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The ASEAN Economic Community after the ASEAN Charter

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Title: The ASEAN Economic Community after the ASEAN Charter


1
The ASEAN Economic Community after the ASEAN
Charter
  • Trading Bloc or Blocked?
  • Associate Professor Michael Ewing-Chow
  • National University of Singapore

2
ASEAN, Quo Vadis?
  • The ASEAN Charter was signed on 20 November 2007.
  • The ASEAN members also issued a Declaration on
    the ASEAN Economic Community (AEC) with adopted
    the AEC Blueprint for the implementation of the
    AEC by 2015.
  • The Declaration says that "the AEC 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."
  • This presentation will consider whether the legal
    frameworks and institutions in ASEAN are
    sufficient to transform the vision of that
    Declaration into a reality.
  • Is ASEAN more than the sum of its parts or
    less?

3
ASEAN History
  • Originally a security bloc to show solidarity
    against communist expansion.
  • Backdrop of the Konfrontasi.
  • Therefore Bangkok Declaration on 8 August 1967
    emphasised cooperation, amity and
    non-interference.
  • Different instinct than Schumans supranational
    European Coal and Steel Commission.
  • This resulted in the ASEAN Way.
  • Bali Summit in 1976 put economics on the agenda.
  • In 1992, idea of a regional bloc formed with the
    CEPT scheme and AFTA.
  • In 2001, idea of a hub-spoke model for ASEAN
    and China, Japan and Korea first enunciated.
  • 2007 ASEAN Charter and ASEAN EC Blueprint.
  • Momentous Constitutional Moment?

4
Hubs and Spokes in Asia Pacific
Source METI MEC
ASEAN 3/6
Canada
NAFTA
China
ROK
ASEAN1
ASEAN1
Japan
ASEAN1
Mexico
U.S.
ASEAN
Thailand
Malaysia
ASEAN1
Singapore
India
Brunei
ASEAN1
NZ
Chile
P4
Australia
APEC
5
Principal Organs of ASEAN
6
The ASEAN EC
  • From the ASEAN Secretariat website
  • The ASEAN Economic Community is, as outlined in
    the 1997 ASEAN Vision 2020, the end-goal of
    economic integration measures. 
  • The goal is to create a stable, prosperous and
    highly competitive ASEAN economic region in which
    there is a free flow of goods, services,
    investment and a freer flow of capital, equitable
    economic development and reduced poverty and
    socio-economic disparities in year 2020.
  • The ASEAN Economic Community seeks to establish
    ASEAN as a single market and production base, so
    as to make ASEAN a more dynamic and stronger
    segment of the global supply chain.
  • 3 Main Building (Stumbling?) Blocks AFTA, ASEAN
    Charter and AEC Blueprint

7
First Block - AFTA
  • Launched in 1992, the ASEAN Free Trade Area
    (AFTA) is now in place.  It aims to promote the
    regions competitive advantage as a single
    production unit. 
  • The elimination of tariff and non-tariff barriers
    among Member Countries is expected to promote
    greater economic efficiency, productivity, and
    competitiveness.
  • Enabling Clause Notification.
  • AFTA Agree First Talk After?

8
Tariff Reductions
  • As of 1 January 2005, tariffs on almost 99
    percent of the products in the Inclusion List of
    the ASEAN-6 (Brunei Darussalam, Indonesia,
    Malaysia, the Philippines, Singapore, and
    Thailand) have been reduced to no more than 5
    percent.  More than 60 percent of these products
    have zero tariffs. 
  • The average tariff for ASEAN-6 has been brought
    down from more than 12 percent when AFTA started
    to 2 percent. 
  • For the newer Member Countries, namely, Cambodia,
    Lao PDR, Myanmar, and Viet Nam (CLMV), tariffs on
    about 81 percent of their Inclusion List have
    been brought down to within the 0-5 percent range.

