ASEAN and Asia‐Pacific economic cooperation

Abstract

The emergence of the Asia‐Pacific Economic Cooperation (APEC) forum has introduced a new element in the global trading environment. APEC includes several regional arrangements: the ASEAN Free Trade Area (AFTA), the North American Free Trade Agreement (NAFTA) and the Australia‐New Zealand Closer Economic Relations (CER) schemes. Initially a preferential trading arrangement that had very limited practical coverage, ASEAN has forged ahead beyond liberalization of tariff policies, towards greater liberalization of trade in services and of investment policies as well. As ASEAN regional economic integration progresses, it is important to assess how this affects and is affected by the APEC process. ASEAN's liberalization measures influence the development of APEC in several ways. Through its expansion and the unilateral liberalization measures that have followed regional liberalization efforts, ASEAN is helping realize the enlargement of the market where APEC hopes to see freer and more open trade and investment policies. Correspondingly, ASEAN can play a more aggressive role in challenging other APEC economies to more quickly knock down remaining barriers to cross‐border trade and investment flows. The extent to which trade and investment policy reform in ASEAN can affect APEC depends not only on ASEAN's present and future economic weight as a market and exporter of goods, services and capital within APEC. It also depends on the economic importance of such reform to individual APEC member economies. At present, ASEAN is still a relatively small player in intra‐APEC trade. ASEAN's share of the total North American and Northeast Asian trade is similarly low. As economic integration proceeds, the ASEAN governments will have a common interest in coordinating policies and eliminating trade and investment barriers vis‐à‐vis other Asia‐Pacific economies. Probably more important than its economic role is ASEAN's political role in molding an Asia‐Pacific community. Currently, ASEAN occupies a central position in the region's security dialogue within the framework of the ASEAN Regional Forum. However, the extent of ASEAN's economic and political role within APEC will depend on ASEAN's unity and continued political stability and economic growth.