Economic Co-operation after 30 Years of ASEAN

Abstract

ASEAN has made remarkable strides in economic co-operation since its very humble beginnings. Starting with bold and innovative approaches in the late 1980s and early 1990s, ASEAN leaders began to develop more ambitious means of economic co-operation, at the same time that political/diplomatic imperatives were falling in importance. This culminated in the creation of an ASEAN Free Trade Area (AFTA) at the Fourth Summit in 1992. Since then, ASEAN has expanded coverage of AFTA, expedited the liberalization process, and has embarked on deeper regional economic integration accords. While many of these latter initiatives are only now being developed, they are indicative of the intentions of the ASEAN leaders to create a unified marketplace in a wider Southeast Asian region. I. Introduction and Overview Exactly 30 years ago, ASEAN leaders created what was to become the most vibrant regional grouping in the developing world on the eve of the new millennium. ASEAN continues to confound the critics and pessimists by reaching ever-higher levels of economic co-operation. The deepening of ASEAN economic integration, which began in 1992 with the creation of the ASEAN Free Trade Area (AFTA), is now being complemented by substantial widening: in July 1995, ASEAN's former nemesis, Vietnam, joined the grouping, and in July 1997, so did Laos and Myanmar, with Cambodia temporarily on the sidelines. Hence, ASEAN has grown to comprise all of Southeast Asia and is moving in fits and starts to reach its ultimate goal of a united, integrated Southeast Asian marketplace. To attain its current state of integration and prosperity, ASEAN has had to overcome many political/diplomatic and economic obstacles. In our March 1991 lead article of the ASEAN Economic Bulletin, we suggested that there were four major economic policy challenges facing ASEAN: First, the most effective, and in the long run the most promising, path to economic development in ASEAN is for all countries to continue to pursue trade and investment liberalization policies at the national level. ... Second, ASEAN memberstates, individually and as a group, should continue to pursue their interests at the Uruguay Round of GATT. ... Third, while ASEAN should continue to press for first-best solutions by promoting international trade and investment liberalization, ASEAN can supplement this process by expanding more vigorously its intraregional trade and investment links to pool markets and resources and stimulate economic growth.... Fourth, ASEAN can continue to explore economic co-operation agreements with its trading partners, based on the concept of open regionalism, i.e. agreements which do not cement ASEAN into various trade blocs. (Naya and Plummer 1991, pp. 271-73) We thought that this agenda was, in fact, a fairly ambitious one, and while it may seem uncontroversial today, it certainly was deemed so at the time of its writing (1989-90). ASEAN economic co-operation had not developed significantly and many scholars felt it couldn't (because of the dominance of politics in the Association) or that it shouldn't (due to the potential effects of trade diversion in a region characterized by low levels of intra-regional trade). We were even warned at this time that our policy-advising work for ASEAN officials would lose its credibility if we used the term free-trade area, for this would conjure up fears of a fledgling European Community (EC) with its strong supranational bureaucracy and common market. An additional argument against formal regional co-operation was that preoccupation with intra-ASEAN integration would detract from its efforts in the far-from-finished Uruguay Round. Instead, the ASEAN leaders exceeded these challenges; in many ways, the Fourth Summit in January 1992 went even further than what we dared recommend. Trade and investment liberalization continues to deepen in the region, and additional co-operative measures taken at the Fifth Summit in December 1995 are providing fresh momentum. …