Forbes | 20 November 2007
ASEAN Signs Landmark Accord On Trading Bloc
MUMBAI — The 10 countries that are part of the Association of Southeast Asian Nations agreed Tuesday to create an economic bloc that will eliminate barriers to free trade and production in the region.
In a declaration released during the annual summit meeting of ASEAN in Singapore, member nations agreed to create an ASEAN Economic Community, along the lines of the European Union. “The blueprint will transform ASEAN into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy,” read a declaration ratified by leaders of the member countries.
ASEAN’s members are Singapore, Indonesia, Brunei, Malaysia, Laos, Cambodia, Myanmar, the Philippines, Thailand and Vietnam. They have a combined population exceeding 500 million and a GDP of around $1 trillion. Exports to regions like North America and the EU account for about 60% of the bloc’s economies.
“Simple, harmonized and standardized trade and customs, processes, procedures and related information flows are expected to reduce transaction costs in ASEAN,” according to the blueprint. The bloc will allow flexibility as it moves toward integration, the charter emphasizes: “A member state may opt out from certain economic schemes that it is not yet ready to participate [in], although it has taken part in determining and approving such economic schemes in the first place.”
“This is a process of deepening the free trade agreement ASEAN nations have adopted. A lot remains to be done to go from an FTA to an economic community—the tariff policy of each nation is different and there are barriers to the free movement of goods,” said Nagesh Kumar, head of the think tank Research and Information System for the Non-Aligned and Other Developing Countries.
Within the ASEAN, complementary trading potential is limited because the members’ economies are similarly endowed and export similar products, he observed. Intraregional trade accounts for 20% of their exports.
To strengthen the bloc, ASEAN should deepen regional ties with India, China, Japan, New Zealand, Korea and Australia instead of only inking free trade agreements with individual nations, Kumar said. ASEAN is currently involved in bilateral trade talks with nations like India, China, Japan and Australia.
On Monday, Indonesia’s trade minister said talks with India would be stalled until New Delhi agreed to further concessions on agricultural and petroleum products.