ASEAN and the Regionalization and Globalization of World Trade

Abstract

The three decades of ASEAN's life have coincided with powerful tendencies towards regionalization and globalization of economic activity. This article (I) discusses these worldwide tendencies and their implications for ASEAN; (2) compares the dynamics of trade expansion within ASEAN with those of the European Union and the North American Free Trade Agreement territories; (3) discusses ASEAN in the context of the Asia-Pacific Economic Co-operation forum, and (4) argues that ASEAN is a successful example of economically efficient regional co-operation to achieve trade expansion. I. A Successful Regional Group ASEAN was formed amongst five states three decades ago with mainly political objectives. This was a time of recent military conflict and considerable continuing tension amongst several of ASEAN's members. It was a time of political instability on the border of the original ASEAN, in particular with the war in Indochina. And it was a time of political uncertainty within several of the ASEAN members, as they sought a firm basis for development. The political objectives were met splendidly. Gradually, objectives of economic co-operation became more prominent in ASEAN - notably in a programme of special measures to promote internal trade expansion from 1976, and with the formation of the ASEAN Free Trade Area (AFTA) from 1992. The programmes to expand trade amongst ASEAN economies prior to the formation of AFTA were generally seen as having been unsuccessful. The complementation agreements and ASEAN industrial projects of the late 1970s did not amount to much. The ASEAN trade preferences did not bite deeply, and were overtaken by multilateral trade liberalization. It was common to point to relatively modest shares of intra-ASEAN in total trade (24 per cent in 1965, 24 per cent in 1995, and lower ratios in between) as evidence of the modest importance, or the unimportance, of the region to the economy of its members. This article sets out to demonstrate that this is a false perspective. Intra-ASEAN trade has grown more rapidly than trade within either of the major regional trading blocs over these past three decades. Intra-regional trade absorbs a higher proportion of the production of the ASEAN economies than of the members of the European Union (EU) or the signatories of the North American Free Trade Agreement (NAFTA). These powerful facts have been obscured by focus on another statistic - the share of intraregional trade in total trade. This focus counts as a failure what is in reality a great achievement of ASEAN: the maintenance of rapid growth in extra-regional, and especially intercontinental, trade alongside strong expansion from a high base of trade within ASEAN. ASEAN as a regional economic arrangement is an outstandingly successful example of open regionalism, or regional co-operation to promote regional trade without discrimination against outsiders. The three decades of ASEAN's life have coincided with powerful tendencies towards regionalization as well as globalization of economic activity. Section II of this article discusses these world-wide tendencies and their implications for ASEAN. Section III compares the dynamics of trade expansion within ASEAN with those of the EU and NAFTA. Section IV discusses ASEAN in the context of the Asia Pacific Economic Co-operation (APEC) forum, and argues that ASEAN is a successful example of economically efficient regional co-operation to achieve trade expansion. It raises a few questions about how the financial problems of 1997 might affect this success. II. Regionalization and Globalization The three decades of ASEAN's existence so far have seen rapid and inexorable increase in the role of international transactions in global economic activity. There has been a tendency towards acceleration of the internationalization of economic life, especially since the mid-1980s. This has been reflected in large increases in the ratio of international trade to GDP, and even more rapid increases in the ratio of international [trade] to total investment. …