"Japan and ASEAN: Cooperation for Peace and Prosperity in the Asia-Pacific Region"

Preface

The Global Forum of Japan (GFJ) aims to contribute to peace and prosperity in the world by helping to build international consensus to be commonly shared by a transnational network of epistemic communities that include opinion leaders. For this purpose, GFJ has been actively engaged for the past 21 years in organizing 3 to 5 policy oriented bilateral and multilateral exchanges every year between Japan and the rest of the world.

It is against this background that GFJ held the 2nd Japan-ASEAN Dialogue “Japan and ASEAN: Cooperation for Peace and Prosperity in the Asia-Pacific Region” in Tokyo on 16-17 January 2003. This report intends to summarize the achievements of these discussions between Japanese and their ASEAN counterparts. Though the printed version of the report will be made available to only the restricted number of people such as members and friends of GFJ and their counterparts from ASEAN, the full text of the report will be shown at the website of GFJ (http://www.gfj.jp/) as well.

The 2nd Japan-ASEAN Dialogue “Japan and ASEAN: Cooperation for Peace and Prosperity in the Asia-Pacific Region” was held under the joint auspices of GFJ and ASEAN ISIS, as a kick-off event of the “ASEAN-Japan Exchange Year 2003” and was attended by 102 Japanese, 25 ASEAN participants including 11 panelists representing ASEAN. Participants exchanged opinions on matters of significance related to the future of Japan-ASEAN relations. We would like to take this opportunity to express our gratitude to the Japan-ASEAN Exchange Projects, which generously supported this 2nd Japan-ASEAN Dialogue.

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1. Program / Agenda

ASEAN-Japan Exchange Year 2003

THE 2nd JAPAN - ASEAN DIALOGUE BY GFJ / ASEAN ISIS

"Japan and ASEAN:
Cooperation for Peace and Prosperity in the Asia-Pacific Region"

January 16, 2003/Tokyo ANA Hotel
and
January 17, 2003/International House of Japan
Tokyo, Japan

Supported by Japan-ASEAN Exchange Projects

Co-sponsored by The Global Forum of Japan (GFJ), ASEAN ISIS

[Note] English-Japanese simultaneous interpretation provided

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2. Participants List

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3. Biographies of the Mediators and Panelists

[ASEAN Panelists] [Japanese Panelists]

(In order of appearance)

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4. Outline of Discussions

Session I



Session II



Session III



Session IV



Policy Recommendations

One of the major achievements of the Second Japan-ASEAN Dialogue was that participants from both Japan and ASEAN had very frank and intensive discussions throughout four sessions. This Dialogue ensured each participant to express their own view to nurture further discussion to find new ideas, commonalities and differences. Thus, the Dialogue did not aim at reaching consensus views or coordinated recommendations. However, there were many points that participants found their common ground, which deserves firm policy recommendations for the further consolidation. Below are the several findings in the Dialogue:

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5. Papers of the Speeches

Welcome Reception

Welcome Dinner Speech

by ITO Kenichi,
Governor & Executive Director, The Global Forum of Japan

Dr. Kusuma Snitwongse, Amb.Chew Tai Soo, Amb.Domingo Siason, Other Distinguished guests from the ASEAN ISIS and the ASEAN Embassies in Tokyo,Ladies and Gentleman;

On behalf of The Global Forum of Japan and its members, I would like to welcome all of you who have come to Japan to attend the Japan-ASEAN Dialogue on "Japan and ASEAN:Cooperation for Peace and Prosperity in the Asia-Pacific Region" hosted jointly by the ASEAN ISIS and the Global Forum of Japan.

As we recall, we had the first of the series of Japan-ASEAN Dialogue on February 20-21 1ast year. It was held on the day following the visit of President Bush to Tokyo in the wake of the terrorist attacks of September 11, 2001. As it was so between President Bush and Prime Minister Koizumi, the discussions of the Japan-ASEAN Dialogue were also focused on the issue of how to deal with the international terrorism. The 2nd Japan-ASEAN Dialogue is going to be held against the background of an imminent U.S.attack on Iraq and an impending nuclear brinkmanship of North Korea. In this sense, it must be said to be very timely for us to meet here tomorrow.

However, as important as this background for the timeliness of our 2nd Japan-ASEAN Dialogue is the fact that this Dialogue is designated to be a kick-off event of the "ASEAN-Japan Exchange Year 2003." As you all know, Prime minister Koizumi proposed to designate the year 2003 as the "ASEAN-Japan Exchange Year 2003" during his visit to Southeast Asia last January. And on November 5 at the ASEAN plus Japan Summit Meeting in Phnom Pehn the leaders formally declared the initiative of the Exchange Year 2003. Japan was designated as a key co-ordinator for the month of January to plan and organize a series of exchange activities in Japan. It is the honour of the Global Forum of Japan to host the first of such exchange activities.

Ladies and Gentlemen,
This evening’s dinner is intended, first, to welcome you all who have come from the ASEAN countries and second, to provide you all who are here this evening with an occasion to get acquainted with each other in advance of the tomorrow’s meeting. To facilitate this purpose, 1et me, first of all, introduce all those who sit around the table this evening.

