EAI Asia Security Initiative Working Paper No. 7

저자

Seungjoo Lee is an associate professor of political science at Chung-Ang University (Seoul, Korea). Professor Lee received his Ph.D. in political science from the University of California at Berkeley, specializing in international and East Asian political economy. Professor Lee has previously taught at the National University of Singapore and Yonsei University. Professor Lee has also been a visiting research scholar at the Institute of Social Science at the University of Tokyo and worked with the Berkeley APEC Study Center (BASC) as a postdoctoral fellow. Professor Lee is the co-editor of Northeast Asia: Ripe for Integration? (2008) and Trade Policy in the Asia-Pacific: The Role of Ideas, Interests, and Domestic Institutions (forthcoming). His recent publications appeared in various journals such as Comparative Political Studies, The Pacific Review, Asian Survey, and Korean Political Science Review. His current research investigates the changing nature of East Asian regionalism, the evolution of global FTA networks, and the transformation of the East Asian countries’ developmental strategies in the age of globalization.

East Asia has long been characterized as under-institutionalized, despite the rapid growth of economic interdependence such as the increase in intra-regional trade and the expansion of production networks. However, East Asian countries have made a drastic move toward free trade agreements (FTAs) in the new millennium. This shift toward FTAs sparked scholarly attention on the changing nature of East Asian regionalism as it was seen as an attempt to transform their deepened economic integration into more institutionalized arrangements. What is the driving force behind these new dynamics? It is believed that East Asian countries embarked on FTA initiatives in reacting to changes in external political and economic factors such as the end of the Cold War, the Asian financial crisis, and the rising Sino-Japanese rivalry. The push for FTAs in East Asia is also part of the global proliferation of bilateral FTAs in the aftermath of the problems experienced in concluding the Doha Development Round (DDR) of the World Trade Organization (WTO). In particular, the Asian financial crisis was a key catalyst in igniting East Asian countries’ rush to FTAs. Frustrated with the inability of existing regional institutions such as ASEAN and APEC to deal with that crisis, nations in East Asia felt it necessary to pursue an alternative way of institutionalizing the region, paving the way for the formation of FTA networks there.

However, an overemphasis on external factors fails to shed light on why East Asia chose markedly different responses in dealing with the external changes and shocks, depending on the country. Furthermore, much analysis of East Asian FTAs is generally underspecified, because it often lumps together individual countries’ FTA policies, the structure of FTA networks, and network strategies. This underspecified analysis of East Asian FTAs makes it more difficult to explain the way in which FTA networks are structured as well as the way they have evolved.

With these analytical lacunae in mind, I explore the evolution of the FTA network in East Asia by drawing on network analysis. Specifically, I examine the following issues. First, despite extensive research on individual countries’ FTA strategies, we still understand neither the FTA network structure nor each country’s position within the FTA network. In order to remedy this analytical failing, I employ network analysis to grasp the nature of the FTA network in East Asia, the evolutionary nature of the network, and changes in individual countries’ positions within the network. Second, I ask how and why East Asian countries have pursued divergent FTA policies and network strategies. In a sense, East Asian countries are competing with each other in networking the region. FTAs may be an expedient way of creating networks in the region. I explore East Asian countries’ FTA network strategy in terms of partner selection and sequence.

I first discuss various features of the FTA network in East Asia by examining the current status of FTAs in which East Asian countries are involved. Next I provide a brief overview of the existing literature that has examined the potential causal factors leading to East Asian countries’ FTA network strategies. After that I employ network analysis to examine the main features of the East Asian FTA network in greater detail. In particular, by using key concepts of network analysis to focus on changes in the network’s structure, I explore the way in which this FTA network has evolved. Finally, I examine the theoretical and practical implications arising from the main findings of this discussion.

