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TABLE 6. THE MAIN OONTENTS OF NAFTA AGREEMENT
Framework Tariffs to be abolished within years.
Strict country-of-origin regulations to be introduced Tariff Every years on item-by-item basis. In first 5 years.
90% of Mexico's exports to the US and 60% of US exports to Mexico to be covered.
Motor Tariffs on auto parts to be abolished in 5 years.
Vehicles Local content ratio to be set at 50% in first 4 years and at 62.5% beginning in the 9th year.
Electronic Use of certain parts produced in North America
& Its to be required for selected products such as computers
Products (mother boards) and TVs (picture tubes) . Textiles Import duties to be abolished within 10 years.
Country-of-origin regulations to be tightened (use of yarn made in North America to be required) .
Maquil- Tariff exemption system to be abolished by 2001.
adora
Energy Mexico's oil industry to be partially opened to foreign investment (oil field ownership prohibited).
Finance Mexico's financial markets to be completely liberalised beginning in 2000. Companies in NAFTA area to be allowed to establish wholly owned local subsidiaries within the area.
Others Agricultural produce. land transportation.
telecommunications. investment. regulations.·
environmental protection. etc.
Source: Excerpted from Tetsuo Naito, "North American Free Trade Agreement (NAFTA) and its Influence on Asia", p.9.
- 385
manufacturers of labour-intensive products such as textiles, boys, and footwear will suffer a trade diversion of up to US$400 million a year.124 Direct foreign investment heading towards a region aims partly to take advantage of regional integration, namely free trade and market scale, and partly to circumvent the possible trade barriers discriminating against outsiders. Therefore, there are reasons to believe that the formation of NAFrA will lure those inflows of foreign investment to Mexico, in particular those East and Southeast Asian export-oriented investments targeting the US market, including those of companies originally US
investing in regional operations.
As far as the CEA is concerned, Taiwan's export dependence on the North previous year the volume of Taiwanese enterprises' export insurance for investment in ASEAN countries and Vietnam doubled in the first four months of 1994. It increased six times for investment in Mexico in the same period. 126 Qmsequently, the investors from the CEA who would be forced to comply with NAFrA's strict local content regulations will have to produce many more of their components in North America. Whatever economic advantage or disadvantage this development will generate to the CEA economies eventually, the effect of NAFrA has stimulated industrial adjstment to reinforce competitiveness within the CEA, by bringing about increasing industrial integration.
Apart from the economic effect to be brought about by NAFrA, the potential
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groupings in the Asia-Pacific region. 'Enterprise Initiative for the Americas", a notion originally proposed by the former US President Bush in 1990 has developed into the lively concept of the 'Western Hemispheric Free Trade Zone" which has won support from most Latin American governments.127 The potentially protectionist NAFT A expanding to a western hemisphere trading bloc linking all parts of ,Latin America would pose even greater psychological threat to the system of open regionalism and free trade which the Asian-Pacific economies have long asserted. Already Latin America has been evolving into a cluster of free trade zones, customs unions, and various bilateral and trilateral free trade Agreement of April 1991. Mexico and five Central American countries free trade agreement of August 1992, the custom union of the Andes Common Market signed in September 1992, the South American Common Market signed in March 1991. and the Central American Economic Union in 1993.128 applauding the US Congress for ratifying the NAFTA agreement. Alejandro Foxly, the Chilean Finance Minister, said that Chile would be the next on the US free trade agenda US officials also pointed out that Argentina and Venemela are most likely to follow suit. 129
Accordingly, there appear to be two implications of the NAFTA expansion for economic development and regional integration in the Asia-Pacific region. Firstly, in response, the Asia-Pacific Economic Cooperation (APEC) has stepped up efforts to become the hub linking Asian economies and NAFTA. The Asia-Pacific export-led economies are more eager than ever before to seek for regional integration to assure their interests in open regionalism. By means of APEC tying up with NAFTA, the aspirations for pan-Pacific integration could serve regional economies' persistent goals for economic growth by securing free trade. Secondly, the emergence of subregional groupings represents the other level of regional integration by way of industrial restructuring. The increasing constraints imposed by NAFTA on the export-led economies in Asia-Pacific provide them with an impetus to carry out industrial restructuring and to collaborate industrially both at national and international levels, which would intensify prospects for regional integration. The emergence of the CEA has rightly reflected this development, as
- 387
industrialists in the region have been pursuing the strength of their competitive advantage by international division of labour.
