IDEAsRIS Workshop Challenges to Asian Regionalism: An ASEAN Perspective

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IDEAs-RIS WorkshopChallenges to Asian
RegionalismAn ASEAN Perspective

• Suthiphand CHIRATHIVAT
• Chulalongkorn University
• 5-6 November 2009
• New Delhi, India

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Changing Asia in Regional and Global Dynamics
Economic Outlook

• Asias economic outlook seems bright, with
  developing Asias estimated growth at 3.9 in
  2009 and 6.8 in 2010.
• Asia leads recovery, despite the global economic
  downtown.
• China and India are leading regions economic
  recovery
• Putting Asia into a unique position, but for
  how long?

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Co-movement of GDP Growth in the Asia, US, and EU
Current and Forecast by IMF
Source CEIC
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Changing Asia in Regional and Global Dynamics
Crisis is Redrawing the Map of Asias Global
Economic Influence

• A multi-polar economy less reliant on the US
  consumers will be a more stable economy
  (Zoellick)
• Crisis has accelerated a shift from west to east
• Major emerging economies like China and India
  take the lead and are becoming real partners
• Would the world now start to rebalance towards
  Asia?

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Changing Asia in Regional and Global Dynamics
Asias Role in the Global Economy

• Asias Seat at the Table of G-20
• Growing recognition in the core economic
  discussion and governance like, the World Bank,
  WTO and the IMF
• US dollar under scrutiny with an increasing
  weight of Asian currencies
• Crisis might happen again and Asia is still part
  of the global imbalances (Bernanke)

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Global imbalances remain, but shifting
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• Strong Foreign Reserves in Asia as compared to
  other developing countries
• Reserve Pooling is a sound suggested option
• The question is how to implement it

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Changing Asia in Regional and Global Dynamics
New Emphasis on Regional Strategy

• Crisis proved Asia not decoupled
• Debate on export-led growth model
• More focus on regional final demand rather than
  solely on regional production networks
• Potential rise in per capita income in all
  emerging Asian economies

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Drop In World Trade volume of goods and services
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Moving into Asian Regionalism At the Beginning

• East Asia,for long, an Empty Box
• Preferences of multilateralism
• ASEAN ? AFTA, the only RTA in operation
• Increasing cooperation and integration since the
  Asian financial crisis of 1997-98

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Moving into Asian Regionalism AFTA

• AFTA 1992 to 2010 (2015 for CMLV)
• At first, conditional MFN and partial tariff
  cutting
• Agree to go to zero (Bali II)
• Each nations sensitive lists
• Net effects each bilateral trade flows faces a
  different tariff structure

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Moving into Asian Regionalism ASEAN Economic
Community

• AEC Blueprint (2009-2015)
• AEC based on single market and productive base
• Also aims for competitive economic region,
  equitable economic development and integration
  into the global economy
• Roadmap for an ASEAN Economic Community
• Implementation, hardest part (AEC Scorecard)

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Moving into Asian Regionalism ASEAN-China FTA

• Signed in November 2004
• Nation-specific sensitive lists conditional
  MFN, so de facto 10 bilaterals
• Tariff cutting started mostly mid 2005 to zero by
  Jan 1st, 2010 for 90 of Products
• From goods to investment and services

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Moving into Asian Regionalism ASEAN-Japan FTA

• Japan-Singapore was signed in 2002
• Different agreement to AFTA and ACFTA, reads like
  European US FTAs, more structured
• Japan-Malaysia signed Dec 2005
• Soon with Indonesia, Thailand, the Philippines,
  Vietnam and Brunei
• In parallel, AJFTA with ASEAN as a whole from
  2008
• Tariff cutting, to zero by 2012

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Moving into Asian Regionalism ASEAN-ANZ FTA

• Similar to Japan-ASEAN FTA, much structured an
  broadened
• In parallel with bilaterals, like Thailand-AWZ,
  starting in 2005.
• Tariff cutting starting in 2009 to zero in 2015

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Moving into Asian Regionalism Latest initiatives
of AKFTA, AIFTA

• Similar to AC FTA, but more political
  difficulties, started later
• De facto 10 bilaterals in 2008 (AKFTA)
• Tariff cutting to start in 2010 (AIFTA)
• Investment agreement concluded for AKFTA, to
  include services as well
• More negotiations needed for ASEAN-India
  investment and services agreements

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Moving into Asian Regionalism BIMSTEC, GMS,
BIMP-EAGA

