Global Policy Forum

Japan is considering establishing an East Asia free-trade zone well ahead of 2010, Japanese trade ministry officials said Saturday. The envisioned free-trade zone, which would hope to take advantage of an integrated market of 2 billion people, would encompass Japan and the 10-member Association of Southeast Asian Nations, as well as China, South Korea, Hong Kong and Taiwan.

The grouping, dubbed by Japanese officials as "ASEAN plus five," would represent a third of the world's population and would seek to liberalize trade and investment in East Asia's vast markets, the officials said. It would also aim to offset the economic challenges posed by the European Union and the North American Free Trade Agreement zone.

Japan believes the integration should take place well ahead of 2010, the deadline for Japan and other industrial members of the Asia-Pacific Economic Cooperation forum to liberalize trade under the so-called Bogor declaration, the officials said. Tokyo will first seek to create a free-trade zone linking Japan and 12 other economies -- China, South Korea and the 10 ASEAN countries. Japan has been putting more emphasis recently on its economic ties with East Asia, including China.

While some circles in Japan see China's rapidly expanding economy as a threat, Japanese manufacturers have been moving to locate parts of their operations in China, and bilateral platforms for dialogue to prevent friction have developed, notably in relation to the recent dispute over farm produce.

Prime Minister Junichiro Koizumi made a pitch Friday for greater economic cooperation in Asia as he delivered a speech at an Asian economic forum on China's Hainan Island. He also agreed with Chinese Premier Zhu Rongji to create a broad dialogue framework.

In the future, the area could be extended to Australia and New Zealand, as well as the United States, with which Japan has strong economic and security ties, the officials said.

Japan will first aim to strike a consensus with the 12 economies by the time their leaders meet in Cambodia in November under the ASEAN-plus-three framework, the officials said. The East Asia Study Group, made up of working-level government officials, is holding meetings in hopes of reaching such an accord by the November summit in Cambodia. Japan and the 12 economies are to submit a report to the summit and could then move toward setting up an institutional framework to realize the goal, possibly on a ministerial level.

Japan recently pitted itself against China in seeking a free-trade agreement with ASEAN, but the officials said they now regard that as a step toward the ultimate goal of an East Asian market, with an undercurrent of competition for leadership with China.

Although opening up its agriculture market remains the toughest challenge for Japan, it can expect to receive impetus from the multilateral trade negotiations that were launched last November, the officials said.

"Our ultimate goal is to realize a broad economic partnership in the market of ASEAN plus five" to bring benefits to Japanese industries active in the area, one official said.

The partnership would involve a comprehensive economic integration in terms of free trade and cross-border investment, services trade, and harmonization of economic policies and systems.

Japan hopes to take the initiative in East Asia by proceeding with free-trade arrangements with ASEAN and South Korea, adding to the one with Singapore, as their economic systems are somewhat closer to Japan's than they are to China's, they said.

"It would be easier for Japan to harmonize systems with ASEAN" due to their decades-old ties, another official said.

Japan plans to use its first-ever free-trade agreement, signed in January with Singapore, as a model for its future FTAs with regional and bilateral trading partners.

Separately from the East Asia study group, Japanese and ASEAN officials are studying ways to conclude an FTA and will submit a report to their leaders in November. Japan and South Korea agreed on a similar study last month.

China and ASEAN, meanwhile, will hold their first meeting of senior officials next month to draw up a blueprint for the free-trade area that their leaders agreed last November to set up within 10 years.

The global trend of forming strategic trade blocs is accelerating, given the success of the EU and NAFTA, as well as the two-year stalemate in World Trade Organization efforts to set up a global free-trade regime, according to the officials.

The November launch in Doha of a three-year WTO round is now expected to fuel the momentum for regional integration, as the 144 members are expected to engage in tough and broad market-opening negotiations in the period up to Jan. 1, 2005, one official said.

The ASEAN-plus-three framework has evolved since ASEAN invited Japan, China and South Korea to its annual summit in 1997. ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The 21-member APEC includes the U.S., Canada, Australia, New Zealand, Taiwan, Hong Kong, Papua New Guinea, Mexico, Chile, Peru and Russia, as well as all ASEAN members except Cambodia, Laos and Myanmar.

In the Indonesian city of Bogor in 1994, APEC leaders agreed on what were then considered ambitious goals of liberalizing trade by 2010 for industrial members and 2020 for developing members.

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