FTAs in Northeast Asia

and TPP
2014.05.20 (Tue.)

Fiorella Espinoza
Zavaleta.
Carlos Morales Larrea.

CONTENT
I.- FREE TRADE AGREEMENTS(FTAS)
1.1. Northeast Asia (NEA).
1.2.Characteristics in Northeast Asia
Region.
1.3.Functional Economic Integration
in Northeast Asia
1.4.Institutional
Economic
Integration in Northeast Asia
1.5.Northeast Asia, Rising Center of
the Global Economy.

II. TRANS PACIFIC PARTNERSHIP (TPP

2.1 Definition
2.2. Purposes and Aims
2.3. 2011 TPP Leaders Statement
2.4. The Evolution of the TPP
2.5. Members and Potential
Members
2.6 U.S.-TPP TRADEBILATERAL
TRENDS
2.7. The TPP And The WTO

I.- Free Trade

Agreements(FTAs)
In Northeast Asia

1.1.- Northeast Asia

(NEA)

Northeast Asia (NEA),

covering
China,
Mongolia,
ROK, Russia, Japan
and
DPRK, possesses rich
resources and huge
development
potential.

1.2.-Characteristics in
Northeast Asia Region

Geographical proximity: transport and trade

facilitation

One of the largest regional economy with fastest

economic growth in the world;
Top ranking foreign exchange reserves in the world;
Highly diversified economy complemented by
resources;
Intra-regional trade and investment grow rapidly with
interdependency;
Increasing opening-up and reforms in transition
economies;
Ongoing FTA negotiations among China - Japan ROK.

1.3.- Functional
Economic Integration in
Northeast Asia
Trade Dependency of Each Country on Northeast
Asian Economies

1.4.- Institutional
Economic Integration in
Northeast Asia

Concluded
FTAs:

- Japan: Singapore, Mexico, Brunei,Indonesia,

Malaysia, the Philippines, Thailand, Vietnam, ASEAN,
Chile, Switzerland, South Korea, Australia, India, and
the GCC.

- South Korea: Chile, Singapore, the EFTA, ASEAN, the

United States, India, , Japan, Canada, Mexico, the European

Union, the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia,
hte UAE), Peru, Australia, adn New Zealand.

- China:

Hong Kong, Macao, Chile, Pakistan, ASEAN, New

Zealand, anDd Singapore, Australia, the GCC, and Peru.

1.5.-Northeast Asia,
Rising Center of the
Global Economy
Northeast Asia : 22% of world population, 16% of
global GDP
World

Korea/China/Japan

Share

Population (Million)

6,671

1,490

22.3%

GDP (Billion $)

48,144

7,886

16.4%

Trade Volume (Billion $)

24,442

3,620

14.8%

Asia is projected to account for 49% of world GDP

by 2050
In ten years time, the worlds largest economies
outside
the G7 will include Mexico and Korea (Source :
Goldman Sachs)
Korea will change BRICs into BRICKs

1.5.1.- China The

Worlds Factory
Attracts 89% of
worldwide
FDI

Worlds #1
exporter /
foreign
exchange
reserve

450 of the worlds top 500 operate

factories
Airbus Assembly in Binhai
Ford Assembly line to Zhongqing
Chinas share of world production
PCs : 39%, Air-conditioners : 50%
Motorcycles : 43%, Mobile phones : 40%

Exports exceed $ 1 trillion

Trade surplus: (`05) $102bn (`06)
$178bn
Foreign Exchange Reserves : $ 1.3
trillion

1.5.1.- China The

Worlds Factory

1.5.1.- China The

Worlds Factory
FTA
Policy:

China pushed its FTA with other countries after it became

a member of WTO in 2000.

Chinese government realized FTA is a useful

instrument for both economic benefits and
international politics.
It also agreed to pursue FTA among SCO
members by 2020.

