Asean must not lose sight of its trade interests
New Straits Times, Malaysia
Asean must not lose sight of its trade interests
By Hardev Kaur
28 August 2009
The Association of Southeast Asian Nations (Asean), which marked its 42nd anniversary on Aug 8, has been described as the most successful regional grouping of developing countries.
However, with the Asian financial crisis which affected its members, of many turning inwards and focusing on domestic issues, the economically weakened grouping lost some of its shine and attractiveness.
However, in the wake of the current global meltdown but the better economic environment and growing economic strength of East Asian countries, including Asean members, there is renewed interest in the grouping. There is a growing list of suitors waiting in line.
The potential for growth of the grouping with its combined consumer market of nearly 580 million is attracting greater attention of the major developed nations. The growing middle class, increased wealth and the shift of economic centre from the West to the East has generated even greater interest in the region and the grouping.
Asean, which started with the five founding members — Indonesia, Malaysia , the Philippines , Singapore and Thailand — has expanded to 10 members today. Its focus has also shifted from politics to bread-and-butter issues relating to economics, trade, investment and security. It has signed a number of bilateral free trade agreements.
To date, Asean has concluded free trade agreements (FTAs) with
all six dialogue partners, namely Asean-Japan, Asean-China, Asean-
South Korea, Asean-Australia-New Zealand and Asean-India.
More bilateral FTAs are being proposed, including “mega FTAs”, but negotiations are not always easy or smooth-sailing, even for the bilateral ones. The Asean-India FTA for trade in goods, that was concluded recently, took 6½ years. And negotiations on services and investment, part of the FTA, are ongoing.
The Asean-China FTA was also concluded recently. The agreement, which also comes into force on Jan 1next year, unlike the Asean-India FTA, covers trade in goods, services and investment.
While there has been some relief that an agreement with India has been concluded, the fact remains that a number of products of interest to Malaysia have been placed on the “highly sensitive track” to protect India’s domestic producers. The terms of the Asean-India FTA are also more stringent compared with other FTAs that Asean has concluded.
Products included on the “highly sensitive track” include crude and refined palm oil, coffee, black tea and pepper. Under the agreement, crude palm oil will continue to be subjected to a tariff of 40 per cent in January 2019 and refined palm oil will be subjected to a tariff of 50 per cent in January 2019 — nine years after the agreement comes into force.
In contrast, the tariff on soya bean, a close competitor of palm oil, is 45 per cent compared with 80 per cent for crude palm oil and 90 per cent for refined palm oil currently.
As more proposals and studies on FTAs are presented to Asean, it is important that Asean members are not put at a disadvantage with the FTAs. In addition to the bilateral FTAs, the grouping is also working on economic integration for an Asean Economic Community. This is expected to be completed in 2015, in which investment, capital and skilled labour can flow freely.
The grouping has also been working on the Asean plus three cooperation and FTA. That is not all. At the recent Asean Economic Ministers (AEM) meeting in Bangkok, theministers were presented with a proposal for an Asean plus six FTA.
The proposal by Japan sets out a plan for a mega FTA comprising the 10 Asean members plus its six dialogue partners — Australia, China, India, Japan, South Korea and New Zealand.
While it is encouraging that there is increased attention being paid to Asean, it is important that the grouping sets out its priorities and focus on what is best for its members. It must be in the driver’s seat and not be driven by others. Observers point out that there are too many drivers and the grouping is in danger of being pulled in different directions.
With the different proposals being made to the grouping, the members must be mindful of not losing focus. With the world slowly emerging from the worst economic crisis in decades and the centre of economic gravity shifting to East Asia, it would be useful for Asean to focus on the region and derive maximum benefits.
There is greater cooperation and synergy in production of goods and services between Asean and the three East Asian nations. The financial linkages are also stronger. Even so, cooperation in East Asia, first proposed in 1991 by former prime minister Tun Dr Mahathir Mohamad, is still work in progress.
With the various efforts in the past to derail, oppose and indeed kill the initiative and the numerous road blocks on the road to East Asian cooperation, the grouping must remain focused. Asean must remain vigilant and ensure that a new proposal or initiative does not undermine or dilute the benefits of regional cooperation to its members.
It is important, therefore, for Asean to plan its journey and work on building collective internal strength so that it is in the driver’s seat and not driven by outside forces or driven in different directions.
Slow and steady has been Asean’s trademark over the past four decades. Undoubtedly, the environment has changed and the world is moving at a much faster pace today. It means the group must be even more vigilant, careful and keep the interests of its members in clear focus. It must use building blocks to work on economic integration and FTAs on an incremental basis and with careful sequencing.
A strong, united grouping in the driver’s seat will not only benefit its members but also be more attractive to other nations, including the more developed countries and other regional groupings. A weak disparate grouping will not only be ineffective in championing the cause of its members but also can easily be undermined as well.