---List of names as attached hereto---
The Global Forum of Japan is known for its long history of international exchange activities dating back to 1982, when Japanese, Americans, Europeans and Canadians met in Washington and established the then so-called Quadrangular Forum. After the Quadrangular Forum was dissolved in 1991 in the wake of the end of the Cold War, its Japanese component reorganized itse1f into a national body for international exchange and has been active as such since then in the name of the Global Forum of Japan.

The Dialogue we are going to have tomorrow will be the 2nd of a series of Japan-ASEAN Dialogue to be organized jointly by The Globa1 Forum of Japan and the ASEAN ISIS. Taking advantage of this occasion, I would like to express my special indebtedness and obligedness to Dr.Kusuma Snitwongse, who, as a contact person for the ASEAN ISIS, did all the necessary coordination works to make the tomorrow’s Dialogue possible. I would also like to thank for the financial support given to us by The Japan-ASEAN Exchange Projects, without which this Dialogue was impossible.

Now I would like to turn to Ambassador Okawara Yoshio, who is the Chairman of The Global Forum of Japan and the host of this evening’s dinner, and propose him to toast our guest from the ASEAN countries. Ambassador Okawara.



Session I
"The Initiatives for the ASEAN-Japan CEP"

Keynote Paper

by KIMURA Fukunari,
Professor, Keio University
The concept of "East Asia"
The East Asia including Northeast Asia and Southeast Asia is now at a critical turning point. In East Asia, we have observed substantial advancement of economic integration at the level of private economic activities. On the other hand, economic integration at the policy level was way behind, compared with other regions in the world. However, as a forerunner, Japan-Singapore Economic Partnership Agreement (JSEPA) was signed in January 2002 (being effective in November 2002), and the China-ASEAN framework agreement was concluded in November 2002. And now, the construction of free trade agreement (FTA) networks has begun in East Asia.
Japan is currently negotiating with Mexico for the second FTA and at the same time, starts preparing for the framework of Japan-ASEAN economic partnership including FTA. In addition, working groups with the Philippines and Thailand have already been formed for bilateral FTAs, and Malaysia and Indonesia have also started considering FTA conclusion with Japan.
The China-ASEAN talk on concluding FTA has advanced further. The framework agreement decides that the early harvest program for agricultural products will begin in 2003 and the tariff reduction for manufactured goods and others will start in 2005.
Korea has successfully finished negotiating over FTA with Chile and is supposed to activate its approach to ASEAN under the new president.
These recent moves of Northeast Asian countries are not explicitly coordinated under a unified scheme. However, all countries in East Asia share a common understanding that the ultimate goal of the FTA initiative is the economic integration of East Asia as a whole. If we look back to history in the last century, we must interpret the shared value as a result of epoch-making changes in the regional concept. Beyond diversity in historical and cultural background as well as differences in development stages, people in East Asia start sharing the view that East Asia is a natural entity heading for economic integration.
In this transition process, it is ASEAN that has shown a model of integration with admitting diversity across partners. It was thus natural that the East Asian integration started from the construction of FTA networks in which ASEAN is at the pivotal position. Northeast Asian countries have deepened economic integrity but have not completely cleaned up negative heritage from the past, from which political turmoil sporadically erupts. Serious economic integration in Northeast Asia requires a considerable time and effort to remove these obstacles. In such political environment, ASEAN is playing an important role as an intermediary or a catalyst for the whole East Asia region.

The East Asian economy leading the world
The East Asian economy drastically deepened its integration in the past ten years. East Asia now has much more sophisticated international production/distribution networks than East Europe or Latin America does.
Key words to characterize East Asian production/distribution networks are "fragmentation," "agglomeration," and "a firm." "Fragmentation" means to separate out production blocks and locate them in their appropriate places. In East Asia, the trade of intermediate products such as parts and components in electric machinery has explosively increased. One of the necessary conditions for enabling fragmentation is a substantial reduction in service link costs to connect remotely located production blocks. Service link costs include transportation cost, telecommunication cost, and various types of coordination cost. The reduction in service link costs is the very indication of globalization, which starts working effectively in East Asia.
The concept of "agglomeration" is useful when we discuss economies of scale in geographical dimension. Vertical production networks with geographical concentration of corporate firms and human resources characterize agglomeration in East Asia. Standardized parts and components are procured from the most price-competitive suppliers in the world through, say, internet browsing. On the other hand, customized components and modules with frequent spec changes and strict supply timing must come from suppliers located nearby. Vertical production chains become increasingly sophisticated, utilizing the merit of both fragmentation and agglomeration. National and local governments in East Asia are in harsh competition to formulate a critical mass of agglomeration because economies of scale provide certain stability in industrial structure.
The third concept, "a firm," takes care of recent phenomena of improved economic environment allowing firms to formulate efficient corporate structure and inter-firm relationship. Firms always make internalization choices; i.e., they decide what to do by themselves and what to ask other firms to do. When the surrounding area has various competitive firms in related industries and allows them to establish flexible contractual relationships, firms can concentrate their resources on activities with core competence and make themselves efficient. In the current East Asia, we often observe firms with efficient production/distribution networks in which they sometimes establish foreign affiliates and sometimes make OEM contracts or utilize EMS firms.
East Asia has been a growth center in the world with globalizing corporate activities. To upgrade the Asian dynamism into a new dimension, we must proceed to economic integration at the policy level. The effort should include the restructuring of traditional import-substituting industries in more competitive environment as well as the establishment of policy environment allowing further fragmentation and agglomeration for export-oriented industries.

