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Japan pushes own ASEAN trade plan
Staff and wires
PHNOM PENH, Cambodia -- Japan has joined China in seeking to conclude a free trade agreement with Southeast Asian nations. Japanese Prime Minister Junichiro Koizumi took the first steps Tuesday to include the world's second-largest economy in a regional trade deal. He signed a joint declaration with the 10 members of the Association of Southeast Asian Nations (ASEAN). Koizumi's move comes a day after China seized the initiative with its 10-year plan to establish a free trade zone with Southeast Asia. Formal talks on the plan will begin next year. On completion, it would be the biggest free trade zone in the world with a population of 1.7 billion people. The ASEAN group, made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, is holding its annual summit in the Cambodian capital. Leaders from China, Japan and South Korea are attending, to discuss how best to expand their economic relations with Southeast Asia. India's Prime Minister A.B. Vajpayee is also at the talks. Comprehensive plan
Japan followed China's suit, with Koizumi's declaration aimed at a 10-year process to build a "comprehensive economic partnership" with ASEAN. Analysts said Japan is trying to prevent China snatching the lead as economic driver of the region, as well as to ward off economic stagnation at home. "I think Japan is feeling the pressure," Ray Jovanovich, head of portfolio management with Credit Agricole, told CNN. "This is really in response to the success of China in moving very quickly from an abstract agreement to getting something on paper." Japan has also been looking to export growth to offset a stagnant domestic economy. "They have really looked at the outside environment as an antidote to the ever-growing problems at home," Jovanovich noted. The partnership will cover trade and investment liberalization, promotion and facilitation. "We want to deepen relations with the ASEAN countries," Koizumi said ahead of the signing in Phnom Penh. But the leader, who earlier this year took a whirlwind tour of Southeast Asia to boost Japan's influence there, played down regional rivalry between China and Japan. "I do not subscribe to this theory that China is a competitor," Koizumi said on Sunday, adding that China's closer ties with ASEAN should be taken as an expression of the enthusiasm of the communist giant for the market economy. Seeking free trade dealsBut for Tokyo, burdened with a stagnant economy and virulent opposition from one of the most strongly protectionist farm lobbies in the world, a comprehensive trade agreement with ASEAN will be easier said than done. The joint declaration signed on Tuesday made no mention of farm goods. Free trade "is vehemently opposed in many quarters in Japan, so it's not as easy as in China, it takes a lot longer to sign one of these pacts," Jovanovich said. "The big stumbling block will be agriculture." In January, Japan signed its first free trade agreement with Singapore, which has been followed by interest from the Philippines, South Korea, Thailand, Indonesia and Mexico. Analysts say Japan is now engaged in a game of catch-up with China. "The reality of an economy in terminal decline is enveloping its ability on the diplomatic front and its influence in the region," Jovanovich said. "They're trying to plug that role." Difference in growthChina posted year-on-year growth of 8.1 percent in the July-September quarter, whereas Japan's economy shrank 1.3 percent in 2001/2002. China proposed on Monday that Japan and South Korea study the idea of a regional free trade agreement among the three, and while Japan expressed interest in the idea over the medium to long term, Tokyo -- typically -- wants to wait and see. On Monday, Chinese Premier Zhu Rongji and ASEAN counterparts signed an agreement that commits them to develop a trade area within 10 years, eliminating tariffs and other trade barriers. The two sides first agreed last November to work towards the plan, which has won early praise. "It's in everyone's best interest," Pieter van der Schaft, regional economist with Barclays Capital, told CNN. ASEAN "is too small and fragmented to compete on a block-for-block basis with China." Both sides stand to gain. China's imports from Southeast Asia have in fact been growing faster than its exports to the region, with most nations posting increases of 30 percent of 40 percent to China this year. "It's not like China is going to be the sole maker of, say, cars in the region," van der Schaft said. "They will be importing spare parts from Thailand and exporting trucks there as well. Free trade helps everyone in the region." The deal will remove red tape for many Southeast Asian companies that have already invested in China. The agreement calls for a provision that involves the reduction of tariffs on a number of goods to take effect within a targeted date of three years from July 1, 2003 when the pact comes into force, ASEAN officials said. Trade within Asia peaked in 1995 at 58 percent of the region's total, and only this year has risen over 50 percent again, thanks in part to weak demand from the United States and Europe. Reuters contributed to this report.
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