Japan, ASEAN Reach Free Trade Agreement

Japan and ASEAN have agreed in principle to the establishment of a free trade zone between the two parties. Representatives from both sides came to a consensus on an outline for the agreement at a three-day ASEAN economic conference in Manila. The deal is expected to be finalized at the upcoming ASEAN summit meeting this November (Voice of America).

The FTA with Japan is one of many on ASEAN's plate at the moment. It is currently also pursuing FTAs with China, South Korea, India, Australia, and New Zealand, and is exploring the potential for an FTA with Pakistan (Forbes). The FTA with China, like the one with Japan, is expected to be completed by the end of this year. The other agreements are all in more preliminary phases. ASEAN Secretary-General Ong Keng Yong expects that all five agreements (excl. Pakistan) will be completed by 2013 (Forbes).

ASEAN's FTA offensive is part of a broader ASEAN strategy to build an Asian Economic Community (AEC) by 2015, a strong Southeast Asian economic bloc capable of running with economic giants like China and India into the 21st century (Voice of America). As Asia continues to grow economically and China and India continue to acquire political influence, ASEAN continues to look for ways to compete economically and remain relevant. By casting a wide net into regional trade waters, ASEAN diversifies its economic portfolio and expands its prospects for growth. It also helps balance external political influence on the Southeast Asian bloc.

The ASEAN-Japan FTA is the latest step in this process. The agreement hopes to expand on already strong trade and investment relationships with Japan. Japan accounted for 12% of ASEAN's trade in 2006 (BBC News), and as of around 2003-2004, unless I am mistaken, Japan was ASEAN's largest source of investment (Lincoln, East Asian Economic Regionalism). The agreement also helps ASEAN balance the influence of China.

For Japan, free trade agreements with Southeast Asia have become common practice. It has already concluded 6 bilateral FTAs with Southeast Asian states, including one just last week with Indonesia (The Economic Intelligence Unit Briefing). Expanding economic relations with the region provides Japan with access to energy resources - the deal with Indonesia, for example, features a comprehensive resource acquisition/investment agreement. It also allows Japan to diversify away from its economic reliance on the United States, and balance against the regional influence of China. This multilateral agreement with ASEAN compliments the previous bilateral trade pacts and contributes to all three of Japan's regional goals.

Analysts are skeptical however that this FTA, or any other regional FTA on ASEAN's plate, can yield concrete results. Southeast Asia lacks infrastructure and suffers from poor product standards that contribute to an overall unappealing climate for foreign investment (Voice of America). Furthermore, the ever-present issue of agricultural in Asia-based trade deals means that any substantive gains from an FTA could be years, if not decades, away.

Personally, I will be greatly surprised if these FTAs can actually materialize into an Asian economic bloc, as ASEAN seems to be envisioning with the AEC. The economic obstacles, political obstacles and competing interests in the region seem too great to overcome in just a decade. Nonetheless, last week's economic conference marked an important step in the right direction, and I suppose November's summit meeting will yield more clues as to the fate of the would-be Asian economic bloc. Keep an eye out.

The Problems with Beijing's Involvement in Chinese Energy Investments

Sorry for the China-heavy contributions. I do have other interests, I promise. This policy brief from the Brookings Institute, "Untangling China's Quest for Oil through State-backed Financials Deals," deals with one of my primary interests though, and I thought anyone else interested in China's energy security strategy would want to give it a read.

The Brookings brief looks more closely at the impact of China's state-financing and foreign aid practices in its energy policy, and suggests that if Beijing's practices do not change, and China remains on the outside looking in at international finance/investment regimes, the heavy state involvement in energy investment deals could eventually undermine open, competitive international energy markets, and in turn international energy security, as well as international aid.

The brief concludes that China should be incorporated into more international forums that can regulate financial interactions and energy practices, like the IEA and the OECD Export Credit Arrangement. These groupings will not only hold China to legal standards and test Beijing's merit as a "responsible stakeholder" in the international system, but also expand dialogue and build trust among parties so that Beijing does not feel compelled to continue financial practices that can undermine competitive international energy markets or international aid.

