GROWING ECONOMIC INTEGRATION IN ASIA
by Lee Kuan Yew, Senior Minister of Singapore

At long last economic integration is taking off in East Asia. China imports components, raw materials, food and tropical products from Northeast and Southeast Asia. Just over three years ago China offered the ten countries of ASEAN a free-trade agreement (FTA). ASEAN and China signed a framework agreement in 2002. The FTA will be realized by 2010, but there has been an early-harvest package on goods and services since January. Moving ahead, Thailand has reached a limited bilateral agreement with China to accelerate some of their commitments under the framework agreement. Other ASEAN countries are seeking similar agreements.

In response to China's initiative, Japan signed a Framework for Comprehensive Economic Partnership with ASEAN in 2003. It concluded a bilateral FTA with Singapore in 2002 and is negotiating similar agreements with Thailand, Malaysia and the Philippines.

India, another economic giant, is negotiating a Comprehensive Economic Cooperation Agreement with Singapore. Other members of ASEAN will seek similar agreements. ASEAN as a whole is negotiating with India to establish an FTA by 2011.

With tensions easing between India and Pakistan, the South Asian Association for Regional Cooperation (Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka) agreed in January to establish an FTA by 2016. Separately, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand signed a framework agreement to work toward reducing tariffs from 2006 onward.

It is the failure of the WTO talks in Cancún last September that has spurred these regional FTAs. These agreements should help lead the way to a successful WTO round.

America Is Key to Asia's Success

During the last ten years China's world trade has grown by an average of 16%, to $851 billion. Over the same period India's has grown by an average of 11% to $127 billion. Half of China's total trade is now regional -- with Hong Kong, Japan, Korea, Taiwan and ASEAN. However, the dynamism of China's economy depends on exports to the U.S., which make up 21% of China's total exports.

Over the next 20 years, as hundreds of millions of middle-class Chinese and Indians emerge as hungry consumers, East Asia's dependency on the U.S. will lessen. But in the meantime any downturn in the U.S. economy will badly affect East Asia. Hence the reason Asians watch anxiously for stronger U.S. economic growth and job creation and are uncomfortable with election rhetoric promising Americans protection against imports and the outsourcing of jobs. But what Asians fear most are further terrorist attacks in America that would cause a sharp economic downturn.

The state of the U.S. economy will be a big factor in November's presidential elections. The elected President will determine the outcomes in Iraq and Afghanistan and decide how the war against terrorism is fought. To ensure their economic growth and progress, Asians need a President in the White House who will increase security and stability worldwide.