと今交渉中ですから、交渉がうまくいけば、来年までにこういうところの交渉が完結できれば、一応目標は達成できるということになろうかと思います。
去年の 6 月 27 日の閣議決定でも一応アメリカや EU との交渉の話も書かれております。
ただし、これは将来の課題として検討をすすめていくという位置づけです。もちろんこれが入りますと、貿易量のパーセンテージはこれだけ大きいわけですから、かなりカバレージが広がるということです。この点はもう韓国はすでにアメリカとは交渉が終わって、批准を待
つのみということですし、EU ともほぼ内容的には妥結をしているということですから、こちらは韓国の方がさらに先をいっているということになるということなんだろうと思います。それから、地域的な取り組みはすでに今回のセッションではいろいろ議論が出ているところですから、こちらについては省略をさせていただきます。
今日の安先生のお話と日本の現状とを少し比べてみようということなのですが、まず外交通商部における体制論というお話がありましたけれども、日本では一応そういうふうにはなっていないわけです。つまり、韓国では外交通商部の中に非常に一元的な交渉体制ができあがっておりますけれども、日本の場合は依然として各省がそれなりに意見を持っていて、主要官庁と言えば外務省と経産省と農水省。その閣僚会議になると必ずこの 3 大臣が並んで出て行くというようなのが日本の現状であるということで、
やはり意志決定のやり方というのはだいぶ違っているなということがあります。
そうなってくると日本の場合は最終的には官邸で調整をするというか、内閣のレベルで調整をするということになりますから、総理大臣の役割というのが非常に重要になってくるということですね。これはだから、突き詰めて考えれば韓国は大統領制をとっているということで、日本は議院内閣制であるというといころの政治体制の違いがこういう違いになってきているんだろうなという気がいたします。
それから、貿易調整援助（TAA）について非常に興味深いお話がありまして、これは日本には全くない制度なんですね。これを日本に導入すべきかどうかというのはいろいろ議論があろうかと思います。もともと安先生のお話にもありました、アメリカが発祥の地なわけですね。アメリカでの TAA というのは必ずしも評判のよい制度ではないわけであります。だいたいその新しい FTA を交渉するたびに労働組合の力を背景にした、反対派の議員たちが
俺たちは反対だと、反対なんだけれども TAA を増やしてくれるんだったら同意してもいいよ、みたいな形で取り引きの材料に使われるということが多くて、必ずしも合理的な制度ではないというふうな批判があるわけです。例えば、アメリカの通商政策の専門家であるデ

Destler という人がおりますが、安先生の論文でいうと 136 ページの文献表にも Destler の本が紹介されていますけれども、彼の最新版の本では、彼は TAA というのはもうやめてし152

まってはどうか、つまり、要するに貿易自由化によって仕事を失った人に対する救済をやろうということなんですけれども、なぜ貿易自由化だけを理由にするのか、だから中産階級が所得を失っているというのであったら、そういう者に対する所得補償政策を全面的にやるべきであって、
なぜ貿易によってディスロケートされた人だけを対象にしないといけないのか。
だから一般的な調整政策を導入すべきではないかというようなことを言っていてですね、ちょっともちろん彼がそう言っているだけで、アメリカで TAA がなくなることはないと思いますけれども、それはそういう話なわけですね。
日本でこういうことをやろうっていうのは考えた時に、何があるかということですけど、こういう話を言いだすとすぐに、多分皆さんもそうだと思いますけど、すぐに思いつくのはウルグアイラウンドのときの、ウルグアイラウンド対策費 6 兆円という、例の話ですよね。
反対派を押さえこむためにお金をばらまくみたいな話に使われるという可能性もあってですね、なかなか合理的にはできないという気がします。しかもそれは、先ほどの議院内閣制
なのか、大統領制なのかというところが多分違ってきていてですね、日本の場合、韓国のよ
うに KTC（韓国貿易委員会）に判断をさせるというふうな、合理的な制度は多分できないですね。農業者の保護をやろうと思うと、これはやっぱり農水省が自分で決めるという話になってしまうので、なかなかこの日本版 TAA というのは導入は難しい制度じゃないかなと思います。
もう時間がなくなってしまったので、新政権のもとでどうなるかという話は私もよく分からないのですが、これも皆さんよく御存じの通りで、民主党のマニフェストの中にはアメリカとの FTA ということがはっきり書いてあって、それについていろいろ農業団体との間で軋轢があったっていうのはご存じの通りだと思います。ただ、一応かつての行程表も含めて
FTA、EPA について積極的に取り組んでいこうということは新政権のもとでも確認されている。もちろん三田課長もやっておられると思いますけれども、例えば外務省でもつい最近、
EPA、FTA 本部というのを外務大臣のもとに設立しまして、最初の会合を開いたというふうなことが報じられておりますので、基本的には日本の政策も FTA に積極的に取り組んでいくという方向は変わらないだろうなという気がするということです。
ということで時間も無くなりましたので雑ぱくなコメントですけれども、以上にさせていただきたいと思います。どうもありがとうございます。

