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75. APEC and ASEAN: Complementing or Competing?
- ISEAS–Yusof Ishak Institute
- Chapter
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APEC and ASEAN: Complementing or Competing? 373 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 75. APEC AND ASEAN Complementing or Competing? MOHAMED ARIFF Reprinted in abridged form from Mohamed Ariff, “APEC and ASEAN: Complementing or Competing?”, in APEC: Challenges and Opportunities, edited by Chia Siow Yue (Singapore: Institute of Southeast Asian Studies, 1994), pp. 151–74, by permission of the author and the publisher. THE ROLE OF ASEAN IN APEC The establishment of APEC in 1989 itself was a testimony to the growing interdependence of the Asia-Pacific economies. Increased economic interdependence implies increased friction, and regional issues call for regional solutions. Hence the need for a Pacific body that would serve as a forum for airing grievances, discussing issues of common interest, seeking amicable solutions for bilateral problems without adversely affecting third countries, and undertaking studies for mutual benefits, exchanging information, and providing early warning signals. It is not difficult to sell such a loosely structured organization with such meaningful objectives. It is no wonder that APEC membership has grown from twelve intially to fifteen in 1991 with the admission of China, Hong Kong, and Taiwan, and subsequently to eighteen with the admission of Mexico and the PNG in 1993 and Chile in 1994. And, there are a few more in the queue, including Peru, waiting to be ushered in. Will APEC and ASEAN compete with or complement each other as institutions? Will APEC render ASEAN irrelevant? Much will depend on how APEC will evolve itself and how ASEAN will play its cards. Without a doubt, the ASEAN countries have much to gain from APEC not only because the Asia-Pacific region is economically important for them in terms of trade and investment flows, as was seen, but also because ASEAN itself has lost some clout in the aftermath of the end of the Cold War. It is no secret that ASEAN was formed primarily for security reasons in the midst of the Cold War in 1967. It was for strategic reasons that ASEAN had received much attention and support from the major powers, including the United States. Now that the Cold War is over and geopolitical equations have changed dramatically , ASEAN faces the danger of being ignored by the key players. It is in this sense that APEC is timely for ASEAN, especially since APEC includes nearly all the Dialogue Partners of ASEAN. APEC provides a forum 075 AR Ch 75 22/9/03, 12:56 PM 373 374 Mohamed Ariff By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville for the ASEAN countries to take a common position on regional issues so that they can continue to enjoy the bargaining power of yester years. However, some caveats are in order. APEC will complement ASEAN only if the former will remain a loosely structured organization . A highly institutionalized APEC will be antithetical to the philosophical underpinnings of ASEAN. The real value of ASEAN lies in the non-economic sphere, and economic co-operation is seen only as a means but not as an end. ASEAN has carefully avoided tightly knit intra-regional trade and investment arrangements that would have caused severe distortions with serious cost implications. The ASEAN countries have traditionally been tradedependent , open economies. They owe much of their prosperity and progress to the open multilateral trading system. It is in their interest to ensure that multilateralism is not usurped by regionalism. Even the ASEAN Free Trade Area (AFTA) initiative1 is aimed not at increasing intraASEAN trade but at rendering ASEAN products internationally competitive. It is hoped that the AFTA exercise will strengthen ASEAN’s extra-regional economic ties. Intra-ASEAN trade accounts for only about one-fifth of the total trade of the ASEAN countries, It is of relevance to note that this share had declined from 19.7 per cent in 1985 to 17.7 per cent in 1990, despite preferential trading arrangements (Ariff 1993). The recent increase in the share of intra-ASEAN trade may be attributed mainly to unilateral trade liberalization undertaken by the ASEAN countries outside the ASEAN framework. It is noteworthy that these countries, AFTA notwithstanding, have their own agenda for unilateral trade liberalization. For example, tariffs in the Philippines are to be reduced under the Executive Order (E.O.) 470 to four levels of tariff rates, that is, 3 per cent, 10 per cent, 20 per cent, and 30 per cent, by 1995 (Alburo 1994). Similarly...