Morita-Jaeger, Minako
(2016)
Services trade integration in East Asia and political economy impediments in domestic decision-making: a case study of Japan-ASEAN bilateral free trade agreements.
PhD thesis, London School of Economics and Political Science.
Abstract
In East Asia, services trade integration, both in market and policy, lags far behind goods trade integration. In spite of a proliferation of ASEAN plus one type FTAs in the Region since the early 2000s, policy-led services integration has not happened in East Asia. The aim of this research project is to investigate the reasons why the Japan-ASEAN bilateral FTAs, which were concluded in the 2000s, resulted in the shallow GATS-plus FTAs. Since barriers in services trade lie in domestic regulations, we examine how domestic determinants, namely interests and institutions in domestic decision-making, shaped the negotiating positions of Japan and ASEAN.
From our empirical work, we found the following: (i) The services trade policy-making structure, which involves a wide participation of domestic regulatory authorities in the decision-making process, constituted horizontal fragmentation of power. Because of horizontal fragmentation of power, the domestic regulatory authorities with strong regulatory autonomy and regulatory concerns were able to exercise a veto power against changes in the status-quo and pushed backward the lead ministry’s negotiating positions. (ii) In terms of interests, no strong proliberalisation interests existed either on the policy demand or supply sides. On the policy demand side, while there existed very limited exporting interests, the import-competing services suppliers were afraid of the erosion of rents and adjustment costs caused by preferential market liberalisation. On the policy supply side, there was few incentives to lock in domestic services reforms by using the Japan-ASEAN bilateral FTAs. In addition, (a) pressure for speedy conclusion of an FTA to win the political competition of creating FTAs in the Region and (b) the strong economic and political motivation of FTAs to enhance regional supply chains in the manufacturing sector undermined the countries’ negotiating positions on services trade.
From the findings above, we conclude that services trade integration in East Asia lags far behind goods trade because of the double layered political economy impediments. The first layer of impediment, which is the horizontally fragmented domestic decision-making structure, reflects the heterogeneity of services. The second layer of impediment, which is interests, mostly reflects the distinctive characteristics of East Asia
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