MARCH 22, 2010By PETER STEIN
The Wall Street JournalEast-West trade tensions are rising, and a new global free-trade agreement seems a distant dream. Yet here's the paradox: the drive for free trade within Asia, where the world's greatest concentration of economic growth now resides, has never been stronger.
Fears of rising protectionism in the West are inspiring a newfound Asian enthusiasm to promote intraregional trade. With talks for the Doha round of global trade stalled indefinitely, "we have to deal with the new normal, where politicians in the leading countries are running scared of free trade," Kishore Mahbubani, a veteran Singaporean diplomat and policy advisor said Saturday at the 20th Asian Corporate Conference in New Delhi. The Wall Street Journal Asia cohosted this year's gathering in India along with Asia Society and the Confederation of Indian Industry.
For Asia, the U.S. Congress's failure so far to pass a long-awaited free-trade deal with South Korea is emblematic of the problem. But the U.S. is keeping a horse in the race amid competing proposals for regional trade clubs. Last week, negotiators from eight nations—the U.S., Australia, Brunei, China, New Zealand, Peru, Singapore and Vietnam—held preliminary talks in Melbourne on creating an Australia-backed free-trade zone. Japan's government, meanwhile, is pushing for an "East Asian Community" and hopes to hammer out details of its proposal in coming months.
Ideas to augment the 10-member Association of South East Asian Nations, comprised of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam , come in several flavors. There's the "plus three" version, which adds South Korea, Japan and China. Then there's the "plus six" version that also includes India, Australia and New Zealand. On Saturday in New Delhi, Singapore's Senior Minister Goh Chok Tong, proposed a "plus eight" model to include the U.S. and Russia.
Bilateral free-trade agreements are sprouting like weeds. Last August, Asean signed a deal with India, and one with China came into effect in January. India also inked a deal with South Korea. Japan, South Korea and China are exploring a trilateral trade agreement, and India and China are looking at a deal of their own.
Trade within the region has been growing by leaps and bounds. In the five years between 2002 and 2006, trade among the 10 Asean members more than doubled to $188 billion, and trade between China and Asean tripled from $59 billion to $192 billion, according to data Mr. Mahbubani cited.
However, a significant portion involved components for goods ultimately destined for export to the U.S. and Europe, highlighting the limits to any aspirations of Asian regional self-reliance. Political tensions within the region also pose serious obstacles to trade growth: While trade between India and China jumped from $15 billion in 2005 to $41 billion in 2009, that's a paltry figure considering the size of their two economies. Suspicion between the two giants dating back to a bitterly fought 1962 border war hasn't been helped by China's concern that the U.S. is courting New Delhi as a hedge against China's military ambitions.
The perpetual war-footing between India and Pakistan is one reason India's trade with its South Asian neighbors remains paltry, although smuggling and trade routed through third countries belies the official data. C. Raja Mohan, an Indian author and political commentator speaking at the conference, recalled the days of the Raj that brought together much of South Asia under British rule.
"The Raj created this whole region into a single market," Mr. Mohan said. "We need a policy initiative from the Indian side which takes the leadership to open its markets unilaterally."
Other optimistic visions of ways to promote regional trade included a suggestion by Victor Zhikai Gao, director of the China National Association of International Studies, that China extend a high-speed rail network connecting Beijing with Tibet across the Himalayan border into India.
"This would be a major breakthrough," enthused Mr. Gao, and "would really increase the exchange of people, goods and eventually ideas between these two countries." Of course, critics of the railway's environmental impact and China's controversial policies toward its Tibetan population probably wouldn't be too thrilled.
If the conversation in New Delhi veered toward the utopian at points, there was still a firmly grounded message that most of those involved would agree on, enunciated by Mr. Mahbubani: All efforts to promote free trade within the region, however flawed, were still "the sensible answer to the imperfect world we live in."