[Notes]
and Richard Blackhurst, (eds.), Regional Integration and the Global Trading System (London: Harvester, Wheatsheaf, 1993), p.135.5. See Far Eastern Economic Review (8 October, 1992), p.70.
10. In terms of overseas direct investment, regional industrial development is driven or led by the private sector. An example is the Kwan-Da Groups, composed of six leading Taiwanese food companies, in the case of the Philippines' Subic Bay development. In a mooting with the Group's representatives, President Ramos of the Philippines has promised a more favourable policy and infrastructure. See Central Daily News, International Edition, 14 May. 1993.
~
l,
7 :2.
52::tJilli~~m~~~~~~mJilli~IiX~7i-tE*".JliiIJ
Era", Asian Survey, 33: 3 (March 1993), pp.24Q..241
12. The US President George Bush, in August 1992, agreed to sell 150 F16 air fighters to Taiwan. Three months later, the French government allowed Taiwan to buy 60 Mirage 2000-5E fighter jets. see ':Ancient Fears", Far Eastern Economic Review (3 December, 1992), p.1O. In consideration of larger business interest in China, in December 1993, the French Prime Minister Edouard Balladur has bowed to Beijing's pressure agreeing to limit its relationship with Taipei. See Lincoln Kaye, "Learning to Bow", Far Eastern Economic Review ('2:7
January, 1994), pp.12-13.
13. See Julian Baum, ''Menage a trois", Far Eastern Economic Review, ('2:7 January, 1994), p.14.
14. Quimao Chen, "New Approaches in China's Foreign Policy", Asian Survey, 33: 3 (March 1993), p.238.
15. In the Singapore panel scrutinising Asian security organised by Time international, Burton Levin reminded Asian countries that they will have to get need to a prosperous Asia without US military cover in the new era. See 'Home Alone: A New Era - Special Report", Time (27 January, 1992), pp.8-23.
16. For details of the traditional trouble spots of the region, also see Ibid. James Walsh, "A Leaner, Meaner Fighting Machine", Time (10 May, 1993), pp.44-47.
17. Many participants shared the trend in the study panel by Time magazine in Singapore in outlook on Asian security. See 'Home Alone: A New Era Special Report", Time (27 January, 1992), p.8.
18. Ibid.
19. Many in Europe confess that "a force-cutting campaign has gone too far". A reprisal has been considered by the NATO alliances. See ':Attacking the Cut", Time (12 April, 1993), p.36, 38.
20. See Bruce Van V oorst, ''Man in a Minefield", Time, (5 April. 1993), pp.42-43.
21 'The New Universe" Time (17 May, 1993), p.49.
22. See Ibid., and ''Asia Unleashed", The Economist (3 April, 1993), pp.15-16.
23. Taiwanese officals are deeply concerned about further direct links with China
389
which could result in the loss of economic superiority over China. This worry is expressed in the government's various documents and publications. See Koong-Lian Kao, Lian Ann Ging Mou Shian Kuan Yu Chan Wang, (Current International Studies, 24: 2(Summer 1993), pp.19O-195.
33. For details of reasons for the rapid growth in intraregional investment and individual countries' investments (Japan, Hong Kong, China, Taiwan, and south Korea), see Edward K. Y. Chen, "Forign Direct Investment in East Asia", Asian
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34. Toru Nakakita, 'The takeoff of the East Asian Economic Sphere", Japan Review of International Affairs (Spring/Summer 1991), pp,70-73.