Quality matters for the FTA network
By now, virtually all East Asian countries have become positive in concluding FTAs with other countries in the region. It is thus very probable that FTA networks will be formed in East Asia. Now the issues concerned are the "speed" of the network formation and the "quality" of the network.
As for the "speed," we must note that the required pace is likely to be set by the timing of approach from other parts of the world, rather than just considering the timing of taking care of each country's domestic problems. Countries outside East Asia are pretty aggressive in trying to establish connections with East Asian countries. Singapore had an FTA with New Zealand and has already finished the core negotiations for an FTA with the United States. The United States declared that it would be ready to negotiate over concluding FTAs with other Southeast Asian countries. Korea has completed negotiations with Chile, and Japan is currently under official negotiation with Mexico. It is good to extend such links with countries outside the region so as to make East Asia open to the world. However, it is crucially important to proceed to East Asian integration at the same time without delay. Otherwise, East Asia would be broken into pieces and lose its dynamism at the regional level. We know that such fear is not pointless from our unpleasant experience as outsiders in North America and Europe.
The "quality" of FTA network consists of two elements: the flawlessness in liberalization and the scope of covered contents.
The flawlessness in liberalization is evaluated by how far the list of exclusion from liberalization can be reduced and how loosely and concisely the rule of origin (ROO) can be specified. In contrast with customs union, free trade area has a convenient property with which a new FTA can be concluded without having any readjustment of already-concluded FTAs and thus the sequential formation of FTA network is possible. However, the compilation of bilateral FTAs does not automatically mean the formation of a plurilateral/regional FTA. In case of customs union, theoretically speaking, once an out-of-region product comes through the common wall of trade barriers, we do not have to specify the origin of the product anymore in intra-regional trade. In case of FTA network, on the other hand, the certificate of origin is always needed in intra-regional trade because the exclusion list and ROO are different across bilateral FTAs. Such complication in FTA networks is called spaghetti bowl phenomenon. To avoid the problem, it is important to conclude "clean" bilateral FTAs with short exclusion lists and loose ROO.
The scope of covered contents means what sort of elements beyond simple tariff removal can be included in FTAs. Particularly in the context of East Asia, we need a set of measures to further enhance the dynamism of international production/distribution networks. Note that most of the firms which have export-oriented affiliates in East Asia pay little tariff, thanks to the tariff rebate system of imported materials to produce exported products. It means that tariff removal by FTAs does not benefit these successful firms very much. We thus should not be satisfied with tariff removal but try to include various elements such as trade facilitation, removal of non-tariff measures, harmonization of standards, protection of intellectual property rights, and others in order to establish integrated business environment in East Asia.
Compared with Europe and Latin America, East Asia has weak inclination to linking FTAs with domestic reform. If we try to avoid domestic politico-economic adjustments in concluding FTAs, it may end up with FTAs of low quality just to clear the loose disclipline imposed by GATT/WTO. We certainly should not imitate the experience of AFTA ten years ago in which immediate hardcore liberalization was postponed and demonstration effects of concluding FTA on FDI was emphasized. It is now important for East Asian countries to construct FTA networks of high quality with strong determination and strategic mind.

Homework
If we set our goal in further enhancing the dynamism of East Asian economy, homework for Japan and ASEAN countries can be set as follows.
As for Japan, the strong recovery and substantial structural reform of domestic economy are the first priority in order to reclaim the reliance on the Japanese economy. With regard to international commercial policies, Japan must lead the formation of FTA networks by setting the quality standard. It means that some difficult issues such as agricultural protection and the movement of natural persons cannot be evaded. The public support for FTA initiative is now pretty strong, and thus it becomes difficult for some specific sectors to block the conclusion of FTAs. Now the issue is not whether we can just conclude FTAs but whether we can strategically link the FTA initiative with domestic reform. The effective links with other policy modes such as international finance policy and economic cooperation policy are also hoped for.
As for ASEAN, the immediate issue is how to construct economic system resilient in more competitive economic environment. Regional tariff reduction under the AFTA scheme primarily stimulates the restructuring of import-substituting industries that were formerly captured by narrow domestic markets. In addition to such effort, ASEAN has to head for the seamless integration to further activate international production/distribution networks.
ASEAN latecomers will not have much time to adjust for economic integration. Not trying to hastily foster local indigenous firms directly, they must first positively invite foreign firms to construct industrial clusters of certain size so as to build up stable industrial basis.
In the meanwhile, ASEAN is expected to continuously play a role at the pivotal position. To fulfill the task, ASEAN must strengthen their economies with keeping the integrity. And strategic moves are hoped for in constructing FTA networks of high quality.