For more on this subject, I suggest this NBR study from 2006, and this 2006 Brookings report on China's Energy Security Strategy.

These reports all discuss the implications of China's energy policy for the United States, but I'd be curious to hear if anyone has any insights, ideas, or links that deal with how other actors (India, Northeast Asian states, etc.) view China's energy policy and practices.

Red Light for China's Green GDP Report

Last month, Beijing announced that it was indefinitely suspending the release of its 2005 "green GDP" report, a study designed to calculate the environmental costs of China's economic development. The announcement has generated considerable speculation and reveals much about both the growing burden of China's environmental woes on the decision-makers in Beijing, and the complexities of Chinese domestic politics.

Originally scheduled for release in March, 2007 (Reuters), the officially titled Environmentally Adjusted GDP Accounting Report for 2005 was slated to be the more thorough, more detailed follow-up to a 2004 report of the same nature, and a major notch in the belt of China's emerging environmental policy.

Growing social unrest over horrendous and harmful environmental problems at home, as well as the increased international consciousness of global climate change, have elevated environmentalism to a political priority in China. Last fall, the National People's Congress set forth ambitious goals to improve energy efficiency, reduce consumption, and fight pollution (China Brief, Vol. VII, Issue 16). From my own observations, since that time, China has also begun listing environmental concerns and global warming among its common interests with regional neighbors and international powers. Calculating "green GDP" is part of a broad approach that attempts to inject a sense of environmental responsibility into China's economically-minded, "development first" political culture.

China launched its "green GDP" project in 2003-2004, jointly administered by the State Environmental Protection Agency (SEPA) and the National Bureau of Statistics (NBS). The first product of the endeavor, the 2004 report, was released in 2006. Assessing the scale of environmental pollution in 10 provinces, the report found that pollution cost China over $67 billion US dollars, 3 percent of its GDP, in 2004 (Worldwatch).

The 2005 report was national in scope, and measured the country's "green GDP" according to seven different criteria, including environmental pollution. The other criteria included depletion costs of mines, forests, land, water, and wildlife, as well as costs to the ecosystem (China Brief). The 2005 report also provides a provincial breakdown in each category, creating a "green GDP" report at the provincial as well as national level.

Obviously, given the increased scope of the study and the expanded criteria, not to mention China's continued struggle to rein in its energy appetite, the 2005 report promised to deliver more disturbing statistics than its predecessor. This alone would be enough to make already-antsy officials in Beijing reluctant to release the results of the report for fear of generating further social unrest, especially with the 17th Party Congress around the corner in the fall. Furthermore, the localization of blame (at the provincial level) for the country's environmental problems introduces additional opponents to the report into the picture (provincial and local officials). According to Wenran Jiang, in some provinces, the cost of pollution, resource depletion, and damage to the ecosystem would actually cancel out the economic gains of the province's GDP for the year (China Brief).

Chinese officials appear divided over the report and divisions, at least publicly, seem to adhere to the old adage about Chinese politics, "Where you sit is where you stand." Officials with the NBS claim that the report's release has been indefinitely suspended due to conflicts over the scientific accuracy of the statistics and technical issues pertaining to publication (Worldwatch). Indeed this is true. As NBS Chief Xie Fuzhan (pictured left) recently told reporters, China is essentially pioneering the creation of a "green GDP" index and the use of "green GDP" to measure and confront environmental degradation (Asia Times). No international standards exist for such a project. According to the 2003 UN Handbook on National Accounting, "there is no consensus on how 'green GDP' can be calculated and, in fact, still less consensus on whether it should be attempted at all." How to quantify environmental elements in terms of monetary value remains an extremely challenging and uncertain task. (Note: this article from Resources for the Future attempts to bridge the gap between environmentalism and economics)

Officials in SEPA meanwhile, and other environmental agencies, remain more loyal to the cause of 'green GDP' and are more candid when discussing the motivations behind suspending the report's release. Wang Jinnan from the Chinese Academy for Environmental Planning (CAEP) recently revealed, "There exist major differences between the environmental-protection agency and the statistical bureau regarding the content of the report and its distribution," (Asia Times). As he told Beijing News:

"In the current sensitive climate where everybody is talking about 'green change,' some provinces fear publicizing their revised [green] GDP figures...Some local governments have lobbied us and tried to put pressure on us not to make the report public."