1.5.1.- China The

Worlds Factory
What drives Chinas FTA strategy?
First, China plans to play a leading role
in building East Asian Economic
Integration
body. of Northeast
Second,
promotion
Asian FTA will benefit the
development of Northeast Asian
regionby
of promoting
China.
Third,
FTA with Russia,
Australia, Middle East, Middle Asia,
Africa, and South America, China
plans to secure stable supply of
resource
and energy.
Fourth,
China
wants to expand its
market around the world by forming
FTAs.

1.5.2.- Japan
Rejuvenating Economy
Export growth Corporate capital

Economic
expenditure,
recovery
employment growth Encourage
after long term
consumption
recession

Virtuous circle for improving business

performance
Eliminated the zero interest rate policy,
increased overnight call rate to 0.5% (Jan
2007)
Toyota leads the auto industry, one of
Japanese
the
companies lead
most important manufacturing
the world
industries,
market
overtaking GM as top automaker (2006)

1.5.2.- Japan
Rejuvenating Economy
FTA Policy:
Japan also didnt pay much attention to the
worldwide trend of FTAs before Asian crisis.
Japanese government officials took
multilateral liberalization process more
seriously and disregarded the shifting trend
to regionalism.
Difficulties of WTO negotiations and rising
number of FTAs around the world led Japan
to rethink its trade policy in favor of FTA.

1.5.2.- Japan
Rejuvenating Economy
Characteristics of JPs FTA policy:
First, Japan chose ASEAN nations as
priority in picking FTA counterparts at
the early stage of FTA negotiations.
Second, level of market opening in
manufacturing sector is high, while that in
agriculture and fishery are relatively low.
Third, Japan utilizes FTA policy as a mean of
not only trade policy but also regional
diplomatic policy. In particular, Japan
intends to take a leading position in East
Asian Economic community, competing with

1.5.3.- Korea in the

World
Land size : 109th, Population:
26th
GDP : 12th, Foreign Reserves:
5th

Land (05, 1000 ha)

Population (05, 1000)
GDP (06, $ billion)
Per Capita (06, $)
Trade (06, EU: bn euro/Korea: $ bn)
Export (06, EU: bn euro/Korea:$ bn)
Foreign reserve (July 07, $ bn)

Korea, Small
but Robust

EU

Korea

Koreas
Ranking

442,277

9,926

109th

492,965

48,692

26th

14,527.1

888.3

12th

29,476

18,392

36th

2,700.7

634.8

12th

1,378.4

325.5

11th

439

255

5th

1.5.3.- Korea in the

World

635

Fastest growth in the world

Korea Reached
$ 600 billion in
Trade
export
import
(USD billion)

21
3

0.06
0.003
0.06

1946

0.5
0.1
0.4

1964

546
$500
bn
Trade

260

326
284

125

10
1

$300bn
bnExport
Export
$300
$600bn
bnTrade
Trade
$600

261

309

135
11

1971

1977

1995

2005

2006

1.5.3.- Korea in the

World (Shifts in
Industrial Structure)

Agriculture/Fish
ing/Forestry

Agriculture Manufacturing
Services
43.6%

Services
Manufacturing

8.9%

26.9%
49.5%
20.9%

<1970>

27.3%

3.3%

28.4%

56.3%

<1990>
<2005>

Shifts in the type of export

items

1990s
2006
apparel,
apparel,
semiconductors,
semiconductors,
fish,
fish, plywood,
plywood, apparel,
apparel, steel,
steel,
semiconductors,
semiconductors,
cars,
cars, wireless
wireless
apparel,
apparel, wiggeryshoes,
shoes, ships shoes,
AV
shoes,
communication
communication
devices
devices,
devices
devices, ships
1960s/70s

1980s

1.5.3.- Korea in the

World
FTA Policy:
Korea turned its eyes to FTAs only after Asian financial
crisis in 1997.
Focused on multilateralism rather than regionalism before
1998.

