http://www.bjreview.com AUGUST 29, 2019 BEIJING REVIEW 23
WORLD
Copyedited by Sudeshna Sarkar
Comments to [email protected]not to be impacted if supplies from Japan are
cut off.
This trade friction could hurt the slowing
global semiconductor industry as well. Chip
sales globally fell 16.8 percent in the second
quarter of 2019 on a year-on-year basis to $98.2
billion, according to statistics from the U.S.
Semiconductor Industry Association. The new
tension could add to the industry’s woes.
Key growth drivers
Since the mid-1980s, trade in the Asia-Pacific
region has grown almost twice as fast as global
trade, far faster than the zone covered by the
North American Free Trade Agreement (NAFTA)
or the European Union (EU). A whopping 60-
65 percent of Asia’s trade volume comes from
intermediate products. For most of the Asian
economies represented by Japan and the ROK,
China mainly acts as a destination for their inter-
mediate exports. China imports semi-finished
products and hi-tech parts from developed
economies in East Asia and mineral commodi-
ties from ASEAN countries. Then the finished
goods are exported mostly to developed
countries.
Trade dependence and integration in the
Asia-Pacific region has been on the rise since
the beginning of this century. According to the
Progress of Asian Economic Integration Annual
Report 2019 released at the Boao Forum for
Asia Annual Conference in March, Asia’s self-
dependence rose to 54.2 percent in 2017 from
50.74 percent in 2016. Also, from 2004-17,
the Asian economies’ dependence on China
increased.
Notably, developing and emerging econo-
mies contributed the most to global trade
growth. Particularly, Asian economies’ imports
grew by as high as 8 percent. If these econo-
mies with their different development paces
and modes as well as complementary advan-
tages can integrate their markets further, the
scale of demand will also increase. By creating
favorable conditions for a more complete value
chain, these countries can change the tradi-
tional trade pattern in South-South or South-
North cooperation, forming a new cooperation
pattern featuring a more complete value chain
within the region.
But now, with the new dispute, there could
be extensive fallout.
Impact on integration
Negotiations for the RCEP, the largest FTA
under negotiation in Asia accounting for 29.1
percent of global trade and 32.5 percent of
global investment, were initiated in 2012 by
the 10 ASEAN countries and the bloc’s six FTA
partners, China, Japan, the ROK, Australia, New
Zealand and India. The total population of this
grouping is about 3.5 billion with a combined
GDP of $23 trillion, or 32.2 percent of the global
GDP.
After 27 rounds of talks, the participating
countries were keen to conclude the pact this
year as a way to fend off trade protectionism
amid rising trade tensions globally.
In the past, developed countries dictated
the formulation of global trade rules, as evi-
denced by the General Agreement on Tariffs
and Trade, the World Trade Organization and
various FTAs. However, their requirements don’t
match the development of emerging econo-
mies’ trade and economy and sometimes,
these trade rules have actually been used by
the developed countries to contain the devel-
opment of emerging economies.
The RCEP, which includes the world’s
most promising economies such as China,
India and ASEAN, is expected to grow in size
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forming the West-dominated trade pattern
into a new one led by emerging economies.
However, the escalating tension between Japan
and the ROK has left the RCEP facing huge
uncertainties.
The fate of the China-Japan-ROK FTA also
becomes uncertain. It was seen as difficult to
achieve, taking a decade for the three countries
to start negotiations since proposed in 2002.Then after the first round of talks in 2013,
the political relations among the trio suffered
several setbacks. But in 2018, driven by thaw-
ing China-Japan relations, the three countries
agreed to speed up negotiations and so far, 15
rounds of talks have been held.
In 2018, the economic volume of China,
Japan and the ROK reached $20.95 trillion, ex-
ceeding the EU’s and drawing close to NAFTA’s.
However, despite the three countries’ total eco-
nomic strength, their economic integration lags
behind the EU’s and North America’s.
China, Japan and the ROK have close eco-
nomic and trade ties and highly integrated
industrial chains. China is the largest trading
partner of the other two while Japan and the
ROK are China’s second and third largest trad-
ing partners and the first and second largest
sources of investment, respectively. The three
neighbors are beneficiaries and active advo-
cates of free trade. Over the past decade, they
have accumulated much experience in devel-
oping their own free trade zones.
However, now even the trilateral FTA might
be put on hold or suffer more difficulties with
relations between Japan and the ROK deterio-
rating and their trade dispute escalating. QXINHUA$SHGHVWULDQZDONVSDVWDELOOERDUGEHDULQJWKHßDJVRI-DSDQDQGWKH5HSXEOLFRI.RUHDLQ7RN\RRQ$XJXVW