Session II
"ASEAN-China FTA negotiations and ASEAN-Japan CEP"

Keynote Paper

by Hank LIM,
Director for Research, Singapore Institute of International Affairs(SIIA)
I. INTRODUCTION

The accession of China to the WTO as the seventh biggest world exporter is expected to have significant impacts on the international trading system. The most important impact will be felt in the Chinese economy as it has to abide on liberalisation and de-regulation of its largely closed domestic economy. On the other hand, China's exports are accorded protection under the WTO's most favoured nations clause (MFN). The market access commitments made by China leading to its accession will increase the import of foreign goods, foreign firms and investment into China, and thus increasing the level of competition. Accession of China to the WTO will bring double-edged benefits and costs to China. Liberalising the Chinese economy will increase the efficiency of its economy but at the same time it will put pressure on domestic firms, requiring major restructuring of China's product, services and labour markets leading to increased unemployment and large-scale industrial dislocation. Over the long run, it is expected that China would benefit from the process of liberalisation and de-regulation following its entry to the WTO.
Against the background of these major changes, challenges and opportunities, China proposed a free trade area (FTA) with ASEAN in November 2001. Initially, there was a negative perception or at best a lukewarm reaction given by some ASEAN countries on the ASEAN-China FTA. After one year of intensive study and preliminary discussions between ASEAN and Chinese Senior Officials, ASEAN officially agrees to the establishment of ASEAN-China FTA within 10 years. The ASEAN-China FTA is a major undertaking and has wide and deep economic and political implications for both sides.

II. CONCEPTUAL FRAMEWORK OF FTA STRUCTURE

Several economic studies have shown that East Asia economic regional co-operation will bring greater benefits to East Asian countries as it involves a larger grouping. In other words, the ASEAN + 3 framework should be more preferable than a series of ASEAN + 1 arrangement. However, in practice it will be very difficult to achieve this, given the very diverse economic interests and structural differences among ASEAN economies. Although it is less optimum, it appears that the ASEAN + 1 arrangement is more feasible than the overall arrangement of ASEAN + 3 format, notwithstanding of over-stretching the limited resources of ASEAN and the risk of overlapping arrangements.
Another important aspect of this ASEAN + 1 arrangement, that is ASEAN-China, ASEAN-Japan and ASEAN-Korea, is the central position of ASEAN as being the "hub" for East Asia. This is potentially a very strategic and powerful potential for Southeast Asian countries. ASEAN may gain this central position more so by default rather than having the intrinsic virtue or power over Northeast Asian countries. The reason is simply because none of the Northeast Asian countries would be allowed to gain a leadership position. It is not likely a sub-regional structure can emerge in Northeast Asia in the foreseeable future.
The format of the ASEAN + 1 arrangement must be broad and comprehensive that can accommodate the interests of its constituent members as well as the interest of the partner economy. Conceptually, ASEAN-China FTA negotiations would not be easy and straightforward because ASEAN and Chinese economies are not complimentary over a broad range industrial production. They are both competing and exporting to the same external markets. To overcome this initial structural incompatibility, China has offered to ASEAN a set of "early harvests" benefits in the sense that while China offers preferential tariff to ASEAN exports there is no reciprocal treatment of China's exports to ASEAN, particularly to the CMLV (Cambodia, Myanmar, Laos and Vietnam) countries.
From the start of negotiations China was more interested and prepared in negotiating the issues and agenda for an FTA. Partly it can be explained due to the fact that China is represented by a single entity while ASEAN is composed of the original 6 ASEAN countries and CMLV. Even among the original 6 ASEAN countries, there is a wide range of views, and differing domestic political, economic and social configurations and priorities. Partly it can be explained that ASEAN economies are growing much slower and less dynamic compared to China. ASEAN's negotiating posture seems more of a reacting one, rather than proactive in identifying opportunities in the FTA negotiating process with China.
It would be a protracted process in the ASEAN-China FTA. If the scope of the FTA discussions is limited, there would be more difficulties to strike a positive sum game result for both sides. Even if both sides agree on the scope and specific details of the FTA arrangement, there is a possibility that there might be a delay or to yield to a "dirty ASEAN-China FTA" (diluted FTA) if economic growth and macroeconomic conditions in ASEAN and China are not substantively improving. For example, if ASEAN fails to attract sufficient foreign direct investment (FDI) to generate sufficient sources of growth during this period of negotiations. Alternatively, if there were large-scale unemployment or serious structural dislocations in China arising from liberalizing its domestic economy, the FTA process would be seriously disrupted.
Basically, the ASEAN-China FTA is based on the assumption or hypothesis that it is a positive sum game, meaning that each party will gain positive values. The prevailing perception is that in the initial period China would gain relatively more than ASEAN and subsequently each side would increase its absolute gain. Over the long run, the absolute gain in positive income effect would exceed the negative substitution effect for both ASEAN and China. The grey area of the ASEAN-China FTA negotiation is to determine which side would be getting more of the relative trade and investment gains in a dynamic and long run context.

