A growing number of Asian nations are considering forming an Asia Pacific trade bloc to counter what they fear is increasing protectionism from trade zones being created or proposed by the European Community and the governments of North America.
The scheme--by promoting trade between many Asian nations that until now have not been close trading partners--is in some ways more ambitious than the plan that will create a single economic European Community in 1992, analysts say. That's because many European Community members already have extensive trade ties and are at generally similar stages of economic development.
The concept could also produce a union that is as formidable as the free-trade zone that President Bush envisions for the United States, Mexico and Canada, observers say.
But an Asian trade bloc--if it encourages protectionism and ignites trade wars--could have enormous detrimental consequences for the United States by making it harder for Americans to gain access to lucrative and burgeoning Asian markets, analysts say. And it could stifle international trade by separating much of the world's commerce into three major blocs--Europe, North America and East Asia.
Although the leading proponent of the Asian bloc is Malaysian Prime Minister Mahathir Mohammed, the biggest beneficiary could be Japan--which is why some are calling the concept a "yen bloc." By combining the world's most robust economy with its fastest-growing economies in one trade group, a yen bloc could pose a formidable threat to the West for global industrial and economic dominance.
Mahathir has yet to define precisely the kind of economic alliance he would like to forge. Malaysian government officials are expected to advance some proposed objectives with other Asian governments during a conference this week in Bali, Indonesia, and in the weeks ahead.
However, the general concept, developed by Malaysia two months ago, calls for Malaysia, Indonesia, Singapore, Thailand, the Philippines and Brunei--already part of a political and economic coalition known as the Assn. of Southeast Asian Nations (ASEAN)--to join with Japan, China, South Korea, Taiwan, Hong Kong, Vietnam, Cambodia and Laos.
In general, the plan is likely to call for a reduction or removal of tariffs on intra-Asian trade, according to Malaysian officials and other observers. The proposal might also call for the establishment of rules or arbitration methods designed to settle intra-Asian trade disputes and engender cooperation on matters such as incentives for foreign investment, they say.
The Malaysian effort may fail. After all, it will be difficult to forge an alliance involving advanced Japan and developing Indonesia, rich Taiwan and the poor Philippines and a political mix of communism, authoritarianism and democracy.
The effort may also be scaled down. Many observers say the most feasible arrangement is probably not a European Community-style unified market, or even tariff-free zones as proposed in North America, but a loose cooperative economic grouping that would promote intra-Asian trade but not discriminate against outsiders.
As such, the proposal may win support from the United States, which wants freer access to Asian markets, and Japan and China, which want continued export growth to U.S. and European markets. Japan and China, the largest potential members of an Asian trade bloc, fear that a restrictive grouping would invite retaliation from the United States and European Community.
But even if the Malaysians gain acceptance for a grouping that is not protectionist, such a coalition could still turn detrimental to the United States. For example, if the world's nations are unable to develop rules for a new General Agreement on Trade and Tariffs (GATT)--a legal guideline that defines economic fair play among nations--an economic free-for-all could ensue, leaving nations free to unilaterally make their own trade rules or adhere to the guidelines of trading blocs.
Mahathir said Sunday that all six ASEAN members backed the trade bloc concept in principle. That gives Malaysia the green light to attempt to build a consensus for a detailed plan.
After initially hinting that an East Asian group might be restrictive to outsiders, Malaysia now appears to be favoring the non-protectionist approach. The Malaysians have also indicated that the objectives and operating rules of such an Asian group would be consistent with provisions of a new GATT agreement.
As such, the United States now has no objection to an Asian economic group if it merely promotes trade consistent with the free-trade principles of a GATT agreement, said Nancy Adams, assistant deputy to U.S. Trade Representative Carla Anderson Hills.
"Who are we--with two free-trade relationships of our own (with Canada and Israel) and one (with Mexico) on the way--to say they can't do that in Asia?" Adams said.