Characteristics:
First, Korea started FTA negotiations to minimize
damage to its trade as regionalism spread around
the world after the launch of EU in 1992 and
NAFTA
in 1994.
The
second
goal of FTA policy was to strengthen
economic competitiveness and improve national
economic system through market opening and
liberalization.

1.5.4.- Comparison of
FTA Policies of CJK
In selecting counterpart of FTAs, China and Japan tend to pick
developing countries while Korea tends to choose advanced countries.

Korea as a middle power in the world tends to

emphasize economic benefit while China and
Japan as major powers in the world tend to
focus relatively more on non-economic
values.
China and Japan seem to pursue regional hegemony in
East Asia through FTA policies. Both countries took
ASEAN member countries as important FTA
counterparts and put higher priority in ASEAN in their
FTA negotiations.

1.5.4.- Comparison of
FTA Policies of CJK
In terms of area of interest:
China considers energy and resource security as one
of the prime goals of FTAs around the world.

Japan prefers lower level of market opening in

agriculture and fishery, while allowing high market
opening in manufacturing sector.
Korea, meanwhile, pursues comprehensive FTA
including services, investment, government
procurement, IPR, and so on.

1.5.7.- FOREX Reserve

1.5.5.- The Partners

1.5.6.- Trade Volume

1.5.8.- P to P
Interaction

1.5.9.- Obstacles
Despite the potentially major impact of a China-JapanSouth Korea FTA, several important caveats apply.
The negotiations could be long and contentious.
Historical precedent suggests that it can take
years for countries to negotiate bilateral FTA.
China has been in free-trade talks with Australia
since 2005, but they remain bogged down over
issues such as how to treat agricultural goods.
The need for three-way talks might introduce
additional complexities.

1.5.9.- Obstacles
Entrenched protectionist interests in each country
can present obstacles.
o China is unlikely to make concessions that would
threaten the state's ability to control strategic
industries.
o Agricultural producers in Japan and South Korea.
Underlying geopolitical tensions may complicate
matters.
Diplomatic relations frequently come under strain
owing to historical issues and territorial disputes
Domestic constituencies.
Japan could be keen to reassure the US that an FTA
with China will not undermine the prospects for a
Trans-Pacific Partnership.

1.5.10.- Importance
A China-Japan-South Korea FTA could have
enormous economic significance.
All three countries are major global exporters,
and their combined weight rival that of the
European Union and the North American FTA.
Trade between the three countries, as
measured by total exports, was worth
US$754bn in 2011, up from US$163bn in 2001.

1.5.10.- Importance
The total value of this measure of trilateral trade
has expanded by an annual average of 17% over
the past decade (IMF, 2011).
The three countries accounted for 18.5% of world
exports in 2010
According to estimates a free trade treaty could lift
China's GDP by up to 2.9 percent, Japan's by 0.5
percent, and South Korea's by 3.1 percent

1.5.11.- Expectations
and Reservations

II. Trans-Pacific Partnership

(TPP)
Intellectual Property Rights Protection in a 21st Century
Trade Agreement

2.1 What is the TransPacific Partnership

Agreement (TPP)?

Definition:

The Trans-Pacific Partnership (TPP) is a potential free trade agreement

(FTA) being negotiated among 12 countries: The United States,
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, and Vietnam; and perhaps more countries,
although the TPP covers a wide range of issues, this site focuses on
the TPP's intellectual property (IP) chapter. The broad outline of an
agreement was announced on the sidelines of the Asia-Pacific
Economic Cooperation (APEC) ministerial in November 2011, in
Honolulu, HI.

2.2. Purposes and

Aims

With 29 chapters under negotiation, the TPP partners envision the

agreement to be comprehensive and high-standard, in that they
seek:
To eliminate tariffs and non-tariff barriers to trade in goods,
services, and agriculture among the parties, by 90 percent of all
tariffs between member countries by 1 January 2006, and
reduction of all trade tariffs to zero by the year 2015.
Try to serve as a template for a future trade pact among APEC
members and potentially other countries.
To establish rules on a wide range of issues including foreign
direct investment and other economic activities.
To promote trade and investment among the TPP partner
countries.
To promote innovation, economic growth and development, and
support the creation and retention of jobs.
To create a 21st-century agreement that addresses new and
crosscutting issues presented by an increasingly globalized
economy.