III. ASEAN- JAPAN COMPREHENSIVE ECONOMIC PARTNERSHIP

The economic structures of ASEAN and Japan are complementing. ASEAN is rich in natural resources while Japan is rich in technology and investment capital. However, the Japanese economy is saddled with many forms of restrictions and non-competitive economic practices, such as high tariff and quota on rice imports, explicit and implied restrictions on financial and banking services, and many forms of trade impediments in domestic sector. Arising from these structural impediments in the Japanese economy, it is not possible to negotiate a standard free trade area.
Japan and Singapore concluded the Japan-Singapore Economic Partnership Agreement (JSEPA) early last year. It is a very important milestone for both countries, particularly for Japan since it is a departure from its well-established multilateral trade policy. Equally important is that JSEPA sets a precedent in terms of trade policy and a model for economic partnership for Japan and its important trading partner such as ASEAN. When ASEAN-China signed a formal agreement in November in Phnom Penh to start negotiations for FTA within 10 years, it was the final policy push for Japan to formalise its ASEAN-Japan Comprehensive Economic Partnership as announced by Prime Minister Koizumi in January 2002 in Singapore.
Since comprehensive economic partnership arrangement is not a free trade area as defined by international trade theory, its scope is not clearly defined by a standard model. Therefore, in the ASEAN-Japan CEP process, the scope and structure would have to be carefully studied to identify the lowest common denominators for both sides that would expedite the process of negotiation. Theoretically, the scope must be broad enough to allow sufficient negotiation space for Japan and the diverse economic interests of ASEAN economies, taking into account the comparative advantage of each side.
Interestingly, the concurrent negotiation process between ASEAN-China FTA would definitely provide a strategic forward thrust for the ASEAN-Japan CEP and a healthy competition that would provide a strong impetus for the realisation of a wider vision of East Asia economic community perhaps in the next 25 years.
The success of the ASEAN-Japan CEP is very much dependent on the Japanese strong interest and capacity to assist ASEAN industrial upgrading and competitiveness. After the Asian financial crisis in 1997, it became acutely evident that many ASEAN economies require major structural re-organisation and upgrading.
Without those changes in the real and financial sector, ASEAN economies would not be able to take full advantage of a comprehensive economic partnership with Japan. Currently, foreign direct investment (FDI) has been radically shifting in favour of China and the gravity of economic dynamism and growth has contributed to the widening of economic gap between Northeast and Southeast Asian countries.
Japan has to extend substantive technical and financial assistance to ASEAN countries with a view to radically re-organise and re-structure its economies. Otherwise, the proposed ASEAN-Japan CEP would not render positive benefits to both sides. Specifically, ASEAN countries need to upgrade the quality of their labour force, infrastructural upgrading with respect to administrative and governance in public and private sectors. It is imperative and vital for ASEAN to retain and attract FDI as sources of economic growth. ASEAN must be economically vibrant to minimise social and political instability. In turn, a viable and vibrant ASEAN economy would have the capacity and propensity to be the critical "hub" to connect intrinsically the rivalling economic powers of Japan and China. Such a regional environment is a precondition for the establishment of a prosperous and stable East Asia in the 21st century.



Session III
"Globalization and Asian Values"

Keynote Paper

by Kusuma SNITWONGSE
Chairperson of Advisory Board, Institute of Security and International Studies(ISIS)

Globalization and Its Impact

Ever since the word globalization has been used to refer to the interconnectedness of the world, the interpretations and reactions to it have been varied. Some see it as a positive force that will bring about economic well being, especially to the less developed countries once they join in the world economy, and along with it the idea of democracy and liberty. The latter would be a natural development as more of the middleclass come to the fore. Through technology, especially the communication technology, the phenomenon of rising expectations could follow and more demands made for change to greater equity.
However, protest riots in Seattle, Prague, Nice, Gothenburg and Genoa indicate that there are a large number who see globalization negatively. Particularly in economic context in which globalization is seen as creating inequity as its benefits fail to reach many others. Especially in the non-western and less developed countries, there is greater sense not only of inequitable benefits, whether in the form of wealth gaps, increasing poverty levels, increasing rate of infectious diseases, or increasing vulnerability among sectors of society. With the economic crash in 1997 that started in Thailand and soon engulfed other countries in the region almost without exception, opening the country to globalization came under greater scrutiny and criticism if not total rejection.

