Free trade zones are the new hot topic in Asia. Suddenly there are more free trade zone proposals being floated in the Orient than joint venture schemes.
The Association of Southeast Asian Nations (ASEAN) concluded a meeting earlier this month by calling for a 10-country free trade zone potentially in 10 years. Meanwhile individual states are sounding out each other about bilateral pacts. The most dramatic idea is a three-way trade bloc between China, Japan and South Korea.
At first glance, it would appear that the global IT industries have little at stake in all the trade alliance jockeying. The major Asian economic powers have already pledged to eliminate all their tariffs on most electronic goods as part of the Information Technology Agreement (ITA) that came into force in 1997. By now IT products should be openly traded among the more than 50 countries that signed the treaty, except for some slack for developing nations.
But the ITA has minimal effect on non-tariff barriers (NTB), one of the biggest remaining obstacles to free trade, and an area where the Asians are master practitioners. Peter Gordon, international trade consultant based in Alexandria, Va., said Asian high tech industries might benefit the most from any free trade zones that could dismantle the NTBs. But he added, "Don't hold your breath expecting this to happen any time soon."
It is one thing to float free trade zone proposals. It is quite another to hammer out the nitty-gritty details to create such alliances.
It took South Korea four years to sign its first free trade bloc alliance, a bilateral pact with Chile, even when trade between the two countries is minimal.
Jun Tian, economic affairs counselor of the Chinese embassy in Washington, told this column, "It will take time to negotiate any free trade zones. There are many difficult issues to settle."
A driving force behind the Asian trade bloc politicking is to form closer ties with China. The 8% annual GDP growth in China has created soaring demand for products from other Asian neighbors. In fact, right now China has replaced the U.S. as a major customer for many of these countries.
Homi Kharas, Far East regional economist for the World Bank, said exports to China by eight East Asian nations jumped 50% in the first half of this year, while their exports to the U.S. were flat or falling. The Korean Ministry of Commerce, Industry and Energy said that country's exports to China from January to October for the first time surpassed exports to the U.S.
Clearly, booming Asian trade with China doesn't depend on any free trade alliances. Nor is the U.S. left out of the Sino trade bonanza. Lan Lijun, deputy chief of mission for the Chinese embassy in the U.S., said China is now America's fourth largest trading partner, and the U.S. is China's second largest trading partner.
Problematic Asian trade blocs are too far in the future to change all these export dynamics. To paraphrase Ross Perot, that great sucking sound you will hear isn't loss of jobs going to China in any Asian free trade zones -- that's already happening without any trade alliances. What you hear is the avalanche of exports right now.