AFTA and MERCOSUR at the Crossroads: Security, Managed Trade, and Globalization

Abstract

If I had a billion US dollars I suspect I too would be very committed to a fully globalized world without any barriers and without any constraints on what I can do with my money and how I can make even more money. -- Mahathir Mohamad, Globalization and the New Realities (Kuala Lumpur: Pelanduk Publications, 2002), p. 35. The World After 11 September 2001 In early 2002, the collapse of the Argentine neoliberal economy almost wrecked the Common Market of the South (MERCOSUR). The heightened global campaign against the al-Qaeda and Taliban-sponsored terrorism in the Pakistan-Afghanistan theatre, the Middle East, and now in Southeast Asia has deeply lacerated the fragile unity of the Association of Southeast Asian Nations (ASEAN) and has cast doubts about the viability of the long-awaited birth of the ASEAN Free Trade Area (AFTA). (1) The election of a leftist union leader to the presidency of Brazil late in 2002 has fortified the xenophobic nationalist-populist opposition to neoliberalism in Latin America and has questioned the MERCOSUR's ability to revive the moribund Argentina. Earlier, the North American Free Trade Agreement (NAFTA) helped Mexico to recover from its peso meltdown of 1994-95, but ASEAN has failed to do the same for Indonesia, Thailand, and Malaysia after the 1997-98 crisis. The bombing in Bali, Indonesia, on 12 October 2002 has exposed the ASEAN countries to the seeming invincibility of the home-grown Islamic radicalism, now firmly linked to the Middle Eastern, Pakistani-Afghan, and Southern Philippine varieties. The movement, which has become global, has been seeking to destroy at least four of the five linchpins of ASEAN and supplant them with a single, unified Islamic nation (Darul Islam). (2) This is a globalization, politico-religious and even ethnocentric, that Southeast Asia did not anticipate a few years ago. Authorities in Singapore, Malaysia, the Philippines, and Indonesia have stepped up the containment strategy by policing and arresting Islamic radicals. Security has once again become the principal driver that has replaced the regional growth and development strategy. Not since the Vietnam War has Southeast Asia been confronted with such a divisive force that can potentially render ASEAN/AFTA useless and fragmentary. The objective of this article is to argue that the security concerns in Southeast Asia after 11 September and the crumbling promise of neoliberalism in South America will effectively prevent the regions from realizing their dream of building the next level of growth-generating regional markets. In Latin America, the peril is the allure of the nationalist-populist and dirigiste past, while in Southeast Asia the clash between Islamic and non-Islamic political forces seems more than real. Security issues at home and abroad have diverted much of the attention and resources from the ASEAN/AFTA project, while the intense search for a new domestic political economy model by Argentina and Brazil will postpone any supranational project of MERCOSUR for a while. Problems with Small Regional Free Trade Arrangements (3) For the past four decades, the world has witnessed four different types of regional free trade agreements or regional market arrangements in the making: the union of mixed economies practising at once both neomercantilist and neoliberal political economy strategies, as in the European Union (EU); the socialist economies of the former Warsaw Pact countries in Eastern Europe; and a group of neomercantilist, state-driven economies like ASEAN and quasi-neoliberal MERCOSUR, both with an industrial policy and managed trade practices; and finally, the club of neoliberal and quasi-neoliberal countries like NAFTA with regulated but open free market systems. (4) The first (the EU) has become a viable external tariff union and free trade regional market with a single currency, a host of co-ordinated regionwide public policies in place, and an increasing proclivity to neoliberalism. …