Ewing Chow Presentation

8/8/2019 Ewing Chow Presentation

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The ASEAN Economic Community

after the ASEAN CharterTrading Bloc or Blocked?

Associate Professor Michael Ewing-ChowNational University of Singapore


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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 theAEC Blueprint for the implementation of the AEC by

2015. The Declaration says that "[t]he AEC Blueprint willtransform ASEAN into a single market and productionbase, a highly competitive economic region, a region ofequitable economic development, and a region fullyintegrated into the global economy."

This presentation will consider whether the legalframeworks and institutions in ASEAN are sufficient totransform the vision of that Declaration into a reality.

Is ASEAN more than the sum of its parts or less?


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ASEAN History

Originally a security bloc to show solidarity against communistexpansion.

Backdrop of the Konfrontasi. Therefore Bangkok Declaration on 8 August 1967 emphasised

cooperation, amity and non-interference.

Different instinct than Schumans supranational European Coal andSteel 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, Japanand Korea first enunciated.

2007 ASEAN Charter and ASEAN EC Blueprint. Momentous Constitutional Moment?


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ASEAN

+3/+6

APEC

ASEAN+1

NAFTACanada

Mexico

China

Japan

India

ASEAN+1

ASEAN+1ASEAN

+1

ASEAN+1

U.S.

ChileP4

ROK

Australia

NZ

Brunei

Singapore

Thailand

Malaysia

Source: METI & MEC

Hubs and Spokes in Asia Pacific

ASEAN


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Principal Organs of ASEAN


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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 integrationmeasures.

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 economicdevelopment and reduced poverty and socio-economic disparities inyear 2020.

The ASEAN Economic Community seeks to establish ASEAN as asingle market and production base, so as to make ASEAN a moredynamic and stronger segment of the global supply chain.

3 Main Building (Stumbling?) Blocks AFTA, ASEAN Charter andAEC Blueprint


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First Block - AFTA

Launched in 1992, the ASEAN Free Trade Area(AFTA) is now in place. It aims to promote theregions competitive advantage as a single

production unit. The elimination of tariff and non-tariff barriers

among Member Countries is expected topromote greater economic efficiency,

productivity, and competitiveness. Enabling Clause Notification.

AFTA Agree First Talk After?


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Tariff Reductions

As of 1 January 2005, tariffs on almost 99 percent of theproducts in the Inclusion List of the ASEAN-6 (BruneiDarussalam, Indonesia, Malaysia, the Philippines,Singapore, and Thailand) have been reduced to no more

than 5 percent. More than 60 percent of these productshave zero tariffs.

The average tariff for ASEAN-6 has been brought downfrom more than 12 percent when AFTA started to 2percent.

For the newer Member Countries, namely, Cambodia,Lao PDR, Myanmar, and Viet Nam (CLMV), tariffs onabout 81 percent of their Inclusion List have beenbrought down to within the 0-5 percent range.


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Other non-tariff initiatives

Other major integration-related economic activities of ASEANinclude 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 telecommunicationsequipment and services, including the ASEAN TelecommunicationsRegulators 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.


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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 thefuture.

ASEAN Leaders recognise that this is an opportunity to set a clear

and ambitious long-term vision, of an ASEAN that is relevant andcompetitive, effective and credible. With the Charter, ASEAN intends to build a solid institutional

framework that will facilitate a more focused and coordinatedagenda.

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 visionarydocument, to inspire the people of ASEAN and our futuregenerations, and engage them more closely in the future of ourregion.


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Charter Timeline

Nov 2004

"Development of an ASEAN Charter" included in the Vientiane ActionProgramme (2004-2010)

Dec 2005

Kuala Lumpur Declaration on the Establishment of the ASEAN Charter-ASEAN Leaders at 11th ASEAN Summit appoint a 10-member EminentPersons' Group of senior statesmen to come up with bold and visionaryrecommendations to be included in an ASEAN Charter. Singapore'srepresentative 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 Leadersmandated a 10-member High Level Task Force on Drafting the ASEAN Charterof senior officials to prepare the draft Charter. Singapore's representative wasAmbassador-at-Large Tommy Koh.

Nov 2007

ASEAN Charteradopted at 13th ASEAN Summit in Singapore.


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Ratification of the Charter

For the 1st Asean Charter to become legally binding, it has been agreedupon that all ten member nations must ratify the Charter before the nextASEAN Summit this December 2008.

The Charter will become effective on the 30th day after the 10th "Instrumentof Ratification" has been submitted to the ASEAN Secretary-General, Dr.Surin Pitsuwan.

