The Challenge to ASEAN Economic Co‑operation

Abstract

No form of economic co-operation between two or more countries can be truly meaningful unless it involves substantial market sharing and resource pooling. Market sharing allows domestic industries to free themselves from the constraints of a limited market at home. Resource pooling permits them to improve their specialization, lower their costs and enhance their competitiveness in the world market. There are four levels at which different countries can pursue meaningful economic co-operation with one another. The first is by establishing among each other a free trade area. In a free trade area, participating countries agree to dis mantle trade barriers against each other, and in effect allow each other's goods to move freely within their territorial boundaries. The desired result is that these countries' industries gain access to a larger market than they would otherwise have had, enabling them to achieve economies of scale and improve their competitive ness against industries outside the region. The region's consumers, incidentally, also benefit from the lower cost and more efficiently produced goods. Beyond the free trade area, there is the second level: the customs union. In a customs union, participating economies agree not only to trade freely with each other, just as countries do in a free trade zone, but also to impose a common external tariff wall against imports from other countries. With this arrangement, high-tariff member states, for example, Indonesia, need not worry about goods from outside the union finding their way past their shores via prior entry in low tariff member states, for example, Singapore. Moving on, we have the third level, the common market. A common market possesses all the features of a customs union, with the addition of complete labour resource mobility within the union's member states. Here, the concept of resource pooling is realized, as manpower is allocated according to where it can be most efficiently used. If the ASEAN region were to become a common market, both Brunei's labour shortage and the Philippines' unemployment problems could be simultaneously solved through unhampered manpower exports. In the long run, wage costs of all the ASEAN member states would be equalized. Finally, we have the full economic union ? the ultimate in economic integra tion. Here, the member states agree not only to trade goods and services freely with one another, but also to unify their economic policies ? trade, monetary, fiscal, and so forth. The full economic union is what most existing unions aspire to