Globalization and Asian Values

One question that first comes to mind is whether there are values that we can identify as Asian values. In the western eyes, Asian values that were seen as being the basis for economic miracle in East Asia were generally identified with Confucian values. Nevertheless, such generalization needs to be tempered by the recognition of the diversity of cultures in the region. Cultures that derive from Islam and Buddhism to name the major ones have to be taken into consideration. However, because most business leaders in Southeast Asia are of Chinese origins and, therefore, there is basis for linking Confucian values to the economic miracle that occurred in East and Southeast Asia. Nevertheless there are enough similarities that the term "Asian values" is valid to a degree. Such values can be said to include a paternalistic state, government guidance and protection of private enterprises, a communitarian outlook with a sacrifice of individual rights to those of the family, community, and nation, and emphasis on social order, harmony, and discipline, as well as social hierarchy that includes respect for those of higher status and age. Other Asian values include a consensual approach that reflects the importance of face-saving. This is reflected in the so-called ASEAN way of non-confrontation and agreement by consensus. Nevertheless, there must be recognition that there are differences in traditions from one country to another in Asia.
It should also be recognized that Asian values have been emphasized, in the case of certain Southeast Asian countries, to legitimize the regimes in power Often rejection of Western values is considered necessary to protect the country from decadent influences of the West. Western culture that places great value on individualism that translates into respect of human rights is often seen as going against government power based on paternalism. Non-governmental organizations (NGOs) and citizen groups are identified as those promoting Western concepts and values such as human rights and worse for being the tool of Westerners who financially support them.
It can be said that Asian values tend to be thought of as traditional values while Western values are essentially seen to be modern ones. In this sense the recognition of values are being geographically defined. Nevertheless, Western values had been embraced with relish in the past as a way of resisting the incursion of Western colonialism as in Thailand and else where in the late nineteen century.
Through globalization, Asian countries are faced with the dilemma between opening to the West for their technology, methodology, capital and keeping their traditional values from being tainted. In the case of Singapore, while it preaches Asian values, in practice it has been selective in its implementation as it places ability over personal relationship. At the same time it defines leadership in such a way to legitimize state paternalism. On the whole, one sees a variation of the mixture of Asian values and Western values from one country to another. In the case of Malaysia, its commitment to rapid development and economic liberalization necessitates further encounter with the West in order to benefit from technology and methodology, knowledge, and capital transfer. This raises a question as to what fundamental values and premises on which Malaysia's relations with the international community are to be based on.
While Asian states are trying to cope with globalization and its impact on traditional values, be they political, economic, social, or moral values, there is no escaping the changes that will come with their opening up to the West. There is no way to take only technology and management style, for example, without changing in the cultural mindset. Individualism, egalitarianism, the rule of law, and public participation have been making inroads and inevitably disrupting the valued traditional social order.
In the case of Thailand, the downside of globalization in the form of economic crisis in 1997, led to reassessment of one's economic system and institutions as well as political, social and cultural structure. Chai-anan Samuthavanich, a leading academic, called attention to "culture as capital". In his view, financial and industrial capitalism has let Thais down. To cope with this challenge, he called for Thai society to put back its faith and seek refuge in its stock of "culture capital". In other words, he was making a plea to return to traditional social values which in the past had so effectively enabled people to live together in harmony, such as respect for elders, tolerance, compassion, gratitude to parents, family ties, and mutual assistance. However, that harmony was often achieved at the expense of the weak and the disadvantaged who were exploited by those in power.
While turning to traditional social values can help ease the pains of the negative impact of globalization, it is not possible for a country to turn it back to the process by sweeping out the undesirable alien influences. Another argument against turning back to traditional culture is that culture is not etched in stone and in the world in which information and culture spread through the media at lightning speed, it is almost impossible that keep culture from changing. It is interesting to realize that foreign cultures are not necessarily cloned. Instead, it has been argued that Western values, instead of being accepted wholly, instead emerge as "local counter-discourses which challenge, absorb, incorporate and finally disregard the leftovers of so-called Western hegemonic culture.¹ The localized culture in Asia has been demonstrated to have the potential to indigenize foreign influence.²
It should also be pointed out that within each country that has opened its door to globalization, there are those who embrace international value system and those who are sidelined in the process of globalization. The latter tends to turn to traditional values, seeing alien values and culture as threats to their identity.
It is those who are sidelined and see the threats to their identity that could bring about the danger of chauvinism and xenophobia. It should also be recognized that in the process of globalization, there are those who embrace international value system. The result is that the two groups could come into conflict. As there is no stopping cultural change in the globalized world, the best hope is that the old and the new will lead to a productive synergy.³
The issue of identity needs also to be discussed in the context of globalization and values. Moreover, as the them of this conference is Cooperation for Peace and Prosperity in the Asia-Pacific Region, the question of identity is very much of relevance to our discussion.
Identity as being discussed here takes on the definition that assumes it "to be something that unproblematically connects individuals to society, with individuals who share some common trait thereby having an "identity as members of a particular group in society."⁴ Along this line of conception, identity is seen as resulting from "the shared possession of `norms' to the socially constructed, contested multiplicities of identity and is closely bound up with the forces of globalization.⁵
In the process of globalization in which Japan and ASEAN countries interact through the large flow of capital, technology, management know-how, information as well as cultural intersection through human contacts, there exist many channels through which shared norms can help strengthen a shared sense of identity. It is for this conference to identify the way towards building shared values that will lead to a sense of identity. The late Prime Minister had expressed his concern on this very issue and this should be a good start for the building of identity based on common values.
In this regard, it is noteworthy to quote the Noble Laureate Amartya Sen who said that the main hope for harmony in the world depends not on cultivating identities of uniqueness, but on fostering "plurality in our identity".⁶

