‘Regional economic cooperation – ASEAN’

Two meetings in the last week of heads of government happened one after the other in two distant places that also claimed the schedule of our President Aquino. One was in Hawaii and the other in Bali, Indonesia.

In Hawaii, US President Barack Obama presided over the meeting of the Asia-Pacific Economic Cooperation. This is a grouping of countries along the Asian- and the North- and South-American sides of the Pacific rim. The agenda of this large grouping of countries is further economic cooperation on all fronts, especially trade and investment.

In Bali, the ASEAN summit meeting of leaders, hosted by Indonesian president Susilo Bambang Yudhoyono, took place. There are now 10 member countries in ASEAN, whereas it began as a five members just under five decades ago. On the second day of the meeting, the ASEAN leaders met with their guests – the leaders of important third countries – to their dialogue on economic and political issues affecting the region. Among the guests this ASEAN Plus meeting are the leaders of the US, China, Japan, Australia, and South Korea.

This is as good as it gets in today’s high-powered diplomacy. The heads of different governments who work in far distances converge to meet on world and regional issues face to face. Advances in transportation and communication have shrunk the world so much.

“The ASEAN Plus… feature.” A major feature of ASEAN summit meetings is the second day in which the ASEAN leaders invite the heads of governments of important countries that seek to exchange views and commitments with them. Such meetings magnify the importance of ASEAN as a trading bloc. In turn, productive meetings induce the member countries to deepen the economic cooperation among themselves.

As soon as the ASEAN countries were able to demonstrate concrete economic agreements as a group, their importance as a bloc emerged. Other important countries and groupings of countries seek new avenues to increase trade, economic and capital flows with ASEAN. This did not happen immediately. The political will to undertake community effort had to be demonstrated and, in the case of ASEAN, this happened slowly.

“ASEAN Concord as marching order.” Even though ASEAN was founded in 1967, it was only when the heads of ASEAN signed the ASEAN Concord in 1976 that economic agreements began to firm up. The ASEAN Concord gave the economic ministers the mandate to frame economic cooperation agreements within ASEAN. Soon, other countries and economic groupings began to take notice.

By the time of the 1978 Kuala Lumpur summit of ASEAN leaders, for the first time, the heads of government of the United States, Japan, and Australia participated in an ASEAN Plus meeting, forging future commitments for consultations and the possibilities of future agreements came in sight. Several more years of incremental agreements within ASEAN gradually improved the steps toward an economic community in the region.

“ASEAN Free Trade Agreement.” And then, in 1992, the ASEAN finally decided to embrace the concept of a Free Trade Area among the member countries. The ASEAN Free Trade Agreement (AFTA) foresaw a single community market in which members sold their own produce to each other without any import tariffs.

A free trade area is not like the Common Market of the European Economic Union which has only one common external tariff with the rest of the world. In a free trade area, each country would still have their own national tariff system with respect to the external world. But among the members, a common effective preferential tariff (CEPT) was to be brought down until it became zero in due time.

The ASEAN envisioned the free trade area to be realized in 2010 for the original six members and in 2015 for the newer members after 1992. The tariff system within ASEAN members was brought down through a common effective preferential tariff system before those dates.

That decision to form a free trade area was game changer for enterprises located within ASEAN member countries. It also spelled a new pattern of decision-making for other investors that were studying the region for possible investments.

The announcement of the timing of the free trade area gave sufficient indication for member nations and their enterprises to undertake adjustment for competition in the future. It was possible to identify strategic production and marketing decisions in various parts of ASEAN in an enlarging market.

“ASEAN- Plus free trade agreements.” After the AFTA was announced in 1992, other countries seeking bigger trade relations took more notice. ASEAN Plus arrangements intensified. Even as ASEAN streamlined the steps toward achieving the free trade area concept, third countries were proposing to conclude bilateral free trade agreements with ASEAN.

In due time, free trade agreements would be concluded each with Australia-New Zealand, China, India, South Korea. With Japan, it concluded a comprehensive economic partnership agreement. All these new agreements are coming into force even as the AFTA is about to begin toward full implementation as a free trade area for all member countries.

“Free trade in goods and services.” A different new development is the so-called Trans-Pacific Partnership (TPP). The concept goes beyond free trade in goods.

Pushed for sometime by the United States among Asia-Pacific Economic Cooperation countries, Japan has also decided to back up the concept. This was the agenda topic of interest in Hawaii. It would have a sobering impact on the Bali meeting. It would force the study of the issue of free trade in services within the context of ASEAN.

In fact, four members of ASEAN – Brunei, Malaysia, Singapore and Thailand – have declared their intentions to join the TPP. The heart of this economic trade agreement is that it also includes within its framework the trade and investment in services.

For the Philippines, this has been a problematic issue. If other members of ASEAN join the TPP, the Philippines would be locked out of an area of progress in this economic cooperation. There is no way for it to join it without any amendment of the constitutional economic restrictions, a topic oft-discussed here.

This makes the issue of dealing with the amendment of the constitutional restrictions all the more urgent. The economic restrictions in the 1987 Constitution include the media, advertising and in the practice of some professions. This makes it all the more imperative for the country to deal with the major issue of revising the restrictive economic features of the constitution. –Gerardo P. Sicat (The Philippine Star)

My email is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/