Comment on “ASEAN's New Frontiers: Integrating the Newest Members into the ASEAN Economic Community”

Abstract

Pomfret (2013) is a highly informative, well-written paper and a very useful introduction to the recent economic histories of Cambodia, Laos, Myanmar, and Vietnam (CLMV) emphasizing the role of regional and subregional integration. On one of the paper's broad themes, the mix of unilateral action and involvement in broader regional and global organizations which characterized the development experiences of the traditional Association of Southeast Asian Nations (ASEAN) economies, the contrast with CLMV is striking. When the organization was founded in the 1960s, with the exception of the small emirate of Brunei, the other original ASEAN members or ASEAN5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) all were pursuing import substituting industrialization strategies. Following the examples of Taiwan and South Korea, Singapore subsequently changed tack and adopted an outward oriented approach which was then emulated by the other ASEAN members. This outward-oriented development strategy was by no means the global norm in the 1970s, but the region's openness paved the way for the development of a horizontal division of labor and the creation of the highly articulated cross-border supply chains collectively dubbed Factory Asia today. An open question is whether the ASEAN5's relationship with the private sector, specifically their openness to the large multinational enterprises from outside the region that have played such a large role in the region's supply chains, is likely to be reproduced in CLMV, or whether the latter will remain in a more defensive crouch. The tension created by the divergence in the attitudes and capacities of the old and new ASEAN members may become more acute as the organization tries to deepen its level of formal commitment while at the same time integrating the new members which are at a much lower level of development than the old members on virtually every metric. The risks are that ASEAN will adopt, but not consistently enforce, more rigorous standards, calling into question the organization's integrity, or explicitly adopt a multispeed model with derogations and exceptions. Either option poses its own risks, as the example of the European Union vividly demonstrates. Arguably, demonstration effects and emulation have been more important in Southeast Asia's contemporary economic history than in formal institutions. Nevertheless, the latter have a role. On the issue of external anchors or drivers, the paper leans toward the view that the East Asian and Trans-Pacific Partnership (TPP) tracks of integration are in opposition when, in fact, the logic of competitive liberalization could make the tracks complementary. Marrying the two agreements together could fulfill the Bogor Declaration, creating the Free Trade Area of the Asia–Pacific, and avoid “drawing a line down the middle of the Pacific” in the words of former American Secretary of State James Baker. In the short run, the East Asian track will generate larger benefits for participants due to the higher levels of existing protection and hence greater potential for liberalization. In contrast, much of the trade among members of TPP is already covered by “high quality” agreements. In each case, much of the initial benefit will come through preferential access to the US and Chinese markets, respectively, and “old ASEAN” countries such as Singapore and Malaysia, and “new ASEAN” Vietnam, that might participate in both tracks early on, would be prime beneficiaries. Ultimately, the logic of enlargement will mean that the USA and China will be among the few countries without preferential access to both large markets, and will hence face an incentive to integrate the two schemes. From this perspective, both sets of negotiations should clearly frame region-wide free trade as the ultimate objective, the dialogue between the two tracks should be intensified, and explicit efforts should be made to reduce the differences between the TPP and East Asian templates. Again, some ASEAN countries, including potentially Vietnam, could play an important bridging role in this regard.