---

¹ Book Reviews by Rob Mackie of Craig, Timothy J. and Richard King, eds, Global Goes Local: Popular Culture in Asia, Vancouver : UBC Press, 2002, in Asia-Pacific News, p.2.
² Ibid.
³ See William J. Klausner, Thai Culture in Transition, Bangkok (revised edition): The Siam Society, Bangkok, 2002
⁴ Lily Kong, "Globalisation, transmigration and the renegotiation of ethnic identity" in Kris Olds, et.al, editors, Globalisation and the Asia Pacific (London:Roudledge, 1999), p.220.
⁵ Ibid.
⁶ Pana janviroj, Mukdawan Sakboon, "Laureate rejects civilisations clash", The Nation, December 12, 2002, p.1.




Luncheon Speech:"East Asia FTA as a Balancer to EU and FTAA"

Luncheon Speech

by TRINH Quang Thanh,
Director General, Institute for International Relations, Ministry of Foreign Affairs

Mr. Chairman,
Ladies and Gentlemen,

It is with great pleasure that I could attend the second Japan-ASEAN dialogue and talk about "East Asia FTA as a balancer to EU and FTAA". In this regard, I would like to make a couple of points.

1. As a matter of fact, moves on free trade agreements gain momentum in East Asia. Recent developments shown in the possibility of the setting up of free trade areas between China and ASEAN on one hand and Japan and ASEAN on the other have further consolidated the feasibility of an East Asia FTA. Several factors at play have contributed to the rising sense of a new economic regionalism:

Firstly, the global trend of forming strategic trading blocks is accelerating, given the success of the EU and NAFTA, as well as the two-year stalemate in WTO efforts to set up a global free-trade regime.

Secondly, momentum for this process is the institutionalization of the ASEAN Plus Three (APT) which began to take shape amid the regional financial and economic crisis in 1997-98. As the crisis was sweeping through the region, there arose the need for cooperation among the East Asian countries to deal with common uncertainties.

Thirdly, the formation of an East Asian FTA is seen as a natural development aimed at enhancing integration among East Asian countries. In terms of economics, East Asia constitutes one of the three centers of global economy, accounting for 23 per cent of the world's GDP, 20 percent of global trade volume. In addition, in the past decade, intra-regional trade increased from 24 per cent to more than 30 per cent of the entire trade of the region. While Europe has the EU to manage its economic enlargement and integration and the Americas is to form the FTAA in 2005, there has been no such institution in East Asia.

Finally, there is real economic benefit of an East Asia FTA. Study has shown that in its first year, a China-ASEAN FTA will increase ASEAN's GDP by 0.9 percent or by 5.4 billion US dollars while China's real GDP expands by 0.3 percent or by 2.2 billion US dollars in absolute terms. If an FTA covering the entire East Asia is to be formed, it will constitute the world's largest trading area, making up of 2 billion people or nearly a third of world population with a total GDP equivalent to that of the United States. China and the ASEAN countries will get easier access to FDI, technology and markets of Japan and other East Asian NIEs. At the same time, Japan and the Asian NIEs are in better position to tap China's huge markets and its low-cost labor force.

2. To my mind, there are both impetus and constraints in the process of forming a free trade area in East Asia. On the one hand, there is a growing sense of East Asian identity and community. Countries in the region share similar cultural norms, values and social structures. The Asia-Europe dialogue in the form of the ASEM Summit Meeting is also founded on the presupposition that there is some form of unity in East Asia.

What is now more important is that there is a strong political will to move towards the target. All countries in East Asia more or less understand that an integrated market would offset the economic challenges posed by the EU and NAFTA..

But on the other hand, East Asia encompasses vast markets with big gaps in the level of economic development.

Moreover, most of the economies in the region is a competitor to each other in terms of exporting products and attracting investment from overseas.

At present, East Asian countries trade more with outside countries and regions than with each other. Currently, EU's intra-regional trade accounts for more 60 per cent of its total trade. The figures are 45 per cent for FTAA and more than 30 per cent for East Asia. That is not to say that an East Asia FTA has only surface value, but it would take a long time before East Asian economies can play pivotal roles in each other's economies.

Last but not least, I share the view that in EU, the "Eurocrats" have played the driving force behind its economic integration and the EU enlargement. In the same manner, lawyers have played pivotal roles in involving complex negotiations towards the NAFTA and FTAA arrangements. In contrast, East Asia seems to lack leadership comparable to these bureaucrats or lawyers in drafting its trading arrangements. This might be explained from the Asian point of views that we still prefer the "Asian Way" of doing things informally rather than formally. Dynamism of economic integration in East Asia, therefore, tends to be a "bottom-up" process which is reactive rather than proactive, while in EU the process is "bottom-down".

3. Only the years to come can show whether East Asia FTA could be achieved in the distant or near future. Nevertheless, it is a beautiful dream. To make this beautiful dream become true, several issues have to be taken into considerations.

