A trade pact between the U.S. and Asean Edgardo Espiritu Philippine News Online
November 03, 2006
A significant event took place last August that was hardly noticed in the local press. The United States and the Association of Southeast Asian Nations (Asean) signed a landmark agreement in Kuala Lumpur on August 25 – the Trade and Investments Framework Arrangement (Tifa), which is seen by many as a precursor to a full FTA (free-trade agreement) between the U.S. and Asean.
Although U.S. trade representative Susan Schwab and the Asean economic ministers pledged their continued support to the WTO process and their commitment to put the Doha Development Round back on track, many observers saw this event as another case of regionalism filling the gaps left by the failure of multilateralism.
The failure of the Sixth WTO Ministerial Conference in Hong Kong to reach agreement on the issues set under the Doha Round set back prospects for a freer, rational, and equitable world trading order yet again, particularly on agricultural products. Because of declining confidence in the WTO process, many countries and regional groupings have been entering increasingly into bilateral and regional trade agreements.
In the region, for instance, the Asean Free-Trade Area (Afta) among the six original Asean members by 2010, with the other four members expected to join by 2015, will culminate in an Asean Economic Community by 2020. The Afta with China, its agreed-upon framework with Japan, and a finalized framework with India will also further support the integration of Asean within itself and the rest of Asia. Hopefully, these regional trade agreements will eventually facilitate the pursuit of global integration under the WTO.
As its trade representative noted, the U.S. considers Asean high priority, not just for commercial ties but also its overall geopolitical interests and commitments. Asean has certain intrinsic strategic advantages that continue to give it a potentially key role in global economics and politics—its strategic location as a gateway to mainland Asia, a bridge between the rich East Asian countries and South and Central Asia, including China and India; its huge consumer market, with a population of 560 million (a large portion armed with significant and increasing purchasing power); its relatively well trained and adaptable human resource pool; and its rich primary resources like oil and gas, wood products, crops, and fisheries.
Despite these advantages, however, there has not been a shortage of challenges for Asean. It was the epicenter of the financial crisis in the late 1990s. Some of its members are oil-producing nations, but it has been hit hard by rising energy price as a whole. Of late it has also suffered much from highly devastating natural calamities.
But one of the biggest challenges it has yet to address, according to the Asean Competitiveness Study of 2003 that Asean itself commissioned, is its waning economic competitiveness vis-à-vis its emergent neighbors, particularly China and India and the rest of the world. Apart from the fact that Asean has recently been expanding its membership to relatively less developed members that may have more limited ability to adjust to requirements of global competition, one reason cited for the region’s declining competitiveness is its “fragmented markets” – i.e., the absence of a single Asean market.
With AFTA’s recent successes, however – its liberalization moves outpacing WTO and the aforementioned free-trade initiatives with its neighbors – Asean has shown willingness and ability to integrate not only within itself but also with the rest of Asia and the global community. Asean is in fact now seen as a leading light in regional economic integration.
The Tifa between the U.S. and Asean recognizes this well. This arrangement will serve as the platform for further deepening and broadening of U.S.-Asean trade and investment relations. The Tifa establishes a formal ministerial dialogue to address issues, coordinate on regional and multilateral trade, and undertake a work plan to support regional integration and help build on already strong trade and investment relations between them. Asean is the U.S.’s fourth largest trading partner, with $153 billion in total trade between them as of 2005.
There is a growing realization in the international community of a gradual shifting of global economic power from west to east. It may be expected that the U.S., still the world’s biggest economy, is among those who most keenly recognize and understand this development.
Whatever the U.S.’s main intention in its new pact with Asean – whether to use the latter as a counterpoint to the emerging global economic powers in the region, to keep its influence, or to tap into the dynamic and growing economic opportunities the region offers— it has made one thing clear: Asean continues to be geopolitically important. The new pact, and the free-trade relations likely to eventually emanate from it, will not only be mutually beneficial to the two parties but also to the global economy.