2.3. 2011 TPP Leaders

Statement
At the 2011 APEC Leaders meeting in Honolulu, the leaders of the
(then) nine TPP countries agreed to the broad outlines of an
agreement. In their statement, they categorized the TPP as a
comprehensive,
next-generation
regional
agreement
that
liberalizes trade and investment and addresses new and
traditional trade issues and 21st-century challenges". TPP trade
ministers also highlighted the following five key areas of the
socalled
historic
and standard-setting agreement:
1)
Comprehensive

Market
2) Regional Agreement
3)

Cross-cutting

Trade

Issues
4) New Trade Challenges
5) Living Agreement
Source: TPP Leaders Statement, Honolulu, Hawaii, November

2.3. 2011 TPP Leaders

Statement
1)
1) Comprehensive
Comprehensive
Market
Market

Removal of both tariff and non-tariff

barriers is comprehensive and ambitious
in all areas.

2)
2) Regional
Regional
Agreement
Agreement

Fully regional agreement that facilitates

trade and the development of production
and supply chains among TPP members.

3)
3) Cross-cutting
Cross-cutting
Trade
Trade
Issues
Issues

Holistic, agreement-wide approach to

specific
areas:
regulatory
coherence,
competitiveness and business facilitation,
small- and medium-sized enterprises, and
development.

4)
4) New
New Trade
Trade
Challenges
Challenges

Addresses emerging trade issues such

as those caused by new technology
(e.g., cloud-computing).

5)
5) Living
Living Agreement
Agreement

Agreement will evolve in response to

developments in trade, technology or
other emerging issues and expand to
include other economies from across the
Asia-Pacific region.

Source: TPP Leaders Statement, Honolulu, Hawaii, November

2.4. The Evolution of the TPP

The Trans-Pacific Strategic Economic Partnership (TPSEP), as it

was originally known, was conceived in 2003 by: Singapore, New
Zealand, and Chile as a path to trade liberalization in the AsiaPacific region. Brunei joined negotiations in 2005, and the TransPacific Strategic Economic Partnership (P-4) agreement was
concluded in 2006.

CHILE

SINGAPOR
E

NEW
ZEALAND

BRUNEI

2.4. The Evolution of the TPP

In February 2008, the United States joined the negotiations to

conclude the still outstanding investment and financial services
provisions. President Bush notified Congress of his intention to
negotiate with the existing P-4 members on September 22, 2008.
The new Obama Administration decided to continue with the TPP
negotiations. On November 14, 2009, President Obama committed the
United States to engage with the TPP countries .
President Obama formally notified Congress of his Administrations
intention to enter into negotiations with the TPP countries on
December 14, 2009.

U.S.A.
SINGAPO
RE

NEW
ZEALAND

CHILE

BRUNEI

2.4. The Evolution of the TPP

In November 2008, Australia,Vietnam, andPeruannounced

that they would join the P4 trade bloc.
In October 2010, TPP participants agreed to by consensus to
the inclusion of Malaysia as a negotiating partner.

AUSTRALI
A

CHILE
SINGAPO
RE

NEW
ZEALAND

PERU

U.S.A
.

MALAYS
A

2.4. The Evolution of the TPP

The negotiating partners announced a framework for the agreement at

the sidelines of the Asia- Pacific Economic Cooperation (APEC) Ministerial
in Honolulu, HI, November 8-13, 2011.
The TPP countries agreed by consensus to the inclusion of Mexico and
Canada and they began participating as negotiating partners in the
December 2012 round in Auckland, New Zealand.
On March 15, 2013, Prime Minister Shinzo Abe announced Japans
definitive interest and the bilateral consultations intensified., and Japan
began to fully participate in the final days of the July 2013 Malaysia round.
Nineteen rounds of negotiations have taken place to
date.