35. Joseph Romm, "Japan's Flying Geese", Forbes, 150: 12 (23 November, 1992).
36. Jihua Zhou, '~apan's Foreign Policy Choices for the Twenty-First Century: A Chinese Perspective", in Tsuneo Akaha, and Frank Langdon, (eds.), Japan in the Posthegemonic World (Boulder, Colorado: Lynne Rienner Publisher, 1993), p.196.
37. Muthiah Alagappa, Japan's Political and Security Role in the Asia-Pacific ( Malaysia: Institute of Strategic and International Studies, 1988), p.25.
38. For this change of US policy which caused shocks for the Japanese see the discussion in Donald C. Hellmann, "Japanese Politics and Foreign Policy:
Elitist Democracy Within an American Greenhouse", in Takashi Inoguchi and Daniel I.Okimoto, (eds.), The Political Economy of Japan, Volume 2. The Changing International Context (Stanford, California: Stanford University Press, 1988), p.364.
39. Scholars have found recently that the regional dimension of Japan's security strategy has still been dominated by the threat of the former Soviet Union.
They have urged Japan to adjust its security strategy to the changes in the Soviet Union. See Fred C. TIde, and Terumasa Nakanishi, "Japan's grand strategy", Foreign Affairs (Spring 1991), pp.82-84.
40. See Whiting, "China and Japan: Politics versus Economics", pp. 41-44; also Qingxin Ken Wang, 'Recent Japanese Economic Diplomacy in China: Political Alignment in a Changing World Order", Asian Survey, 33: 6 (June 1993), pp.
625-641
41 For a similar observation of the importance of China in Japanese foreign policy to the region, note the statement of the former Japanese ambassador to China, Yosuke Nakae, that 'lt is certain that without friendly and cooperative relations between Japan and China there can be no support for peace, stability and prosperity in Asia." David Arase," Japan in East Asia", in Akaha, and Langdon, (eds.), Japan in the Posthegemonic World, p.123.
42. Based on his previous contribution to Sino..Japan relations, China Eyes Japan (
- 391
Berkeley: University of California Press, 1989), Allen Whiting continues to emphasize the heritage of Chinese enmity against Japanese aggression in observing their relations. See his "China and Japan: Politics versus Economics", The Annals, AAPSS, 519 (January 1992), pp.39-51
43. Sino..Japanese trade is basically asymmetrical in both quantitative and qualitative terms. While the China trade is about 4-5 per cent of total Japanese foreign trade, Japan's trade links with China account for about one fifth of total China foreign trade. In addition, Japanese aid and private investment in China have also contributed to this asymmetry. See Whiting, "
China and Japan: Politics versus Economics", pp.41-42; Japan is quite confident about maintaining this asymmetrical interdependence in favour of Japan for some time, Arase," Japan in East Asia", p.123.
44. For labour intensive industries, comparative advantage is based on cutting production costs, e.g. wage and rents. However, for those capital-and technological-intensive industries, competitive advantage stems from market share rather than simply lower cost of production factors. fragility.Wang, 'Recent Japanese Economic Diplomacy in China: Political Alignment in a Changing World Order", pp.633-634.
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51 Ibid., pp.634-635.
52. 'Hong Kong, Taiwan, China Lead Asian Trade Partners: 'Three Chinas' Voraciously Gobbing up Japanese Goods", Japan Times Weekly International Edition., 33: 21 (24-30 May, 1993), p.13.
53. Robert Thomson, ''Beijing Encourages Tokyo Trade Links", Financial Times (23 September, 1992), p.8.
54. Information was based on MITL Trade and Industry, March 1991. p.24. Quoted from qingxin Ken Wang, 'Recent Japanese Economic Diplomacy in China", p.632.
55. Robert Thomson, ''Beijing Encourages Tokyo Trade Links".
56. for Japanese investment in Hong Kong for the period of 1985-90, see Carl Goldstein., and Anthony Rowley, 'Shogun Wedding", Far Eastern Economic Review (28 June, 1990), pp.70-71
57. In response to Taipei's program of becoming the regional operational centre, Japanese transnational corporations seem to have lagged behind American and European TNCs' moves there. Sony, the best known Japanese electronics giant, has chosen Taiwan to be the base of its regional operation centre for manufacturing.