9
Other non-tariff initiatives
  • Other major integration-related economic
    activities of ASEAN include the following
  • Roadmap for Financial and Monetary Integration of
    ASEAN
  • trans-ASEAN transportation network
  • Roadmap for Integration of Air Travel Sector
  • interoperability and interconnectivity of
    national telecommunications equipment and
    services, including the ASEAN Telecommunications
    Regulators Council Sectoral Mutual Recognition
    Arrangement (ATRC-MRA) on Conformity Assessment
    for Telecommunications Equipment
  • trans-ASEAN energy networks
  • Initiative for ASEAN Integration (IAI) focusing
    on infrastructure, human resource development,
    information and communications technology, and
    regional economic integration primarily in the
    CLMV countries
  • Visit ASEAN Campaign and the private sector-led
    ASEAN Hip-Hop Pass to promote intra-ASEAN tourism
  • Agreement on the ASEAN Food Security Reserve.

10
Second Block ASEAN Charter
  • From the ASEAN website
  • The ASEAN Charter is at the core of ASEAN's
    strategy to adapt itself to a changing regional
    landscape and the challenges of the future.
  • ASEAN Leaders recognise that this is an
    opportunity to set a clear and ambitious
    long-term vision, of an ASEAN that is relevant
    and competitive, effective and credible.
  • With the Charter, ASEAN intends to build a solid
    institutional framework that will facilitate a
    more focused and coordinated agenda.
  • This will be supported by a rigorous legal
    framework that will reinforce ASEAN's cooperation
    and commitments in all areas.
  • At the same time, we are working to make the
    Charter a visionary document, to inspire the
    people of ASEAN and our future generations, and
    engage them more closely in the future of our
    region.

11
Charter Timeline
  • Nov 2004
  • "Development of an ASEAN Charter" included in the
    Vientiane Action Programme (2004-2010)
  • Dec 2005
  • Kuala Lumpur Declaration on the Establishment of
    the ASEAN Charter - ASEAN Leaders at 11th ASEAN
    Summit appoint a 10-member Eminent Persons' Group
    of senior statesmen to come up with bold and
    visionary recommendations to be included in an
    ASEAN Charter. Singapore's representative was DPM
    S Jayakumar.
  • Jan 2007
  • EPG submits its report to the 12th ASEAN Summit.
  • Cebu Declaration on the Blueprint for the ASEAN
    Charter - ASEAN Leaders mandated a 10-member High
    Level Task Force on Drafting the ASEAN Charter of
    senior officials to prepare the draft Charter.
    Singapore's representative was Ambassador-at-Large
    Tommy Koh.
  • Nov 2007
  • ASEAN Charter adopted at 13th ASEAN Summit in
    Singapore.

12
Ratification of the Charter
  • For the 1st Asean Charter to become legally
    binding, it has been agreed upon that all ten
    member nations must ratify the Charter before the
    next ASEAN Summit this December 2008.
  • The Charter will become effective on the 30th day
    after the 10th "Instrument of Ratification" has
    been submitted to the ASEAN Secretary-General,
    Dr. Surin Pitsuwan.

13
The Charters Economic Purposes
  • Art 1 of the Charter
  • The Purposes of ASEAN are
  • 2. To enhance regional resilience by promoting
    greater political, security, economic and
    socio-cultural cooperation
  • 5. To create a single market and production base
    which is stable, prosperous, highly competitive
    and economically integrated with effective
    facilitation for trade and investment in which
    there is free flow of goods, services and
    investment facilitated movement of business
    persons, professionals, talents and labour and
    freer flow of capital
  • 6. To alleviate poverty and narrow the
    development gap within ASEAN through mutual
    assistance and cooperation

14
Single Market?
  • To most people, a single market is synonymous
    with a custom union which also includes not just
    free movement of goods but also of labour,
    services and capital.
  • The most famous single market, the European Union
    (EU) began life as the European Coal and Steel
    Community in 1951 (Treaty of Paris (1951)) and
    went on to become the European Economic Community
    (EEC) in 1957 (Treaty of Rome (1957)) (when it
    become known in Britain and Ireland as "the
    Common Market").
  • The abolition of internal tariff barriers was
    achieved in 1968. In subsequent years little was
    done to move from this basic customs union to a
    full single market.
  • The Single European Act was signed in 1986 to
    establish a Single European Market by 1992, by
    removing the barriers to free movement of
    capital, labour, goods and services.
  • ASEAN EC will have free movement of goods,
    services, skilled labour and freer movement of
    capital but is unlikely to be a custom union.

