Problems with the ASEAN Free Trade Area Dispute Settlement Mechanism and Solutions for the ASEAN Economic Community

Abstract

The Association of Southeast Asian Nations (ASEAN) is pushing for closer economic integration to maintain its competitiveness as a free trade area in the world economy. The push is to transform, by 2015, the ASEAN Free Trade Area (AFTA) into the ASEAN Economic Community (AEC).The AEC would create a single market for goods, services, and investments and a single production base for the region. Closer economic integration, however, requires an effective system for the settlement of the kind of disputes that inevitably arise from the further liberalization of trade and investment. To this end, in 2004,ASEAN adopted the Protocol on Enhanced Dispute Settlement Mechanism, which establishes a near rule-based Dispute Settlement Mechanism for the ASEAN Free Trade Area (AFTA DSM). In the decade since its establishment, the AFTA DSM has never been invoked. This article explores the limitations and constraints of the AFTA DSM and proposes an arbitration model as the ideal method of conflict resolution for ASEAN and the eventual AEC.