MURDOCH RESEARCH REPOSITORY
This is a preprint of an article whose final and definitive form has been published in
as
Wilson, J.D. (2012) Resource security: a new motivation for free trade agreements in the
Asia-Pacific region. The Pacific Review, 25 (4). pp. 429-453.
Available here
http://dx.doi.org/10.1080/09512748.2012.685098
http://researchrepository.murdoch.edu.au/10814
Copyright © © 2012 Copyright Taylor and Francis Group, LLC.
It is posted here for your personal use. No further distribution is permitted.
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RESOURCE SECURITY: A NEW MOTIVATION FOR FREE TRADE AGREEMENTS
IN THE
ASIA-PACIFIC REGION
Jeffrey D. Wilson
Asia Research Centre
Murdoch University
j.wilson@murdoch.edu.au
PREPRINT DRAFT. DO NOT CITE OR REDISTRIBUTE WITHOUT AUTHOR’S PERMISSION
Keywords: free trade agreements; preferential trade agreements; resource security; Asia-Pacific
region; bilateralism
Forthcoming as: Wilson, J.D. (forthcoming). Resource security: A new motivation for free trade
agreements in the Asia-Pacific region. The Pacific Review, expected publication 2012.
ABSTRACT:
Following a historical commitment to multilateralism, in the last decade the trade policy
initiatives of many states in the Asia-Pacific have turned to bilateralism through the negotiation of
free trade agreements (FTAs). The corresponding proliferation of regional FTAs has thus far been
understood to result from three broad motivations: a desire to advance trade liberalisation beyond
WTO disciplines; mercantilistic efforts to secure preferential access to key export markets; and/or
attempts to use FTAs to secure non-economic political gains. This paper argues that since the
middle of the decade a new motive has emerged – the use of FTAs to improve resource security –
particularly by import dependent resource consumers in Northeast Asia. As yet unexamined in
the literature, this paper seeks to document and explain this trend. It analyses the recent
emergence of resource security concerns as a new FTA motive; the corresponding shifts in the
FTA strategies and initiatives of Japan, Korea and China; and the dynamics of an emerging race
for resource-related FTAs between the three governments. Based on this analysis, it demonstrates
that resource-related FTAs could potentially improve consumers’ resource security through either
the liberalisation of trade, the extension of investment protections, or broader diplomatic gains
with the targeted supplier. However, owing to supplier reluctance to enter into binding policy
commitments for resource industries, their track record shows success in only the diplomatic
dimension, and the prospects for a strengthening of their effects are poor. As a result, it is argued
that while resource concerns have become a key motive for FTA initiatives in the Asia-Pacific
region, they have not substantively improved resource security for its import-dependent states
and are unlikely to do so in the future.
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INTRODUCTION
The architecture of the Asia-Pacific trading order is in flux. Following a long period of
commitment to multilateralism, a proliferation of free trade agreements [1] (FTAs) during the last
decade appears to have cemented bilateralism as the guiding principle for trade liberalisation in
the region. Given the speed of this shift, and its potential implications for both the regional and
global trading orders, attempts have been made to theorise the causes for this turn towards trade
bilateralism. Generally, these attribute the bilateral shift in regional governments’ approach to
trade policy to one of three underlying motives – desires to advance trade liberalisation beyond
the current disciplines of the World Trade Organisation (WTO), mercantilistic attempts to obtain
preferential access to key export markets, and/or efforts to leverage FTAs for broader political
gains. In the literature on FTA proliferation in the region, debate currently focuses on which of
these motives (or a combination thereof) account for both the FTA strategies of particular
governments, as well as the regional trend as a whole.
But are these three motives sufficient to fully account for the shift to trade bilateralism in the Asia-
Pacific? This paper argues that a new motive – the use of FTAs to improve resource security – has
emerged as an additional motive in the FTA strategies of the region’s major resource consumers
(Japan, Korea and China) due to resource security difficulties emerging in the middle of the 2000s.
As yet unexamined in the literature, the paper considers this new motive by analysing emerging
resource security concerns in the region, corresponding changes in the FTA strategies of the three
Northeast Asian governments, and the content of their resulting initiatives with targeted resource
suppliers. Through this analysis, it is argued that while resource security goals have become
salient in many FTAs in the region, and that such FTAs could improve consumers’ resource
security through a combination of trade liberalisation, investment protection and diplomatic
provisions, their effects have largely been limited to the domain of diplomatic gains. As a result,
such initiatives have so far done little to improve the resource security of the three Northeast
Asian economies, and an assessment of their prospects indicates they are also unlikely to do so in
the future.