153

【Powepoint】
Japan’s EPA Policy
荒木一郎(横浜国立大学大学院国際社会科学研究科・教授)

154

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【質疑応答】
浦田：

どうもありがとうございました。今の荒木さんの TAA に関する点、非常に興味深い質問だったと思います。予定の時間を 5 分ほどオーバーしてしまっているのですが、先ほどと同じようにお 1 人から質問をいただきたいと思いま
すがいかがでしょうか？韓国の FTA 政策に関してですが、いかがですか？ど
うぞ。

フロア：

WTO フォーラム代表の山浦です。青山学院大学 WTO 研究センターの客員研究員も兼ねております。安先生に簡単におたずねさせていただきたいのです
が、韓国は日本との FTA 交渉では、EPA ということについて非常に疑念を持っていたように韓国の関係者から伺っているのですが、韓国の FTA 政策は完
全にフルフレッジド FTA を追求するという立場なんでしょうか。ちょっとその辺教えていただければと思います。

浦田：

では荒木さんからのご質問、コメント、それから今フロアからの質問にお願い致します。

Ahn：

First, regarding the question from the floor, yes, as I mentioned, theKorean government has now finished actively, even with the U.S. and theEU, addressing all those issues, including protection of intellectual
property and many other issues, like investment.
So the Korean government has become much more aggressive
than when they first engaged in negotiations with Japan. So clearly, theKorean government has tried to have full FTA. But in that aspect,
probably later, we will resume active negotiations with Japan, and they
will raise more controversial problems.
On the other hand, the better aspect is that we are moreexperienced. Also, our industrial sector is much better prepared toaccommodate the requests from other countries, maybe including Japan
later.
So in that sense, the situation appears to be more favorable.
On the point raised by Professor Aki, I completely agree. The
TAA was very effective in addressing industry injury. But policy-wisealready TAA appeared to be a quite interesting basis or excuse for the
Korean government to push more aggressive ideas, because now we haveinstitutionalized the process under which the injured sectors may raise156

complaints.
So it may not be a very efficient way to address those injury
problems caused by import competition. But at least it can work very
nicely, as in the U.S. case. There is a good basis for the policymakers toraise a kind of last resort when we push these trade negotiations in Korea.
浦田：

ありがとうございます。このセッションではアジア地域経済統合の実態についての議論と制度的な面からの議論を行いました。ここにいらっしゃる発表者、討論者はこういった分野での第一人者たちであります。そのおかげで非常に最先端な議論が聞けたと私は思っております。時間が少しオーバーしてしまいましたが、そもそも始まったのが 10 分ぐらい遅かったので、タイミン
グ的にはちょうどかなというように思います。発表者、討論者に温かい拍手をお送りください。どうもありがとうございました。

157