Member State Government RatificationDeposit of

Instrument of RatificationSigned by

Singapore Tuesday, 2007 December 18 Monday, 2008 January 07 Prime Minister

Brunei Darussalam Thursday, 2008 January 31 Friday, 2008 February 15 Sultan of Brunei Darussalam

Malaysia Thursday, 2008 February 14 Wednesday, 2008 February 20 Foreign Minister

Lao PDR Thursday, 2008 February 14 Wednesday, 2008 February 20 Prime Minister

Cambodia Tuesday, 2008 February 25 Wednesday, 2008 April 2 Cambodian King

VietNam Tuesday, 2008 March 06 Friday, 2008 March 14 President


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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 marketand production base which

is stable, prosperous, highly competitive andeconomically integrated with effective facilitation fortrade and investment in which there is free flow of goods,services and investment; facilitated movement ofbusiness persons, professionals, talents and labour; andfreer flow of capital;

6. To alleviate poverty and narrow the development gapwithin ASEAN through mutual assistance andcooperation;


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Single Market?

To most people, a single market is synonymous with a customunion which also includes not just free movement of goods but alsoof labour, services and capital.

The most famous single market, the European Union (EU) began lifeas 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 inBritain and Ireland as "the Common Market").

The abolition of internal tariff barriers was achieved in 1968. Insubsequent years little was done to move from this basic customsunion to a full single market.

The Single European Act was signed in 1986 to establish a SingleEuropean Market by 1992, by removing the barriers to freemovement of capital, labour, goods and services.

ASEAN EC will have free movement of goods, services, skilledlabour and freermovement of capital but is unlikely to be a customunion.


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Custom Union?

Unlikely because a custom union has to create acommon 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 orthat other ASEAN members will have to go downsignificantly to implement a common external tariffpolicy.

Further, Singapore will have to give up many of its FTAswith non-ASEAN partners unless they agree with all theother ASEAN partners or the preferential tariff rates areharmonised with the ASEAN common external tariffrates (thus, making the FTA superfluous at least forgoods).


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Charters Institutions

Art 7 ASEAN Summit held twiceannually 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


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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 andtourism / 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 ofskilledlabour (visas and employment passes for

professionals and skilled labour and ASEAN University Network).

In addition, the single market and production base also include twoimportant components, namely, the priority integration sectors, and food,agriculture and forestry.

S&D Treatment for CLMV including IAI. NB: AFTA ROOs at the moment is 40% regional value content.


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Tricky Bits

Competition Policy by 2015 (NB: Competition out ofDoha 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


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Implementation of Blueprint

High Level Task Force

SG to provide monitoring and reporting

Economic Committee and Summit todecide things

ASEAN Minus X can be invoked to

accelerate implementation Flexibility is pre-agreed (!?)


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Getting to the AEC

We have the vehicle ASEAN

We have the destination AEC

We have the map Blueprint Can ASEAN get there?


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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?


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Steering Wheel

Art 20.1 As a basic principle, decision-makingin ASEAN shall be based on consultation andconsensus. (ASEAN Way)

Art 20.2 Where consensus cannot beachieved, the ASEAN Summit may decide how aspecific decision can be made. (refer to Rule 1?)

Art 21.2 In the implementation of economiccommitments, a formula for flexible participation,

including the ASEAN Minus X formula, may beapplied where there is a consensus to do so. Variable Geometry?


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Engine

Art 11 and 27 Greater role of the SG inmonitoring and reporting to the ASEAN Summitregarding progress on Blueprint

Equal financial contributions of member states. In the current financial year, ASEC has been given

US$9.05 million. Thus each Member Statecontributes US$905,000 to the budget.

The ASEAN Secretariat staff now consists of SG, 2DSGs (from Cambodia and IndonesiaLao PDR and

Myanmar are next in line to nominate theirs), 60openly-recruited staff from 9 Member States (nonefrom Brunei Darussalam), and about 200 support staff(almost all are Indonesians).


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A Spare (in case of blow ups)

Art 25 Where not otherwise specifically provided,appropriate dispute settlement mechanisms, includingarbitration, shall be established for disputes whichconcern the interpretation or application of this Charterand other ASEAN instruments.

Art 26 When a dispute remains unresolved, after theapplication of the preceding provisions of this Chapter,this dispute shall be referred to the ASEAN Summit, forits decision.

Art 24.3 Where not otherwise specifically provided,

disputes which concern the interpretation or applicationof ASEAN economic agreements shall be settled inaccordance with the ASEAN Protocol on EnhancedDispute Settlement Mechanism. (implementation bynegative consensus)


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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?


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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 theattractiveness of the region.

Together we stand, divided we fall?


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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 theASEAN Summit, upon the recommendation of theASEAN Coordinating Council.

(PNG & Timor-Leste?)


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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 % increasefrom US$ 141.42 billion in 2005 to US$ 163.69 billion in 2006.

The share of intra-ASEAN trade in ASEAN total trade remainedrelatively constant with a slight increase of 24.97% in 2006 ascompared 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 in2006 was 11.55%, 11.52%, 11.43%, 9.97% and 3.73 %,respectively.


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A journey of a thousand miles

begins with a single step


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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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