58. Denis F. Simon., 'China in the World Economic System", Proceedings of the Academy of Political Science, 38: 2 (1991), p.24;· Reinhrd Drifte argues that Japan is being forced into increasing investment in China for "competitive"
reasons, as its neighbouring ANICs have invested in China to take advantage of China's low production factors. See his Japan's Foreign Policy, p.99.
59. 'Hua Ren Yu Hua Chiao Chi Yeh Shien Chi Da Lu Toa Tze Rer", (Chinese and overseas Chinese enterprises launch China fever of investment), Central Daily News, International edition (4 May, 1993).
60. Edward J. Lincoln, ''Japan's Role in Asia-Pacific Cooperation: Dimensions, Prospects, and Problems", Journal of Northeast Asian Studies (Winter 1989), p.
10.
61 'Samsung: Korea' Hope for High Tech", Business Week (27 January, 1992).
62. Edwin A. Winckler, and Susan Greenhalgh, (eds.), Contending Approaches to
- 393
the Political Economy of Taiwan (New York: M. E. Sharpe, Inc., 1988), pp.213
215.
63. Y. W. Ho, 'Gin Gi Chung Kuo De Gien Bin - Tai Shan", (The pioneer of Economic China - Taiwanese businessmen), Global Views (15 December, 1992), p.
44.
64. Ibid., p.43
65. Ford S. Worthy, 'Keys to Japanese Success in Asia", Fortune, 124: 8 (7 October, 1991).
66. Henny Sender, '1nside the Overseas Chinese Networks", Institutional Investors, 25: 10 (September 1991), p. 38.
67. Ibid., pAL
68. Victor Simpao Limlingan, The Overseas Chinese in ASEAN: Business Strategies and Management Practices <Manila: Vita Development Co, 1986), p.158.
69. Information above quoted from The Economist Year Book 1993 Edition.
70. 'That sucking sound is China slurping up money", Business Week (30 August, 1993), p.19.
71 Michael Selwyn, "SE Asia Chinese Head for Home", Asian Business, 29: 4 (April 1993), p.25; In 1993 about half Singapore's overseas investment projects in China received help from Singapore's Economic Development Board. See 'Giant Leaps", The Economist (2 april, 1994), pp.64-65.
72. K. S. Liao, "Singapore De Da Lu Tzen Tse Gih Ch'i Tsai Lian An Kwan Shi De Tsu Yun", (Singapore's Mainland policy and its role playing on the relations between two sides of the Strait), Central Daily News, International Edition, 23 April, 1993.
73. Singapore's role, played in the first quasi~fficial meeting of China and Taiwan, was Significant. According to information revealed, Singapore's former Prime Minister, Lee Kuan Yew, played a key role in helping Taipei and Beijing to arrange the meeting in Singapore. In February 1992, Lee visited his Taipei counterpart, the premier Hau Pei-tsung, forwarding a message from China's President Yang Sun-Kuen for a dialogue between Beijing and Taipei. See
394
74.
75. '
76.
77.
f 78. f 79. 1
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80.
81 82.
83. j
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Central Daily News, International Edition, 19 April, 1993; also Cora L S. Wang, With a Clear Conscience (Taipei: Commonwealth Publishing Co., 1994), pp.262
264.
74. See C. H. Wu, 'Singapore Da Lu Rur Yin Chia Ling Kuo Yie Lui': (Singapore's
"China fever" causes doubt from neighbouring countries), Central Daily News, International Edition, 24 May, 1993.
75. T. M. Hsui. 'Mien Duei Chu Kuo Ren Ging Gih Tong Her, Ker Kuo Ging Yu Giou Gia", (Facing chinese Economic Integration, Countries are astonished and worried about it), Central Daily News, International Edition, 1 June, 1993.
76. 'That sucking sound is China slurping up money", p.19.
77. based on Hong Kong Economic Journal's report on 17 August, 1993, see 'That sucking sound is China slurping up money", p.19. Earlier in a special report on China, the same warning had been expressed. See 'The spark plug of Asia's
future'~ Business Week (17 May, 1993), p.30.