A Snapshot of FTAs in East Asia

East Asian FTAs have four primary features. First, these FTA networks have grown dense and complex as East Asian countries have actively undertaken FTA negotiations in the first decade of the new millennium. As of January 2010, East Asian nations were involved in a total of 79 deals. Out of 79, 33 FTAs are currently in effect and 5 FTAs are signed. With this backdrop, FTA networks are emerging in East Asia, giving rise to a classic hub-and-spoke structure. Bigger countries in East Asia have emerged as key hubs of the networks, while smaller countries have become spokes. For example, the five largest economies in East Asia have extensively engaged in multiple FTA deals over the last decade. Singapore, which is most enthusiastic about FTAs in East Asia, has concluded 12 FTAs, of which 10 are in effect and 2 are signed. In addition, 5 more are under negotiation and 2 have been proposed.

Second, another unusual characteristic of East Asian FTA networks is that each of the Northeast Asian countries, Korea, China, and Japan, concluded ASEAN+1 FTAs without concluding a single FTA among themselves. In February 2003, China signed an FTA framework agreement with the 10 ASEAN countries, pledging free trade by 2010. Alarmed by China’s surprise move, Japan signed the Comprehensive Economic Partnership Agreement (CEPA) with ASEAN in October 2003. Stimulated by the Sino-Japanese rivalry in Southeast Asia, South Korea jumped ahead of Japan and signed an FTA of its own with ASEAN in May 2006. ASEAN plays a pivotal role linking Southeast Asian countries to the region’s bigger economies. Moreover, ASEAN has been active in setting up FTAs with advanced or big economies outside the region such as India, Australia, and New Zealand. As a consequence, ASEAN is emerging as a hub of FTA networks in East Asia, connecting countries there to other regions.

Third, in terms of the geographical orientation, East Asian countries tend to pursue trans- or cross-regional FTAs as they have actively pursued FTAs with extra-regional partners. In contrast to their counterparts in Europe and North America, East Asian countries have displayed a cross-regional orientation in the early stage of their FTAs. This feature is particularly visible in the FTAs of major economies. Japan, South Korea, and Singapore have been active in pursuing trans-regional FTAs with distant economies, both small and large. South Korea concluded FTAs with Chile, EFTA, the United States, India, and the European Union. Korea has also concluded FTAs with small economies, even though their economic effects will remain insignificant, if not negligible. China has actively negotiated with Nigeria, Pakistan, Australia, the states of the Gulf Cooperation Council (GCC), Peru, Iceland, Norway, and Costa Rica. Japan also signed FTAs with Mexico and Chile and is currently negotiating with India, Australia, and Switzerland.

Singapore has been the most aggressive in concluding trans-regional FTAs, both bilaterally and minilaterally. Among the 14 bilateral FTAs it has concluded so far, 9 are with countries outside the region. Starting with its first FTA with New Zealand in 2000, Singapore completed FTA negotiations with Chile (2002), the United States (2003), Australia (2003), Jordan (2004), India (2005), Panama (2006), and Peru (2008). A strong cross-regional character is also found in FTAs under negotiation as well as in proposed FTAs. East Asian countries’ heightened interest in cross-regionalism reflects their trade dependence on the rest of the world and their political interest in ameliorating domestic opposition to comprehensive trade liberalization.

Finally, East Asian countries focus heavily on the negotiation of bilateral FTAs rather than on minilateral or plurilateral FTAs, while East Asian countries continue to discuss the benefits of minilateral arrangements. Plurilateral FTAs, which involve more countries, inevitably take a longer period of time and more resources in the negotiation process. As latecomers to FTAs, bilateral FTAs are an expedient way for East Asian countries to catch up with other countries. In addition, East Asian countries prefer bilateral FTAs in which they have greater room for maneuvering...(Continued)

Acknowledgement

This article is supported by a generous grant from the East Asia Institute. My deepest gratitude goes to Young-Sun Ha, Byung-Kook Kim, Sook-Jong Lee, Chaesung Chun, Yong Wook Lee and Min Gyo Koo for their thoughtful comments and suggestions.