SINGAPO
RE

VIETNA
M

CHIL
E

NEW ZEALAND

PER
U

AUSTRAL
IA

CANAD
A

BRUNEI

MALAY
SA

JAPAN

U.S.
A.

MEXICO

2.5. Members and Potential

Members

South
South Korea
Korea expressed
expressed interest
interest
in
in joining
joining in
in November
November 2010,and
2010,and
was
was officially
officially invited
invited to
to join
join the
the
TPP
TPP negotiating
negotiating rounds
rounds by
by the
the
United
States
after
the
United
States
after
the
successful
successful conclusion
conclusion of
of its
its
bilateral
bilateral trade
trade agreement
agreement with
with
South
South Korea
Korea in
in late
late December.
December.
Other
countries
that
have
expressed
interest
in
TPP
membership include:
Taiwan
Indonesia
The
Cambodia
Philippines
Bangladesh
Laos
India
Colombia

China also has some interest

in eventually joining the TPP

Figure 1.
Trans-Pacific Partnership Countries (2012)

Sources: Analysis by CRS. Population and GDP data from IMF, World Economic
Outlook, April 2013. Trade data from the U.S. International Trade Commission
(ITC). Total trade includes both imports and exports, but does not include

Figure 1.
Trans-Pacific Partnership Countries (2012)

Sources: Analysis by CRS. Population and GDP data from IMF, World Economic
Outlook, April 2013. Trade data from the U.S. International Trade Commission
(ITC). Total trade includes both imports and exports, but does not include

Figure 2.
The TPP and Other Asia-Pacific Trade Agreements

Sources: WTO FTA database and websites of TPP countries trade ministries.

Figure 2.
The TPP and Other Asia-Pacific Trade Agreements

Sources: WTO FTA database and websites of TPP countries trade ministries.

Figure 3.
U.S.-World, APEC, and TPP Goods
Trade
(in billions of U.S. dollars)

Source: Analysis by CRS. Data from the International Trade

Commission.

Figure 4.
Largest U.S. FTAsGoods
(in billions of U.S. dollars, 2012)

Source: Analysis by CRS. Data from ITC.

Figure 5.
Largest U.S. FTAsServices
(in billions of U.S. dollars,
2012)

Source: Analysis by CRS. Data from BEA.

2.6 U.S.-TPP TRADEBILATERAL

TRENDS

Twelve countries, including highly developed economies

such as Australia, Canada, Japan, and New Zealand;
middle income countries such as Mexico, Chile, and
Malaysia; and emerging economies such as Vietnam are
potential U.S. FTA partners in the TPP.

The U.S. trade relationship

with Japan
Japan is the third-largest U.S trading partner in the TPP
negotiations, and the largest among the five TPP countries
with which the United States does not have an existing FTA.
U.S. trade with Japan was $216 billion in merchandise and $73 billion in
services in 2012.
Many view Japans participation as pivotal to enhancing the
credibility and viability of the TPP as a regional free trade
arrangement, and believe it may encourage other
The Detroit-based U.S. auto industry, the United Autoworkers union,
and Members of Congress with a large auto-industry presence in their
districts have expressed strong opposition to Japans involvement in
the TPP
Japanese farmers have been vocal opponents of the TPP over concerns
of increased foreign competition.
A large segment of the U.S. business
community has expressed support for
Japanese participation in the TPP, if Japan
can resolve long-standing issues on
access to its markets for U.S. goods,
services, and agriculture.

