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Regional Trade and Bilateral Trading Agreements: The Case of ASEAN

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Written by Richard Rousseau

In a global economic system characterized by the multiplication of bilateral trade agreements, regional economic organizations risk losing their traditional rationale and becoming irrelevant. This peril has been particularly noticeable for the Association of Southeast East Asian Nations (ASEAN). Established in August 1967 by five countries – Indonesia, Malaysia, Philippines, Singapore and Thailand – this organization aims, first, to accelerate economic growth, second, promote regional peace and stability and, third, encourage active cooperation and mutual assistance on matters of common interest.

ASEAN has largely failed to achieve and support trade liberalization among its members, and this despite several expansions in the 1990s to include liberalizing “socialist” economies (Cambodia, Laos, and Vietnam) in various high-level initiatives to advance the collective commitments to liberalization. Moreover, it has a mixed record as a forum intended to foster peace and “caring societies”. ASEAN has therefore gradually lost visibility and now finds himself buried in a thick “noodle bowl” of bilateral preferential trade agreements in South East Asia.
Trying to regain momentum, ASEAN has sought to carve out a new regional role for itself through a series of initiatives aimed at developing relations with key countries in the broader region and even beyond with the “global community of nations”. In addition, the organization has been involved in a widening complex of regional schemes that were elaborated in the aftermath of the 1997 Asian financial crisis and has continued since then. Furthermore, it has signed bilateral free trade agreements with non-member countries, including China, India, Japan and South Korea (ASEAN +1 agreements). Finally, ASEAN launched even more ambitious initiatives, such as the establishment in May 2000 of ASEAN + 3, a regional financial agreement with China, Japan and South Korea.

ASEAN +3 contains the expanded ASEAN Swap Arrangement (ASA), an initiative that aims to “provide liquidity support for those experiencing balance of payments difficulties”, and several Bilateral Swap Arrangements (BASs) among participating countries. If the prospect of an East Asia Free Trade Area (EAFTA) is added to this, the effect would be to multilateralize free trade from the current sets of ASEAN + 1 agreements with China, Japan and South Korea. ASEAN + 3 now acts either as a hub or as the most natural locus of integration in Asia. However, it is difficult to foresee ​​the future of ASEAN in the context of these associations with the largest economies of the region.

In 2005 ASEAN launched the East Asian Summit (EAS), a regional leaders’ forum for strategic dialogue and cooperation on the key challenges facing the East Asian region.  EAS brings the ten ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Burma, the Philippines, Singapore, Thailand, Vietnam) around a table with Australia, China, India, Japan, New Zealand, the Republic of Korea, the United States and Russia to discuss joint projects. It builds upon all the existing ASEAN + 1 agreements to develop a Regional Comprehensive Eco­nomic Partnership (RCEP). In 2011, ASEAN leaders adopted the guiding principles and objectives of the part­nership and, more recently, refined them with the addition of a specific timetable for negotiations (with a 2015 deadline for completion).

A fundamental principle is that negotiations “will recognize ASEAN centrality in the emerging regional eco­nomic architecture”. Uncertainty, however, is still high as to the translation of these principles into practice and the expected end results.

On the one hand, there is the desire to address the problem of the “noodle bowl” of preferential trade agreements through some sort of multilateralization of benefits, but on the other, the Guiding Principles RCEP state that  “the ASEAN + 1 Free Trade Areas (FTAs) and the bilateral/plurilateral FTAs between and among participating countries will continue to exist and no provision in the RCEP agreement will detract from the terms and conditions in these bilat­eral/plurilateral FTAs between and among the participating countries”.

An established fact, however, is ASEAN’s eagerness to prove its utility in integrating the most economically dynamic and prosperous region of the world in the context of a lingering impasse in global trade negotiations at the World Trade Organization (WTO). Yet, ASEAN’s regional centrality is challenged, especially by the Trans-Pacific Strategic Economic Partnership (TPP) launched in 2006 by the P4 group of Pacific Rim countries (Chile, New Zealand, Brunei and Singapore, the last two being members of ASEAN). Larger economies have since joined this initiative, in particular the United States and Australia, but also two other members of ASEAN, Malaysia and Vietnam. Nineteen rounds of TPP negotiations have been held between March 2010 and August 2013, resulting in the outlining of a broad and high-level agreement. Since then Chief Negotiators Meetings and Ministers Meetings take place on a regular basis.

The Asia Pacific Economic Cooperation forum (APEC) has also been a major competitor to ASEAN. Facing irrelevance in the 2000s, APEC’s 21 member countries (including members of ASEAN) have tried in 2010 to rejuvenate the organization by proposing the creation of a Free Trade Area of ​​the Asia-Pacific (FTAAP).
Recent developments within ASEAN and in East and Southeast Asia more generally have taught specialists, pundits and political leaders contrasting lessons as to the evolution and the role of regional trade organizations. While they highlight their potential usefulness to resolve complex trade conflicts, contribute to convergence and limit international distortions in economic competition, they also raises a series of questions about the feasibility and implementation of solutions agreed upon by members and about the fate of regional trade organization if the wider pan-regional initiatives, such as the FTAAP, do see the light of day. The proliferation of bilateral trade agreements in the world is straining traditional regional economic organizations. Such is the case of the ASEAN, which is struggling to avoid being marginalized. From this perspective, regional economic organizations may face a choice between deep change and slow death.

 

Richard Rousseau is Associate Professor at the American University of Ras Al Khaimah, United Arab Emirates. His research, teaching and consulting interests include Russian politics, Eurasian geopolitics, inte