ASEAN free trade
The Association of Southeast Asian (ASEAN) trade liberalization process took further steps forward last week when the seven-nation grouping's economic ministers agreed to include all unprocessed farm commodities in the tariff-cut scheme by the year 2010 at the latest. The move on the farm commodities, which drew so much attention from the media, was only one of a series of measures adopted by the ministers to facilitate the ASEAN Free Trade Area (AFTA) process. In fact, the ministers advanced further in laying stronger grounds for eventual economic integration in the region.
That the agreement on farm commodities was preceded by vigorous discourses and differences of views that spilled over into the media was simply natural. Each of the seven member countries always sees the common regional vision from a point of view which reflects their own national interests. After all, ASEAN cohesion and resilience should be based on the stability and national resilience of its individual member countries. The most important thing is that once they agree on something, they abide by and implement it fully.
However, the ministers also fully realized that trade liberalization is not only a matter of tariff cuts. Tariff reductions would be rendered meaningless if other trade-related issues were not resolved. Hence, the ministers' efforts at trade facilitation measures such as the harmonization of customs services, which are crucial for trade flows, are no less important. Their initiatives on investment promotion, industrial cooperation and a dispute settlement mechanism are also essential to enhance not only free trade, but also eventual economic integration in the region.
The ASEAN Industrial Cooperation scheme, which the ministers agreed would be implemented beginning in November, will serve to strengthen economic linkages between the member countries on the basis of their respective comparative advantages. The scheme will contribute to expanding intra-ASEAN trade, since industrial products manufactured by companies set up under the scheme are automatically entitled to the 0 to 5 percent tariffs.
The agreement on the ASEAN Investment Area currently being prepared is another instrument which will enhance the complimentary relationship of the member countries' economies. The idea of the common investment area, which was adopted by the ASEAN summit in Bangkok last December, is that investors looking for business ventures in ASEAN should no longer shop around from one member country to another. The investor needs only to analyze the comparative advantages offered by each member and then chooses the country that best suits the needs of its investment project. The advantage is that the products of the investment venture will be able to freely enter other countries under Afta.
The dispute settlement mechanism is crucial for resolving any differences of views or interpretations which may take place, especially in the initial implementation of the various agreements already adopted. Disputes are unavoidable between countries, notably between members of such a regional grouping as ASEAN, in view of the high intensity of their relations and the convergence of their interests. Differences of views are not only expected, but are also part of the convergence process within ASEAN, especially when its membership expands to eventually include Laos, Cambodia and Myanmar.
On top of all those agreements and instruments already adopted, there is another area of progress worthy of note within the accelerated process of economic cooperation in ASEAN: The higher frequency of meetings of the economic ministers. The ministers now gather at least twice a year, besides their annual meeting, at what they call a "retreat" and under the Afta Council. Such a high number of discourses is warranted in the run-up to the 2003 launch of AFTA.