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.