MOTIVATIONS FOR FTA PROLIFERATION IN THE ASIA-PACIFIC
During the last decade, the architecture of the global trading system has been dramatically
transformed. The rapid proliferation of FTAs has reshaped the institutional basis for trade
liberalisation from one solely based on multilateralism and the non-discriminatory most-
favoured-nation (MFN) principle to one overlaid by a range of preferential bilateral or minilateral
agreements. At the global level, the number of FTAs in-force and notified to the WTO surged from
58 in 2000 to some 178 by July 2011 (WTO 2011). An equally dramatic shift has occurred in the
Asia-Pacific region [2], which had previously lagged behind the global trend, being home to only
three in-force FTAs in 2000. However, following a spate of FTA proposals beginning in 1998 the
region quickly joined the global trend; and by July 2011 the number of in-force FTAs notified to
the WTO – including both within-region and cross-region agreements – had grown to 41.
Moreover, if non-WTO notified and under-negotiation FTAs are included, the current count of
regional ‘initiatives’ rises to 101 (ADB 2011). As a result, the Asia-Pacific region has quickly been
catapulted from the status of an FTA laggard to become the most active site for FTA negotiation
globally (Dent 2010).
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The rapid proliferation of FTAs in the Asia-Pacific, which has been considered part of a ‘new
bilateralism’ in the region (Lloyd 2002; Ravenhill 2006), has attracted scholarly attention given the
dramatic change in states’ trade policy approaches it implies. In this literature, a wide range of
potential explanations for the shift have been offered – in one survey the Warwick Commission
(2007) identified no less than ten distinct causes – and debate currently centres on which of these
factors, or a sub-set of them, provide the best account of the process at play. Summarising this
literature, it is possible to identify three distinct sets of motives which have been theorised as the
drivers of the FTA turn in the Asia-Pacific region – that it represents either liberalising attempts by
regional governments to advance trade liberalisation, mercantilistic efforts to secure preferential
access to key export markets, and/or the desire to exploit FTAs for political gains.
A first approach sees the FTA turn in the region as motivated by states’ desire to advance trade
liberalisation, arguing such agreements are a means to push regional liberalisation further than
existing multilateral arrangements have allowed. Some have argued that inertia at the WTO has
acted as a catalyst for heavily trade-exposed Asia-Pacific economies to turn to FTAs as a second-
best means to promote trade liberalisation (Desker 2004; Lloyd 2002). Others have contended that
‘liberalisation ready’ states are using FTAs to bilaterally achieve liberalisation for so-called WTO-
Plus issues (such as investment, services, and intellectual property) that have yet to receive
substantive treatment at the WTO (Sauve 2007; Thangavelu & Toh 2005). It is also suggested that
FTAs have been used by states to assist the implementation of domestic reforms in sensitive
sectors (such as agriculture), by acting as a more politically acceptable starting point upon which
deeper liberalisation can subsequently be based (Findlay et al. 2003). While stressing different
underlying logics, these contributions share an understanding of the regional shift as one
fundamentally aimed at advancing trade liberalisation beyond that presently achieved
multilaterally through the WTO. They also tend to view the impact of FTA proliferation
optimistically, arguing they can act as a ‘building block’ upon which deeper trade liberalisation
can be achieved – either by weakening domestic obstacles to trade reform (Ornelas 2005), or
through the subsequent linking up of bi- and mini-lateral agreements first into larger blocs and
ultimately the WTO (Baldwin 2006).
Nonetheless, others dispute the argument that regional FTAs are motivated by liberalisation goals.
Given that FTAs provide states with the positional good of preferential access to partners’ markets
(Dieter 2006), a competing approach has argued that FTA proliferation in fact reflects
mercantilistic strategies to competitively secure access to key export markets. For some, this
development in the region is viewed as a purely defensive move necessitated by broader global
developments. Extending Baldwin’s (1999) ‘Domino Theory’ of regionalism, several have
suggested that as FTA proliferation in Europe and the Americas during the 1990s discriminated
against Asian firms in their key export markets, regional governments were forced to (reluctantly)
launch their own initiatives to neutralise disadvantages associated with being ‘FTA outsiders’
(Dent 2010; Dieter 2006). Others, however, are more willing to attribute the shift to underlying
changes in governments’ trade policy preferences. For example, Aggarwal and Koo (2005) link
regional FTA initiatives to the stagnation of East Asian exports in the late 1990s and the need to
secure footholds in new export markets; and Manger (2009) identifies firm preferences to gain FDI
concessions in key production locations as a domestic source of political pressure for FTAs.
