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Global Trade Talks Stall as Free Trade Agreements Grow in Asia

As the latest World Trade Organization round of talks loses momentum, bilateral and regional free trade agreements are mushrooming in Asia. Claudia Blume reports from VOA's Asia News Center in Hong Kong.

After 10 months of tough negotiations, the United States sealed a free-trade pact with South Korea at the beginning of April. A few days later, Japan and Thailand signed a free-trade deal. The two pacts are but the latest of a rising number of bilateral trade agreements in the region.

According to the Asian Development Bank, 150 bilateral free trade agreements had either been signed or were under negotiation last year in Asia.

And more than 40 trade deals were either signed or negotiated by groupings of more than two countries. The Association of Southeast Asian Nations, for example, aims to abolish tariffs by 2015 under a regional trade deal, and is negotiating agreements with China, Japan, and South Korea.

The mushrooming of free trade pacts in the past few years is partly a defensive response to regional trading blocs elsewhere in the world, such as the European Union or the North American Free Trade Agreement. Jose Tongzon is an expert on international trade at the Australian Maritime College.

"The reaction on the part of the countries in Southeast Asia as well as in other parts of Asia was that they could be discriminated against in favor of the European Union members and in North America so in order to counteract that event, to maintain the leverage, their bargaining power, they started to deepen also their economic integration," Tongzon said.

Malcolm Cook, program director at the Lowy Institute for International Policy in Australia, says dissatisfaction with the slow pace of global trade talks also plays a large role in the push for regional or bilateral deals.

Cook says the export-dependent East Asian countries in particular are strong supporters of global approaches to trade policy. But they are disappointed by the failure of the Doha round, the latest round of talks in the World Trade Organization.

"East Asia was the last remaining region that was a strong supporter and put most of its trade policy eggs in the multilateral basket. But with the repeated deaths of the Doha round, without a doubt their trade experts have decided that the multilateral system is moving too slowly," Cook said.

He says trade pacts in the region are not only about commerce, investments and services but are also political agreements to strengthen relations between states. Cook says a growing strategic rivalry between China and Japan has made them sign trade agreements with other Asian countries - as a way to expand their influence in the region.

Most experts view free trade agreements, which lower trade barriers among participants but allow them to maintain barriers toward the rest of the world - as a second-best solution, compared with the ultimate goal of global trade liberalizations.

But Jose Tongzon says since multilateral trade talks have stalled, the proliferation of bilateral trade pacts has some advantages.

"The positive aspects of course would be that it is much quicker to achieve free trade because you are dealing with fewer countries and usually countries that are geographically close, and would probably have similar economic priorities and interests, so it's much easier to come to (a) consensus," Tongzon said.

One of the pitfalls of the growing number of bilateral agreements, however, is the so-called spaghetti bowl effect. This means that overlapping regulations of countries with different agreements can complicate trade.

Liqun Jin is vice president of the Asian Development Bank, a non-profit lending institution in Manila.

"This spaghetti-bowl effect is not something we think can work very well," Jin said. "As you know it's cumbersome, it's time-consuming and it's complicated."

Malcolm Cook says another problem of free trade agreements is that they allow governments to protect sacred sectors.

"Even in the example (of) the South Korea - U.S. FTA, the Koreans were able to keep rice out of the agreement and if you look at China's FTAs with Southeast Asia, both sides have left out quite a few sensitive sectors," Cook said.

Another difficulty, he says, is that most governments in the region only have a limited number of experienced trade negotiators, who now spend most of their time on bilateral pacts. This could take their focus away from the much larger task of reaching an agreement through the World Trade Organization.

Liqun Jin at the ADB is more optimistic.

"I think it's very likely certain bilateral agreements, and multilateral, sub-regional or regional free trade agreements can merge, can be consolidated once they have agreements - among two countries, three countries, a couple of countries, a group of countries," Jin said. "I don't think it will be terribly difficult to consolidate all these agreements."

The ADB says regional integration and cooperation are vital for prosperity in Asia and that consolidating the snowballing number of bilateral trade agreements would help achieve that goal.