Should ASEAN endorse free trade plan?

Should ASEAN endorse free trade plan?

By Makmur Keliat

JAKARTA (JP): Where is APEC headed? For some, such as the
recent proposal submitted by the Eminent Persons Group (EPG)
indicates, APEC is expected to be something more than merely a
consultative forum projected as a free trade area. On the grounds
that APEC will minimize the possibilities of unilateral
protectionist action by the European Community with a view to
obtaining economic benefits such as increased trade and capital
flows, they have strived to engineer the ground reality by
putting forth self-fulfilling appraisals. This article attempts
to show that their prescriptions should not be taken for granted.
There are three primary reasons as to why we have to display
extreme caution about their proposed ideas.

First, there has been no empirical evidence to indicate that
the remarkable economic growth of East and Southeast Asian
countries was spurred by a regional free trade scheme. In fact,
the success story of impressive industrial and export growth of
the countries in the region can be mainly attributed to several
economic measures taken at a domestic level -- such as
controlling labor unions, creating an attractive environment for
foreign investment through tax breaks, and relaxing the grip on
foreign exchange control -- combined with a strong reliance on
the benefits offered by the multilateral trade mechanism of GATT.

On account of these past records, accordingly, it is not a
far-fetched suggestion to continue relying on the recent Marakesh
agreement of GATT rather than heading for an uncertain situation.

If any, APEC should only be conceptualized as the second-best
strategy, meaning that the main objective of organization would
be to lobby other countries to keep their faith in the benefits
of international free trade rather than being committed to an
exclusive regional free trade. In addition, the existing economic
indicators showing discrepancies in income per capita, different
stages of industrialization and a variety of regulations among
member countries, will result in mounting hurdles and costs to
lead and establish APEC as a free trade area. It is likely that
if the idea of a free trade area is imposed and realized without
taking into account the aforementioned economic distinctions, the
weaker countries would harbor misgivings about the sincerity of
the stronger ones in the sense that they may have fears that
their economic interests will be marginalized.

Secondly, it seems necessary to underscore the fact that
American interests in economic regionalism are not only motivated
by economic considerations. Some analysts have suggested other
significant motives, namely its traditional zeal to mold "Asia
into the American wish". From an historical vantage point, it has
always been America's quest -- conducted through regional
framework -- to regulate Asian practice and regulation in line
with their game rules. This eagerness, however, has been
manifested through different fashions.

Before the dissolution of the Soviet Union such zeal was
displayed through the establishment of defense cooperation
against communism, like the Southeast Asia Treaty Organization
(SEATO), and following the end of the Cold War the intention is
desperately being executed through regional economic cooperation,
particularly at a time when the American economical power is
declining.

It is difficult to say with certainty whether America's deep
rooted objective could be realized. Certainly several slightly
emotional statements have been made by some leading Asians
in APEC countries saying that the Asian way of life is culturally
distinct from that of America.

Irrespective of this stance, it is noteworthy to put forth two
interesting facts. First, it was a Japanese, not an American, who
initially pioneered the idea of free trade in the Asian-Pacific
region. Known as a distinctive theory coming out from "Asian
land", Akamatsu Kaname and his intelligent pupil, Kojima Kyoshi,
have built "the theory of flying geese".

According to this line of thinking, increased economic
contacts among the entire Asia Pacific countries through a free
trade mechanism -- regardless of whether they belong to developed
countries (shensinkoku) -- newly rising countries (shinkookoku)
or developing countries (kooshinkoku) -- in a cyclical process
will accelerate industrial development of the two latter groups
of countries. Second, Kojima, however, does not suggest an
exclusive free trade bloc in a view to speed up the economic
interaction. Indeed, his idea of the interaction should be
evolved and arranged through a loosely organized pluralistic
community.

It is based on the theory that Kojima in 1965 mooted an idea
of establishing "Pacific Free Trade Area". Discussion on economic
cooperation in the Pacific subsequently mushroomed as other
countries have displayed positive responses to the idea. Several
organizations were therefore established. It was initiated by an
international conference of Pacific Trade and Development
(PAFTAD) in Tokyo in 1967, followed by the creation of Pacific
Economic Cooperation Conference (PECC) in 1980, and Asia Pacific
Economic Cooperation in 1989. Keeping this historical backdrop in
mind, it is not an exaggeration to point out that the question of
the APEC format in future, to a large extent, will be determined
by compromise between the "Asian value system" and the "American
game rules".

Third, there will be serious consequences for ASEAN with
regard to its existence if APEC is endorsed as an exclusive trade
bloc. As ASEAN has decided to set up Free Trade Area (AFTA), a
question arises here: what is the relevance of AFTA if APEC is
led to achieve the same objective? This will further question
ASEAN's existence as a regional organization for economic
cooperation. There is no doubt that ASEAN will continue to exist
considering its remarkable contribution and success in non-
economic aspects such as regional stability through containing
disputes among the members. Nevertheless, there are two possible
impacts which need to be anticipated due to the existence of
ASEAN and APEC.

The first possibility is that ASEAN will continue to move into
a trade bloc but at the same time it will be put into a larger
trade bloc of APEC. The second one is that ASEAN will put more
emphasis on security, political and cultural cooperation while
efforts for economic cooperation within the ASEAN framework will
be subdued.

The writer is a Ph.D candidate at the School of International
Studies, Jawaharlal Nehru University, New Delhi, India.