• BIMSTEC is aiming at links of countries in South
  and Southeast Asia
• Still negotiations on FTA
• More cooperation on agriculture, fishery,
  tourism, human resources, etc.
• GMS and BIMP-EAGA are sub-regional cooperation
• Infrastructure development
• Role of ADB, ASEAN (IAI)

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Moving into Asian Regionalism Country-to-Country
Bilaterals

• ASEAN individual countries have additional
  bilateral FTAs
• Singapore, the most advanced stage
• Malaysia, Thailand considered as medium high
• Indonesia, the Philippines and Vietnam, at a
  moderate level
• Others, not significant

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Defining Asian Regionalism Some Conceptual Issues

• Asian Noodle Bowl (Spaghetti Bowl a la
  Bhagwati)
• Managing the Noodle Bowl The Fragility of East
  Asian Regionalism (Baldwin (2006))
• Triggers dominos
• Where all these leading to?

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Defining Asian Regionalism Likely Outcomes

• ASEAN1, with 6 major partners
• Ad hoc nature of ACFTA, but will get done (192
  billions US in 2008, from 60 billions US in
  2002)
• Japan, bilaterals, with big ASEANs, will get done
• AJ FTA looks like opportunity for largesse, but
  basically, more GSP like
• ASEAN-ANZ FTA, also, will get done
• Finally, AK FTA and AI FTA look promising as well
  (ASEAN-India trade, 50 billions US in 2010, then
  70 billions US in 2012)

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Defining Asian Regionalism System Fragility

• Baldwin argues
• East Asias collective action problem
• Asymmetric dependence makes matters worse
• ASEAN more dependent on the conveyer belts than
  are China and Japan
• If a few conveyer belts break down, whole
  factory suffers
• Competitiveness of Japanese firms in US market
  depends on intra-regional trade
• Ditto Korean Chinese firms
• Indian ANZ firms?

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Defining Asian Regionalism Emerging Issues

• RTAs, by nature, discriminatory
• Rules of origin, tools for protection
• Overlapping RTAs, difficult adjustment for
  business
• In the case of AFTA, utilization rates are low

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Institutionalizing AsianRegionalism Needs for
Broader Regional Cooperation

• Market dynamics and increasing role of East Asia
• Consolidation of various initiatives
• Immediate concern, overlapping FTAs
• Institutionalizing possibilities, tremendous, but
  also to be realistic.

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Institutionalizing Asian Regionalism EAFTA Phase
I

• Leaders put EAFTA on the economic cooperation
  agenda during the 10th ASEAM3 Summit
• EAFTA process to process within ASEAN3 framework
• EAFTA to be of high quality
• Economic cooperation along with EAFTA

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Institutionalizing Asian Regionalism EAFTA Phase
II

• Leaders put EAFTA as an important initiative
  during the 13th ASEAN3 Summit
• Gradual and realistic strategy be pursued to
  achieve a desirable and feasible EAFTA
• Consolidating existing FTAs
• Working groups on (1) unified ROOs and (2) tariff
  nomenclature and other customs-related issues
• Negotiations to be launched by 2012, at the latest

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Institutionalizing Asian Regionalism CEPEA Phase
I

• Objectives and structure to be composed of 3
  pillars
• economic cooperation
• trade and investment facilitation
• trade and investment liberalization
• Discussion to be commenced among officials on
  cooperation and facilitation
• Necessary decision to be made regarding on FTA
• Mechanism to be developed for the private sector

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Institutionalizing Asian Regionalism CEPEA Phase
II

• Objectives and structure reaffirmed by leaders
• Study and discusses on
• concrete steps to realize CEPEA
• comprehensive framework that includes
  cooperation, facilitation and liberalization, and
  to be commenced immediately among officials.

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Impact on GDP
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Institutionalizing Asian Regionalism ASEANs
Centrality

• Role of ASEAN in the ASEAN3 and ASEAN6
• ASEANs in the drivers seat?
• Blocs top-down, whats about bottom-up?
• Upcoming challenges Whos in or out?

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Institutionalizing Asian Regionalism Latest
Initiatives

• Leaders accepted both EAFTA and CEPEA
  initiatives, still to be decided how to proceed
• In addition, more proposals added at the 4th East
  Asia Summit
• East Asia Community by Japanese PM Hatoyama
• Asia-Pacific Community by Australian PM K. Rudd