Feasibility of an East Asian FTA and common agricultural policy: Analysis of agricultural and environmental impacts

Abstract

Since the current WTO (World Trade Organization) rules have several unfair aspects favorable to exporting countries with large-scale farms like the U.S. and Australia, it would be impossible for Asian small-scale farming to survive under the rules. The rules are focusing on economic efficiency without considering equitable distribution of wealth and external economies such as national security and environmental concerns. Furthermore, although it is said that a total ban on export subsidies by the end of 2013 was agreed, the pledge is very unlikely to be fulfilled because many "hidden" export subsidies are left out of this agreement. Therefore, forming the East Asian FTA (Free Trade Agreement) is a way to strengthen cooperative relationships against unfairly severe free trade pressure from exporting countries with large-scale farms. It is important to jointly establish new criteria for East Asian food trade to ensure sustainable and diversified agriculture. In the longer term, it could serve as a good model for establishing fair food trade rules under the WTO. However, our analysis showed that the East Asian FTA could endanger existence of Japan and Korea's rice farming because of huge gaps in agricultural prices and costs between Japan/Korea and other East Asian countries. Therefore, we need a measure to adjust the current agricultural productivity gaps in the East Asia. A feasible measure is establishing the East Asian CAP (Common Agricultural Policy) with a fund collected in proportion to the GDP level of each partner country just like the EU budget. Using the funds, the uneven distribution of FTA benefits can be redistributed across borders.