Given the everlasting debate on liberalism versus protectionism, the vision of East Asia FTA is now still at a crossroads. The question is whether it could be a stepping stone towards global liberalization or it could develop into a regional trading block? To me, on the one hand, the trend towards liberalization within regional cooperation groupings like ASEAN, APEC, NAFTA, MERCOSUR, etc., has ever been intensifying nowadays than any time in the past. But it should be noted that intra-regional trade liberalization in these groupings occurs at the time they are also involved in negotiations with external powers or other regional groupings on the formation of new FTAs which are greater in scale and deeper in process. In most cases, arrangements for these FTAs are in consistence with WTO arrangements. If this trend continues, it is only a matter of time before the world is fully liberalized in terms of trade.

But on the other hand, a pending East Asia FTA, as an economic powerhouse, might use its economic leverage to help balance and defuse any possible tension between the EU and FTAA at global level. At regional level, an East Asia FTA can also be served as a pilot project to help regional countries resist negative impacts brought about by waves of globalization and trade liberalization.

Our experiences have shown that while countries are moving towards trade liberalization, they are often impeded by "trivial" barriers such as the gap in economic development, new protectionism in the form of standardization of economic, environmental and labor policies, so on and so forth. Thus, in the transitional period towards a free-trade world, trading block like an East Asia FTA is still needed to protect the economic interests of regional countries against storms coming up from globalization or trade liberalization.

Let me conclude my remarks here by saying that this is the first time for ASEAN to embark on full-ledged talks on a free trade agreement with countries outside the region. Moves towards integrated market in East Asia require a long way of negotiations, talks, even studies, because market-opening is always a tough challenge, especially for developing economies like Vietnam. But we believe that in the end it will bring benefits to us all.

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1. At the Sixth ASEAN Plus Three (APT) Summit held in Phnom Penh in November 2002, China agreed to enter full negotiations with ASEAN in 2003 on the setting up of the China-ASEAN FTA (CAFTA) in the next 10 to 15 years. Meanwhile, Japan and ASEAN also signed a joint declaration calling for the realization of a comprehensive economic partnership, including FTAs on bilateral and multilateral basis, within ten years.

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6. An Introduction to ASEAN-ISIS

ASEAN-ISIS (ASEAN Institute of Strategic and International Studies) is an association of non-governmental organizations registered with the Association of Southeast Asian Nations. Formed in 1988, its founding membership comprises the Centre for Strategic and International Studies (CSIS) of Indonesia, the Institute of Strategic and International Studies (ISIS) of Malaysia, the Institute of Strategic and Development Studies (ISDS) of the Philippines, the Singapore Institute of International Affairs (SIIA), and the Institute of Security and International Studies (ISIS) of Thailand. Its purpose is to encourage cooperation and coordination of activities among policy-oriented. ASEAN scholars and analysts, and to promote policy-oriented studies of, and exchanges of information and viewpoints on, various strategic and international issues affecting Southeast Asia's and ASEAN's peace, security and well-being.

ASEAN-ISIS now consists of 9 members: CSIS Indonesia, ISIS Malaysia, ISDS Philippines, SIIA Singapore, ISIS Thailand, Brunei Darussalam Institute of Policy and Strategic Studies (BDIPSS), Cambodian Institute for Cooperation & Peace (CICP), Institute for International Relations (IIR) Vietnam, and Institute of Foreign Affairs (IFA) Lao People's Democratic Republic.

ASEAN-ISIS also succeeded in obtaining recognition from the ASEAN member states as a valuable mechanism for policy making by institutionalizing the meeting between the Heads of ASEAN-ISIS and the ASEAN Senior Officials since ASEAN Senior Official Meeting (SOM) in Singapore in 1993. In addition to its recognition, ASEAN-ISIS has also contributed significantly to the emergence of an important regional and international political process-that of track two diplomacy.

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7. An Introduction to ASEAN-Japan Exchange Year 2003

Outline of the "ASEAN-Japan Exchange Year 2003"

1. Background and rationales
Prime Minister Junichiro Koizumi proposed to designate the year 2003 as the "ASEAN-Japan Exchange Year" during his visit to Southeast Asian countries last January. This proposal was intended to put into action several recommendations of the final report of "Vision 2020: ASEAN-Japan Consultation Conference on the Hanoi Plan of Action." On this score, the proposal is not simply Japan's initiative, but is an ASEAN-Japan initiative.
Exchange programmes and activities would not only contribute to deepening mutual understanding between ASEAN and Japan, but would also bring about substantive benefits for ASEAN and Japan as they should galvanise their economies, which have been suffering since the Asian financial crisis in 1997 and 1998. For these reasons, the exchange programmes should include not only artistic performances and exhibitions, but also sending trade and investment missions, activating tourism, providing opportunities for experts to assemble and discuss the need for creating a number of new institutions in various economic, political and social fields.

2. Exchange Programmes and Activities


3. Modalities of Operating the Exchange Year Programmes