15
Custom Union?
  • Unlikely because a custom union has to create a
    common external tariff policy.
  • Singapore has an almost zero tariff policy (only
    beer, stout, samsu and medicated samsu c.f.
    excise tax).
  • This means that Singapores tariffs will have to
    go up or that other ASEAN members will have to go
    down significantly to implement a common external
    tariff policy.
  • Further, Singapore will have to give up many of
    its FTAs with non-ASEAN partners unless they
    agree with all the other ASEAN partners or the
    preferential tariff rates are harmonised with the
    ASEAN common external tariff rates (thus, making
    the FTA superfluous at least for goods).

16
Charters Institutions
  • Art 7 ASEAN Summit held twice annually to
    make decisions
  • Art 8 ASEAN Coordinating Council
  • Art 9 ASEAN Economic Committee Council
  • Art 11 A DSG for Economic Community
  • Art 12 Permanent Representatives to ASEAN

17
Third Block ASEAN EC Blueprint
  • Along with the Charter, ASEAN leaders also
    adopted the AEC Blueprint.
  • Blueprint Para 9. An ASEAN single market and
    production base shall comprise five core
    elements
  • (i) free flow of goods (tariffs/NTBs eliminated
    ROOs and TF improved to create single production
    base)
  • (ii) free flow of services (particularly air
    transport, e-ASEAN, heath care and tourism /
    MRAs)
  • (iii) free flow of investment (AIA and ASEAN
    IGA)
  • (iv) freer flow of capital (ASEAN Capital Market
    Development and Integration) and
  • (v) free flow of skilled labour (visas and
    employment passes for professionals and skilled
    labour and ASEAN University Network).
  • In addition, the single market and production
    base also include two important components,
    namely, the priority integration sectors, and
    food, agriculture and forestry.
  • SD Treatment for CLMV including IAI.
  • NB AFTA ROOs at the moment is 40 regional value
    content.

18
Tricky Bits
  • Competition Policy by 2015 (NB Competition out
    of Doha Single Undertaking)
  • Consumer Protection
  • High Level of IPRs including accession to Madrid
    Protocol where possible
  • Infrastructure Development
  • Transport Linkages
  • Energy Cooperation
  • Mining Cooperation
  • Double Taxation Agreement by 2010
  • Biggest Tricky Bit Myanmar

19
Implementation of Blueprint
  • High Level Task Force
  • SG to provide monitoring and reporting
  • Economic Committee and Summit to decide things
  • ASEAN Minus X can be invoked to accelerate
    implementation
  • Flexibility is pre-agreed (!?)

20
Getting to the AEC
  • We have the vehicle ASEAN
  • We have the destination AEC
  • We have the map Blueprint
  • Can ASEAN get there?

21
Is the vehicle good enough?
  • Does the ASEAN vehicle have
  • a steering wheel,
  • an engine, and
  • a spare tire?
  • Does it have
  • a decision making institution,
  • a monitoring institution and
  • an dispute settlement institution
  • c.f. European Community?

22
Steering Wheel
  • Art 20.1 As a basic principle, decision-making
    in ASEAN shall be based on consultation and
    consensus. (ASEAN Way)
  • Art 20.2 Where consensus cannot be achieved,
    the ASEAN Summit may decide how a specific
    decision can be made. (refer to Rule 1?)
  • Art 21.2 In the implementation of economic
    commitments, a formula for flexible
    participation, including the ASEAN Minus X
    formula, may be applied where there is a
    consensus to do so.
  • Variable Geometry?

