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#2702, 12 October 2008
Towards Comprehensive Economic Partnership in East Asia
Mohit Anand
Research Officer, IPCS
e-mail: mohit@ipcs.org

The Comprehensive Economic Partnership in East Asia (CEPEA) initiative, floated by Japan, has emerged as one of the most important steps being taken under the East Asia Summit (EAS). The idea for CEPEA was proposed by Japan at the 2nd EAS held in January 2007. The working group, constituted from among the member states, has already finalized a draft framework for the CEPEA, which will be tabled for discussion at the 4th EAS, to be held in Bangkok in December 2008. Focusing on a range of issues including trade in goods and services, investment and intellectual property rights among others, CEPEA hopes to contribute towards a free, fair and rule-based economic integration process in the region.

The CEPEA has been proposed with the aim of strengthening the East Asian Economic Partnership Agreement with the ultimate objective of developing a regional production network, and trade and investment liberalization along with system facilitation and institutional capacity-building. The CEPEA has been initiated along with the proposal to establish the Economic Research Institute for ASEAN and East Asia (ERIA), which aims at conducting in-depth policy research and making policy recommendations to promote economic integration in East Asia. ERIA is meant to provide the basis of cooperation and to sustain attempts at narrowing the economic disparities in the region. It is envisioned as providing the intellectual support to CEPEA to ensure strong partnership between various stakeholders in order to bolster the potential gains associated with CEPEA. The dual framework is characteristic of the Japanese approach of inculcating a two-fold method of liberalization and cooperation. Together, both the initiatives are aimed at providing an all-encompassing framework for economic integration and regional cooperation in East Asia.

Japan's emphasis on such a framework rests on its attempt to ensure that prosperity accruing from effective economic integration of East Asia will connect Japan's economy with Asia's growth. Understandably, Japan's economy is in dire need of avenues to revitalize itself and check its decade-long economic slump. It is thus essential for Japan to ensure that its economy is a principle element of successful East Asian integration. In the light of China's established economic might in the region, it can also be inferred that a dwindling Japan wants to safeguard its position in East Asia. Evidently, Japan's insistence on the inclusion of India along with Australia and New Zealand as part of the larger integration process highlights its concerns regarding an economically and strategically balanced East Asia.

For India, being part of the CEPEA would mean enlargement of its export market from just Southeast Asia to all of East Asia. More importantly, it would open definite avenues for consolidating its participation in an East Asian Community. Benefits from such developments are obvious in terms of strengthened economic and political support from the regional bloc along with opportunities for increased influence on the region.

There is a sense that the CEPEA serves the same purpose as the East Asia-FTA (EA-FTA) that is currently being worked out. In this regard, it has been clarified that the CEPEA has an exclusive purpose of facilitating trade liberalization and economic cooperation. Trade liberalization has been perceived as the outcome towards which processes would be facilitated by the CEPEA which would not actually include liberalization measures per se. In the context of the EA-FTA, CEPEA stands to ensure the smooth and effective establishment of the FTA and does not include actual working out of the modalities of trade liberalization.

There are however, definite concerns regarding the perceived success of the CEPEA in the context of regional realities in East Asia. China's continued reluctance vis-a-vis the EAS still lingers over the future prospect of the body as an overarching framework for economic integration encompassing its member states. While the CEPEA suggests a wide-ranging and comprehensive economic initiative, it does not really represent the process of regional economic integration, but integration among select member states in the region. An economic partnership agreement looking to consolidate the region would fall short of its objectives if it does not effectively incorporate all players, such as North Korea and Taiwan in its focus.

It also remains to be seen if the CEPEA reinforces existing attempts at trade liberalization or acts as an impediment to them. Multiple initiatives towards trade liberalization in the region are exacerbating the existing risks pertaining to overlaps and the consequent 'noodle bowl effect.' The CEPEA needs to be able to reconcile the multiple trade agreements being pursued in the region and ensure that inherent overlaps do not complicate and jeopardize the integration process. A lot will depend on its ability to provide a framework for consolidation and mediation.

Finally, it is interesting to note that the CEPEA comes as a far-reaching extension of the underlying regional integration experiment of ASEAN. The CEPEA's attempt to provide the institutional impetus for an East Asian Community rests largely on the effective integration of ASEAN. Arguably, ASEAN itself has a long way ahead in realizing its objectives of a consolidated Southeast Asia. The CEPEA, with its foundations in ASEAN, needs to ensure that it does not merely end up trying to achieve too much too soon.

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