SEPA, CAEP, and Chinese environmentalists support the report's release, despite technical difficulties and political opposition. The NBS sees things differently. This gap in perspective has put the 2005 report on the shelf until further notice.

But while the 2005 report may not be made public, the importance of addressing China's worsening environmental woes will not fade away so easily for the Chinese government or the Chinese people. China is, and will continue to be, one of the most polluted countries in the world until it takes some drastic steps to address its pollution problems and curb its consumption of energy and natural resources. The launching of the "green GDP" project a few years ago seemed like a new and exciting step in the right direction: an active, ambitious, and creative approach to a demanding challenge. The tie-up over the 2005 "green GDP" report suggests that the more things change, the more they stay the same. In China, "face" and positive financial statistics remain more important than results.

On a positive note however, the concept of "green GDP" is not dead, nor is environmentalism in China. The 2006 report, perhaps in hopes that it will yield more positive results, and perhaps because its release will not precede any high profile political conferences, is still going ahead as planned (China Daily). Outside observers may be helpless to remove political obstacles to the development of China's "green GDP," but international actors and non-government actors can still play a major role in tackling the technical challenges of the index, and more importantly the environmental problems the index aims to address.

Recommendation: China Road

I figure I'd reacquaint myself with the blog with a simple contribution: a reading recommendation.

I just finished reading China Road, by NPR correspondent, Rob Gifford. Gifford spent six years living in and reporting on China for NPR. China Road takes place at the end of his tenure, as he prepares to return to his homeland to take up a post as NPR's London correspondent.

Gifford embarks on a journey along China's Route 312, which he describes as China's Route 66, the main artery running from one end of the Middle Kingdom to the other. Linking the developing East to the struggling West, urban China to rural China, Han China to the minority "autonomous regions," Gifford depicts Route 312 as more than infrastructure connecting one place to another; Route 312 is an avenue of opportunity, a path to something better for many of China's "old hundred names."

He begins his trip in Shanghai and finishes at Korgaz, along the border with Kazakhstan (grrreat success!). Along the way, he shares his encounters with a variety of Chinese common people, from optimistic entrepreneurs, to poor farmers, to conflicted Uighurs, and paints a vivid picture of the diverse Chinese landscape, all in an effort to present the many opportunities, contradictions, and challenges that define modern China.

In depicting the present, Gifford incorporates excellent historical context and thoughtful analysis of the many issues confronting rising China as it marches towards the future. His insights and analysis are thought-provoking, and his writing style is most entertaining. It's a great read for any China buff.

I figured this was an appropriate topic if anything was

I'm surprised. Anyone else?

"N Korea closes more nuclear sites"

The Peace Constitution

Shinzo Abe has apparently made progress on his promise to change the constitution... here is a article about the passage of a bill which sets up the process of holding a referendum on changing the peace constitution. Abe, as I'm sure most of you know, wants to allow more military activity.

Anyone have an opinion on how the Japanese public will react? Will a referendum like this pass? The impression I've gotten from Mochizuki's class was that the LDP is significantly more conservative than the general population. Will this make an impact?

Also, will this affect Korea and China? I can't believe that it won't, that they won't react to the potential for changing the constitution...

Interesting!

"Disneyland is Too Far"

Alright, this article my friend sent me from Japan Probe is so unbelievable/hilarious, I had to share it with you. This takes Chinese piracy to a whole new level.



Presenting Shijingshan Amusement Park, a fun and exciting themepark in Beijing that's not Disnelyand...seriously...