78. See Central Daily News, International Edition, 19 April,1994 .
79. Although there have been huge investments from Japan and the ANICs in North America for Access to these markets, more recent investment trends seem to target Southeast asia for their lower cost production. for investment flows see Rober L. George, 'The Surge in Pacific Capital Flows", Asian Finance
(15 December, 1988).For the purposes of the ANICs' investment in Southeast asia see Kong Yam Tan, "Industrial Restructuring in the East Asian Newly Industrialising Economies and the Implications for ASEAN and ASEAN-China Economic Relations", in Siow-Yue Chis, and Bifan Heng, (eds.) ASEAN-China Economic Relations: In the Context of Pacific Economic Development and Co
operation (Singapore: Institute of world Economics and Politics, 1992).
80. Doug Tsuruoka, 'No more Mr Nice Guy", Far Eastern Economic Review (18
March, 1993), p.46.
81 Ibid.
82. Central Daily News, International Edition, 14 June, 1993.
83. Gordan Firclough, "Chopping the Chopsticks: Some Labour-Intensive Firms Flee
- 395
Thailand", Far Eastern Economic Review (18 March, 1993), p.48.
84. Although labour-intensive industries have escaped from Thailand, foreign investment has increasingly tended towards higher-technology industries. See Fairclough, ''Chopping the Chopsticks", p.48.
85. Brian Caplen, '~n Opportunity too Good to Miss", Asian Business, 28: 10 ( October 1992).
86. Yoko Shibata, "Japan's Investment Targets in Asia", Global Finance, 7: 2 ( February 1993), p.64.
87. Joy M. Tadaki, ''China and Vietnam Tempting for Direct Investment", Japan Times Weekly International Edition, 33: 4 (25 January-31 January, 1993), p.15.
88. Julian Baum, 'Taipei's Offshore Empire", Far Eastern Economic Review (18 March, 1993), p.45.
89. 'That sucking sound is China slurping up money", p.19.
90. 'The spark plug of Asia's future", p.30.
91 Fred Herschede, ''Competition among ASEAN, China and the East Asian NICk A Shift-Share Analysis", ASEAN Economic Bulletin, 7: 3 (March 1993).
92. R. Tyers, P. Philips, and C. Findlay, '~SEAN and China Exports of Labour
Intensive Manufacturers: Performance and prospects", ASEAN Economic Bulletin, 1: 3 (March 1987); John Wong, 'lntegration of China into the Asia
Pacific region", The World Economy (September 1988).
93. Kong Yam Tan, 'lndustrial Restructuring in the East Asian Newly Industrialising Economies", pp.19O-191
94. Charng Kao, "A 'great China Economic Sphere': Reality and Prospects", Issues and Studies, 28: 11 <November 1992), p.63.
95. For example, Taiwan's exports to the US market accounted for 48.8 per cent of its total exports. its highest level, in 1984. Since then , as its efforts to diversify market dependence, Taiwan has steadily reduced its exports to the US to 32.4 per cent in 1990, and 28.9 per cent in 1992. On the other hand, Taiwan' s trade with Europe has increased from 10.4 per cent in 1984, the lowest point, to 17.9 per cent in 1990, and 17.2 per cent in 1992. See Taiwan Statistical Data
- 396
Bo Pr Or 96. C.
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103. '1£
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Book, 1993, Council for Economic Planning and development, R.O.c.: Economic Progress & European Trade of the Republic of China, 1993, Euro-Asia Trade Organisation.
96. C. H. Kwan, 'The Emerging Pattern on Trade and Interdependence in the Pacific Region", Tokyo Club Papers, 4, part 2 (1991), p.l45.
97. the import figure has also suggested the same developing trend. Information based on IMF, Direction of Trade Statistics and Taiwan's Monthly Statistics of Exports and Imports, see Ibid., p.l40.
98. Figures for Taiwan refer to Euro-Asia Trade Organisation, Economic Progress and European trade of the Republic of China 1993, p.27.