23
Engine
  • Art 11 and 27 Greater role of the SG in
    monitoring and reporting to the ASEAN Summit
    regarding progress on Blueprint
  • Equal financial contributions of member states.
  • In the current financial year, ASEC has been
    given US9.05 million.   Thus each Member State
    contributes US905,000 to the budget.
  • The ASEAN Secretariat staff now consists of SG, 2
    DSGs (from Cambodia and IndonesiaLao PDR and
    Myanmar are next in line to nominate theirs), 60
    openly-recruited staff from 9 Member States (none
    from Brunei Darussalam), and about 200 support
    staff (almost all are Indonesians).

24
A Spare (in case of blow ups)
  • Art 25 Where not otherwise specifically
    provided, appropriate dispute settlement
    mechanisms, including arbitration, shall be
    established for disputes which concern the
    interpretation or application of this Charter and
    other ASEAN instruments.
  • Art 26 When a dispute remains unresolved, after
    the application of the preceding provisions of
    this Chapter, this dispute shall be referred to
    the ASEAN Summit, for its decision.
  • Art 24.3 Where not otherwise specifically
    provided, disputes which concern the
    interpretation or application of ASEAN economic
    agreements shall be settled in accordance with
    the ASEAN Protocol on Enhanced Dispute Settlement
    Mechanism. (implementation by negative consensus)

25
ASEAN Proton or Porsche?
  • ASEAN Way?
  • Considering the historical backdrop, the best one
    could hope for?
  • Better for our culture?
  • Does it matter that it does not look like the EU,
    so long as the vehicle takes us there?

26
Fuel
  • As of 2006, the ASEAN region has
  • a population of about 560 million,
  • a total area of 4.5 million square kilometers,
  • a combined GDP of almost US 1,100 billion,
  • and a total trade of about US 1,400 billion.
  • Facing competition for FDI from India and China.
  • Increasingly manufacturers prefer a vertically
    integrated manufacturing chain.
  • Reduced transactional costs will add to the
    attractiveness of the region.
  • Together we stand, divided we fall?

27
Multilateralising ASEAN
  • Art 6
  • 2 Admission shall be based on the following
    criteria
  • (a) location in the recognised geographical
    region of Southeast Asia
  • (b) recognition by all ASEAN Member States
  • (c) agreement to be bound and to abide by the
    Charter
  • and
  • (d) ability and willingness to carry out the
    obligations of Membership.
  • 3. Admission shall be decided by consensus by the
    ASEAN Summit, upon the recommendation of the
    ASEAN Coordinating Council.
  • (PNG Timor-Leste?)

28
The New Economic Landscape
  • From ASEAN website
  • For 2006, total ASEAN exports expanded by 16.5
    from US 650.63 billion in 2005 to US 758.04
    billion in 2006.
  • Intra-ASEAN exports increased from US 164.06
    billion in 2005 to US 189.12 billion in 2006, up
    by 15.3.
  • The growth in intra-ASEAN imports registered a
    15.8 increase from US 141.42 billion in 2005
    to US 163.69 billion in 2006. 
  • The share of intra-ASEAN trade in ASEAN total
    trade remained relatively constant with a slight
    increase of 24.97 in 2006 as compared with 24.83
    in 2005 .
  • Japan, the US, the European Union, China and
    Korea continued to be ASEANs largest trading
    partners. The share of ASEAN trade (exports
    imports) with these countries to overall ASEAN
    trade in 2006 was 11.55, 11.52, 11.43, 9.97
    and 3.73 , respectively.

29
A journey of a thousand miles begins with a
single step
30
Everything is for the best for man lives in
the "best of all possible worlds." Pangloss, in
Voltaires Candide
An optimist thinks this is the best of all
worlds. A pessimist fears the same may be true.
Doug Larson
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