Bridges Weekly Trade News Digest • Volume 13 • Number 8 • 4th March 2009
ASEAN Pushes for Deeper Integration, Signs FTA with Australia, New Zealand
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The Association of Southeast Asian Nations signed a free trade deal with Australia and New Zealand and announced plans to accelerate progress toward an EU-style trading bloc at an annual summit in Thailand last week.
Gathering at the Thai beach resort Hua Hin from 27 February to 1 March for ASEAN’s 14th summit, leaders from the 10 countries that comprise the regional coalition also renewed their commitment to keeping trade lines open amidst the global economic crisis.
The free trade deal with Australia and New Zealand, which was signed on 28 February and will take effect in December, will be one of Asia’s largest trade agreements. The pact is projected to increase the flow of goods and services among the signatories by US$ 48 billion over the next decade.
The deal will reduce or do away with tariffs on cars, coffee, vegetables, dairy and minerals over a period of 12 years. The agreement also covers investment, competition policy, electronic commerce, and trade in the services sector, including financial services and telecommunications.
The agreement “powerfully demonstrates Australia’s – and the region’s – strong commitment to opening up markets in the face of this crisis,” Australian trade minister Simon Crean said Friday.
“Such a move is even more essential in these times of economic difficulties, when interdependence, cooperation, and openness are increasingly crucial to our economies and when paving the way for businesses to reap tangible benefits is vital,” Singapore trade minister Lim Hng Kiang said, Bloomberg reported.
Thailand and Malaysia, both of which depend heavily on exports, have been particularly hard hit by the economic crisis. Exports from both countries fell by roughly 25 percent in January from a year earlier, marking three months in a row of double-digit drops for Thailand.
In addition to the New Zealand/Australia deal, ASEAN has also negotiated trade pacts with China, Japan, and South Korea. Final approval of a pending trade deal with India was postponed in early February, after New Delhi requested a delay in its implementation.
Talks are ongoing toward a bloc-to-bloc trade deal with the EU, although slow progress in the negotiations has led some to speculate that liberalisation should be pursued at a bilateral level, rather than a regional one.
But the trade minister from Indonesia, ASEAN’s largest ASEAN economy, refuted that position last week.
“We still maintain that if there’s going to be an ASEAN-EU FTA then it has to be region to region. ASEAN has not changed on that position,” Indonesian Trade Minister Mari Pangestu said in an interview with Agence-France Presse.
“If some countries are going to be approached for bilaterals, that’s another issue…that is their right to do it,” Pangestu said. “But I don’t think we want to have a situation where they negotiate bilaterally with only a few and then try to add it up for that becoming an ASEAN-EU [deal].”
ASEAN Secretary-General Surin Pitsuwan said in August last year that a free trade deal with the EU is “probably one of the most challenging agreements that we are negotiating.”
Indeed, little progress has been made since free trade talks between the two blocs were launched in May 2007 (see Bridges Weekly, 9 May 2007, http://ictsd.net/i/news/bridgesweekly/7589/). Although Pitsuwan has declined to offer any explanation for the lack of movement, some observers say that the fact that military-ruled Myanmar is an ASEAN member and thus would be part of the trade deal poses a challenge for the talks.
Leaders press for deeper regional and multilateral integration
Continuing the momentum generated with the signing of the ASEAN charter in December, ASEAN leaders at last week’s summit agreed on a ‘roadmap’ for the creation of an integrated economic community, without a common currency, by 2015. But analysts say that the member countries still need to make deep concessions in terms of national sovereignty before such a goal can be realised.
Addressing the ongoing economic crisis, the ASEAN leaders called for “bold and urgent reform of the international financial system,” and stressed the importance of “standing firm against protectionism” and intensifying efforts to conclude a Doha Round trade deal at the WTO.
“We urged all Members of the World Trade Organisation, especially the major players, to expeditiously reengage and exercise flexibility to bring about an early conclusion of the Round,” the leaders said in a joint declaration. “We believe that an early conclusion to the modalities negotiations, and thereafter, the Doha Round, would help to restore confidence and growth in the global economy.”
Echoing recent statements made by WTO Director-General Pascal Lamy, the leaders said that a Doha Round deal would effectively serve as a “’stimulus package’ at a multinational level” to help countries weather the economic crisis.
In another move in response to the ongoing financial turmoil, ASEAN finance ministers meeting the week before the summit agreed to increase a regional emergency fund from US$ 80 billion to US$ 120 billion. The funds will be used to provide loans to member countries in need. Most of the additional money will be supplied by non-ASEAN countries China, Japan, and South Korea.
The ASEAN region has a combined GDP of US$ 2 trillion and a population of 570 million, more than that of either the EU or the member countries of NAFTA – Canada, Mexico and the US.
The ten ASEAN members include Brunei Darussalam, Cambodia, Indonesia, Lao, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The regional grouping was founded in 1967.
Last week’s meeting was the group’s first official summit since the enactment in December of the ASEAN charter, which established the group as a legal entity (see Bridges Weekly, 17 December 2008, http://ictsd.net/i/news/bridgesweekly/36580/).
ICTSD reporting; “ASEAN wants EU talks as group,” AGENCE-FRANCE PRESSE, 1 March 2009; “ASEAN, armed with new charter, remains far from EU dream,” BLOOMBERG, 2 March 2009; “ASEAN, Australia, New Zealand, sign free-trade deal,” BLOOMBERG, 27 February 2009; “Slump in exports, output mean more Thai GDP pain,” REUTERS, 27 February 2009; “Economics May Overshadow Human Rights, Burma at ASEAN Summit,” VOA NEWS, 26 February 2009.
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Ultimetely will be EAS East Asia Summit/ the Great East Asia Free Trade Area. ie Asean+3+Cer. This free trade area has to be followed with the enlargement of Chiang May Initiative capitalization. a mini IMF has to be in its agenda for this region.Intense coordination among the Central Banks must take place soonest. The weaknesess of Asean+3 so far there is no a real primemovers/leaders of the region.EU has Sarkozy and German Prime Minister as the leader of the region. With the Autralia and New Zealand joining the the Great East Asia FTA,I expect will emerge leader/s of the region. This establishment is an unpresidented event where by the east cultutre met with wertern cultutre in a form of FTA.I beliee it will create a positive synergi.