99. Elaine Kurtenbach, 'Dragons Against the Fortress", International Management ( October 1985), p.62.
100. Ibid.
101 See Economic Progress and European Trade of the Republic of China 1993, Euro-Asia Trade Organisation, p.4.
102. See the IMF figures Financial Times, 25 February, 1994, p.8.
103. "If You Can't Beat 'Em", Far Eastern Economic Review (8 October, 1992), p.71 104. Ibid.
105. Shada Islam, 'Textile Trouble", Far Eastern Economic Review (3 February, 1994), p.50.
106. This general trend has been notable in Asia-Pacific economic cooperation. See arguments in Lawrence Krause, 'Trade Policy in the 1990s I: Goodbye Bipolarity, Hello Regions", The World Today, 46: 5 (May 1990), pp.83-84.
107. See Michael Davenport and Sheila Page, Europe: 1992 and the Developing World (London: Overseas Development Institute, 1991), p.1S.
lOS. See Sheila Page, 'Europe 1992: Views of Developing Countries", The Economic Journal, 101 (November 1991), p.1559.
109. Ibid., p.l56O.
110. Soogil Young, 'East Asia as a Regional Force for Regionalism", p.136.
111 Lawrence Krause and Soogil Young have expressed the same worry.
- 397
:
.
I
112. The ESI = 100 represents perfect similarity between analyzed economies' export
structure.
which would evoke rompeti.tion See QJ.ie.nan Wang. and Jui-ling Hsu, 'The Impact of the European Integration on Taiwan and Taiwan's Response", in 1992Sino~European Conference on Economic Development: Impact of the European Integration and Response of Non-EC Countries, Chung-Hua Institute for Economic Research, Taipei, 6-7 May, 1992.
113. See Davenport and Page, Europe: 1992 and the Developing World, p.42.
114. Peter J. Buckly, Hafiz Mirza, and Kate Prescott, "Europe 1992 and Its Impact on Pacific Futures", The Pacific Review, 4: 4 (1991), p.373.
115. Ibid; 800gil Young agrees with this suggestion. See his "East Asia as a Fegional Force for Globalism'; also Kym Anderson suggests East Asia economies need to club together with North American economies as a way of maintaining an open global trading system. See 'Europe 1992 and the Western Pacific Economies", The Economic Journal, 101 <November 1991), p.1549.
116. Tetsuo Naito, 'North American Free Trade Agreement (NAFTA) and its Influence on Asia", RIM Pacifi<;: Business and Industries, 2 (1993), p.8.
117. The arguments around for and against the NAFTA became a public fuss in the US. All sides' arguments have been discussed in Gary Hufbauer, and Jeffrey Schott, NAFTA: A clarified discussion the NAFTA myth and misconception is provided by William A.Orme. Jr. "Myths versus Facts: The Whole Truth about the Half-Truths", Foreign Affairs, 72: 5 <November/
December, 1993), pp.2-12.
118. 'New ~d on .the Bloc", Far Eastern Economic Review (27 August, 1992), pp.50
51
119. Figure was based on International trade Commission, see Han 800 Kim, and Ann Weston, "A North American Free Trade Agreement and East Asia Developing Countries", ASEAN Economic Bulletin, 9: 3 (March 1993), p.289.
120. Susumu Awanohara, 'Not-so-Fine Print: NAFTA's Details May Exclude Asian Traders", Far Eastern Economic Review (24 September, 1992), p.106.
121 ':America's back door'~ Far Eastern Economic Review (11 July, 1991), p.44.
- 398
122.1.
123.
124.
125.
126..
127.
128.
129.
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122. According to OECD reports, Mexico, along with the Asian four NICs, Brazil, Greece, Portugal, Spain, and Yugoslavia, was also classified as a
NIe.
See The hnpact of the Newly Industrialising Countries: on Production and Trade in122. According to OECD reports, Mexico, along with the Asian four NICs, Brazil, Greece, Portugal, Spain, and Yugoslavia, was also classified as a