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70. ASEAN and the International Trading System
- ISEAS–Yusof Ishak Institute
- Chapter
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348 H. S. Kartadjoemena By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 70. ASEAN AND THE INTERNATIONAL TRADING SYSTEM H. S. KARTADJOEMENA Reprinted in abridged form from H. S. Kartadjoemena, “ASEAN and the International Trading System: Regional Trade Arrangement vs. the WTO”, in ASEAN Beyond the Regional Crisis: Challenges and Initiatives, edited by Mya Than (Singapore: Institute of Southeast Asian Studies, 2001), pp. 203–42, by permission of the author and the publisher. IDENTIFYING STEPS TOWARDS ASEAN REGIONAL INTEGRATION Political considerations led to the persuasive conclusion that intra-ASEAN relations must be reinforced. However, because of ASEAN’s great dependence on the international market, its overall orientation in trade must remain global. As regional efforts are being further encouraged, the ASEAN countries must also operate in the context of two other fora, APEC and the WTO. How can a more consolidated and consistent position be formulated, given these considerations? In the three decades of its existence, ASEAN has taken some important steps to intensify regional co-operation, which have been creditable political achievements in their own right. We have alluded to these accomplishments in the foregoing pages. However, these achievements have largely been in the area of dealing with third parties and in negotiating common positions. They have not included the process of regional integration, as it is conventionally defined. Even the free trade area in ASEAN has not moved far. The Exception and Exclusion Lists are very long, covering many important areas. Moreover, even if the ASEAN free trade area is fully in place, it does not replace trade with the rest of the world in terms of importance. Given these limited accomplishments, can we visualize an approach to ASEAN regional integration which accepts the primordial importance of the WTO for future ASEAN trade and growth and yet makes use of the advantage of regional integration? In this section, we shall argue for an approach which is appropriate for ASEAN. Economic Integration: The “Hard” Option There is an ambiguity about the intention of economic integration in ASEAN when one looks at the declarations and statements of ASEAN leaders and officials. The word “integration” has been used so often that the time will come when a decision needs to be made on how far the process of 070 AR Ch 70 22/9/03, 12:55 PM 348 ASEAN and the International Trading System 349 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville integration is intended to go. If we take the concept as described in the mainstream literature, we are really talking about an extensive process and moving towards a degree of intensity of interdependence which is quite far-reaching. This process has taken place in the European Union. Although members of the EU may have different views about the speed of the process, there is less doubt about where they are heading — a politically and economically unified Europe. It is necessary to know how far ASEAN wishes to go on its part. Widening and Deepening of Substantive Coverage The mainstream “classical” view of regional integration, as developed by Balassa and Scitovsky, has implications beyond trade. Beyond the stage of a free trade area, wide policy measures are required if the process is to be completed as intended. At the stage of a customs union, ASEAN would have to decide on the appropriate level of common external tariffs. Whose tariff levels would it be: the higher tariff levels of Indonesia, the Philippines, Thailand, and other countries, or the lower tariff levels of Singapore which call for the free movement of goods and services, and factors of production? How far and how fast would this process be pushed? Institutional Implications There is also the institutional aspect of economic integration. It calls for a supranational authority to make major economic decisions. In the prevailing literature, it calls for a common policy on a whole array of major economic areas. The European Union has reached that point and beyond. It is questionable whether this is what has been intended when leaders of ASEAN talk about integration. Let us take this exercise of stocktaking the policy and institutional issues a step further. Macroeconomic policies in the integrating countries must be compatible, harmonized, and eventually fully unified and attuned to the needs of the region and the realities prevailing in the countries if the objective of integration is to be achieved. Social policies of the individual countries also need to...