The U.S. trade relationship with Peru

The United States-Peru Trade Promotion Agreement (an FTA)
entered into force on February 1, 2009.
U.S.-Peru trade totaled $15.8 billion in goods in 2012.
Relative to other TPP countries, Peru is the third-smallest U.S.
trade partner, in front of New Zealand and
The major U.S. imports from Peru are oil and oil products, copper,
and knitted apparel, whereas the major U.S. exports to Peru are
machinery, refined oils, and electrical machinery. As with Chile,
the United States is a major trading partner with Peru, providing
nearly 20% of the countrys total imports.
The United States had a goods trade surplus with
Peru of $2.9 billion in 2012, with U.S. exports to
Peru increasing four-fold over the past decade
In its FTA with the United States, Peru agreed to
IPR provisionsknown as the May 10th
agreementthat reflected certain lasting U.S.
concerns regarding accessibility to medicines.

Table A-1.
U.S. Goods Trade with TPP Countries,
2012
(in millions of U.S. dollars, ordered by total trade)

Source: U.S. International Trade Commission.

Table A-2.
Services Trade with TPP Countries,
2012
(in millions of U.S. dollars, ordered by total trade)

Source: Bureau of Economic Analysis, Survey of Current

2.7. The TPP And The

WTO
influence
influence of
of the
the TPP
TPP impact
impact could
could be
be great
great due
due to
to

The
its
The
its potential
potential
expansion
expansion and,
and, hence,
hence, the
the fact
fact that
that it
it could
could eventually
eventually affect
affect a
a substantial
substantial
amount
of
world
tradeover
60%
of
U.S.
trade
alone
is
with
other
amount of world tradeover 60% of U.S. trade alone is with other APEC
APEC
members.
members.
The debate over whether FTAs have a positive or negative effect on the
multilateral system continues.
Proponents of bilateral and regional agreements would argue that:

Successful
negotiation
and
implementation
of
proposed new trade rules in the TPP, on such
emerging issues as State-owned enterprises and
regulatory coherence, could serve as a template for
future WTO negotiations.
A successful TPP agreement among the current negotiating
partners could cause other regional economies to consider
joining (as seen recently with the addition of Canada, Japan,
and Mexico) in order to ensure they remain competitive in
TPP markets, thus furthering the WTO goal of greater global
trade liberalization; and
TPP could help promote and ensure the longevity of
TPP could help promote and ensure the longevity of
domestic economic policy reforms, particularly for
countries such as Vietnam.

2.7.The TPP and

the WTO
Opponents, however, would counter that:

Efforts toward the TPP and other regional/bilateral FTAs

may divert attention and resources from multilateral WTO
efforts;
Increased trade among TPP members due to the
preferential tariff structures of the agreement could
simply be diverted from other regions rather than be
newly created; and
The spread of FTAs may actually make international
commerce more difficult as companies must navigate
varying rules and standards associated with different
agreements

2.8. Negotiating Topics In TPP (Potential

Chapters)
1) Core Negotiating Issues: Market Access
MARKET ACCESS FOR GOODS AND SERVICES
Textiles, Apparel, and
Footwear
Trade in Services
Government
Procurement

AGRICULTURE
Market Access
Border Protection Issues for
Sensitive Agricultural
Products
Agricultural Issues in Other
TPP Chapters

2.8. Negotiating Topics In TPP (Potential

Chapters)

2) Core Negotiating Issues: Rules

Intellectual Property Rights (IPR)

Rules of Origin
Technical Barriers to Trade
Transparency in Health Care Technology and Pharmaceuticals
Foreign Investment
Competition Policies
Trade Remedies
Labor
Environment

2.8. Negotiating Topics In TPP (Potential

Chapters)

3) New and Cross-Cutting Issues

Regulatory Coherence
State-Owned Enterprises
E-Commerce
Competitiveness and Supply Chains
Small- and Medium-Sized Enterprises

Supply Chains

Q&A

Discussion:
1. Which of the three partners (Japan, South
Korea and China) benefits most from an FTA
and in what way?
2. What could be, in any, the implications for SEA
nations?
3. Which would be
the advantages and
disadvantages if South Korea joined to the
TPP?

Thank you for

your
attention!!!
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