Whether the shift in approach is seen as defensive or offensive in origin, both agree that the
adoption of FTA strategies in the region evidences a weakening commitment to trade
multilateralism in favour of competitive market access motives. This approach tends to view the
trend pessimistically, arguing that FTA proliferation acts as a ‘stumbling block’ for global trade
liberalisation – by weakening domestic preferences for across-the-board liberalisation, producing
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a range of competing and inconsistent preferential deals, and potentially inviting retaliation
between competing trade blocs (Bhagwati 2008; Findlay et al. 2003).
However, a third approach challenges the view that economic considerations are the principal
motive for regional FTA initiatives. Such arguments are based on the observation that most
bilateral agreements signed by East Asian countries in the first decade of the 21st Century are: (a)
between countries with low bilateral trade volumes (Dent 2010); and (b) have narrow sectoral
coverage and low tariff commitments (Ravenhill 2008); indicating that both their economic
rationales and effects are relatively weak. Instead, it is claimed that political motives have
underscored the trend. In some cases security motives have predominated, particularly evident in
the recent US strategy of using FTAs to reward cooperation by security partners in the region
(Higgott 2004). Others have identified diplomatic goals as a catalyst, particularly in the use of
FTAs by both China and Taiwan as a component of broader regional diplomacy programs
(Hoadley & Yang 2007; Ravenhill 2008). Others still have identified contests over regional
‘leadership’ as a key driver – particularly evident in China’s opening of FTA talks with the
ASEAN in 2000, followed by Japanese and Korean courtship of the regional grouping as a
competitive move in turn (Aggarwal & Koo 2005; Wesley 2008). By downplaying economic
motives, advocates of a political explanation for regional FTA proliferation take an ambivalent
position on their economic effects, with Hoadley (2007) suggesting they may facilitate trade policy
harmonisation in the region, while Ravenhill contends they are nonetheless “unambiguously bad”
for comprehensive global liberalisation efforts (2006: 45).
Of course, while this literature has theorised trade liberalisation, preferential market access and
non-economic political motives as competing explanations for regional FTA proliferation, these
should not be though of as mutually exclusive. A combination of these motives may underlie a
government’s FTA strategy – evident in the case of Japan, which has used FTAs both to achieve
foreign market access and soften domestic opposition to agricultural liberalisation (Solis 2010).
They may also be combined within particular bilateral initiatives – for example, the importance of
both diplomatic and market access motives to China’s 2005 FTA with Chile (Hoadley & Yang
2007: 342). As such, these theorised motives should be thought of as mutually supportive rather
than exclusive, with the balance varying case-by-case given the specific issues and interests at
stake.
One motive that has not received sustained attention in this literature has been the use of FTAs by
resource-importing states to attempt to improve resource supply security – a situation where an
economy enjoys the continuous availability of needed natural resources at reasonable prices [3].
However, such a motive appears to be salient in the Asia-Pacific. Improving resource security has
been stressed (alongside other motives) in recent FTA strategies issued by the region’s major
resource consumers of Japan (MOFA 2004a), Korea (MOFAT 2007) and China (Hu 2007); and
resource suppliers have accounted for around half of these countries’ FTA initiatives during the
last decade (Table 2). Additionally, since 2005 all three have signed FTAs that contain ‘resource
clauses’ aimed at securing supply from key exporters within the region (Table 3). Rarely, however,
do studies on FTA proliferation identify resource security goals as a motive behind the regional
trend. Several influential reviews of region-wide dynamics have failed to identify resource
security motives entirely (Aggarwal & Urata 2006; Dent 2006, 2010; Desker 2004); and the few
mentions resource security has received have typically been limited to the context of recent
Chinese initiatives with countries such as Australia and the Gulf Cooperation Council (GCC)
(Jiang 2008, 2010; Ravenhill 2008; Ravenhill & Jiang 2009).
