Date: 15 July 2003

Speaker: Prof. Shjujiro Urata, Senior Research Associate, University of California at Berkeley and Professor of Economics, Waseda University, Japan

 
 
In his lecture, Prof. Urata emphasized the need for stronger regional cooperation among East Asian countries to give new momentum to the Japanese economy and multilateral trade negotiations.
Faced with difficult multilateral negotiations in the WTO, and slow progress in the regional forum of Asian-Pacific Economic Cooperation (APEC), Japanese trade policy has recently started to embrace bilateral free trade arrangements with its East Asian trading partners. Currently there are six Regional trading agreements (RTAs), with many more being negotiated or under study. How promising is this multi-track approach for Japan, and what’s in it for the WTO?
According to Prof. Urata, the proliferation of RTAs should be seen as a complement, not a contradiction to the multilateral framework of the WTO. In order to reap the benefits of globalization, countries must liberalise. However, the WTO seems almost too burdened by its success: the sheer number of contracting parties may hamper the required consensus on further market access and the regulation of new areas for trade. This might explain why many countries prefer to cooperate in a more restricted framework.
Since the early 1990s, East Asian regional economic integration has already strongly accelerated, as indicated by an increasing share of intra-regional trade in both global and regional trade. So far this integration process has been largely market driven. However, now Prof. Urata sees scope for a more institution-driven integration process based on the comprehensive bilateral ’Economic Partnership Agreements’ (EPA) examined by the Japanese government. Not unlike the European integration model, these aim at a ’WTO plus’ approach. This includes not only the establishment of a free trade area but also trade facilitation measures like increased harmonization and labour mobility, and stronger economic cooperation.
According to Prof. Urata’s forecasts, the economic impact of EPAs would be significant and dynamic, allowing for market expansion and investment creation. Although Japan still accounts for the biggest absolute share in East Asian trade, its economy is much less dynamic than those of its neighbours. If it is to expand again, it will have to bite into those closely located regional markets. After the 1997 financial crisis, these are now again being credited with a high potential for growth and prosperity - and may actually be more important trading partners to Japan than vice versa.
Thus the challenge today is to design regional trade arrangements that are WTO consistent, domestically acceptable and which help strengthen multilateral rules. However, for Japanese trade to develop its full potential through regionalisation, Prof. Urata concluded, political impetus is essential. This needs to come both from within the political establishment and from the general public. In particular, he urged that the Japanese people wake up to the challenge of revitalising their economy. The best way to achieve this awakening is through better information policies, explicit advocacy, and civil society exchanges between Japan and its East Asian partners.