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80. ASEAN Policy Responses to North American and European Trading Agreements
- ISEAS–Yusof Ishak Institute
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394 Gordon P. Means By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 80. ASEAN POLICY RESPONSES TO NORTH AMERICAN AND EUROPEAN TRADING AGREEMENTS GORDON P. MEANS Reprinted in abridged form from Gordon P. Means, “ASEAN Policy Responses to North American and European Trading Agreements”, in New Challenges for ASEAN: Emerging Policy Issues, edited by Amitav Acharya and Richard Stubbs (Vancouver: UBC Press, 1995), pp. 146–81, by permission of the author. RISK ASSESSMENTS The initial concerns of Southeast Asian political leaders over the formation of SEM and NAFTA appeared to concentrate on the fear that the new trading blocs would raise tariff barriers against external trade. Under GATT rules, existing tariffs should not be raised when free trade areas are formed, but the highest tariff level of a joining member state could be adopted for the entire free trade bloc. In early Southeast Asian policy evaluations of the impact of trading blocs, attention focused on the possible consequences to Southeast Asia of higher tariff barriers protecting North American and European markets.1 Repeated assurances from North American and European leaders that the new integrated markets would not result in higher external tariffs shifted the attention of Southeast Asian policy makers to the other consequences of NAFTA and SEM. Even so, many Asian analysts saw NAFTA as designed to increase the competitive capacity of North America and, therefore, as being essentially protectionist and potentially directed against the high levels of imports from Asia. They also saw it as a measure to reverse the high trade imbalance between the US and Japan, along with imports from other Asian economies, by improving the domestic competitive capacity of North America. Some accused Canada and the US of preaching free trade but of practising protectionist policies. From the ASEAN policy makers’ perspective, even if tariff barriers were not raised by the formation of NAFTA, there would still be ‘rules of origin’ for many products, anti-dumping rules, and other non-tariff barriers which would be imposed to the detriment of Asian exporters to the North American and European markets. As a result, the primary concerns of Southeast Asian policy analysts began to focus on the following issues: the prospects for a continuation of a general system of preferences (GSP) for market access; the impact of the new and proposed trading blocs on investment flows and the transfer of technology; the changing patterns of 080 AR Ch 80 22/9/03, 12:57 PM 394 ASEAN Policy Responses to North American and European Trading Agreements 395 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville competition arising from economies of scale and complementarity within trading blocs; and the changing conditions of trade created by the potential imposition of new non-tariff trade and investment barriers, including the linking of trade with nontrade issues such as social conditions, human rights, and environment policies. All the ASEAN countries (except Brunei) have enjoyed a GSP, extended to them by most OECD countries, providing substantially lower tariffs for imports from qualifying less-developed countries. Besides the US, the EC and twelve other countries (including Canada) extend GSP trading privileges to underdeveloped countries. The US GSP was established by the Trade Act of 1974 and was scheduled to expire on 4 July 1993 (McGovern 1986: 271–83), but the existing system was ‘rolled over’ for fifteen months to give the new Clinton administration time to study the issue and to come up with a new ten-year scheme. Although the US was expected to retain a GSP system, policy makers anticipated new ‘graduation’ rules to determine when countries have developed to the point where they no longer qualify for special trade advantages. Singapore lost its GSP status in 1989. Rising per capita income and rapid economic development in Malaysia and Thailand suggested that they would become the next ASEAN GSP ‘graduands.’ Therefore, policy makers in those states began planning for the potential loss of their GSP trade advantages.2 They also anticipated that Europe, Canada, and other states giving GSP preferences would follow them with similar rules patterned after the new GSP regime promised by the Clinton administration for the end of 1994.3 Although there was much concern in Southeast Asia for the economic impact on the region of NAFTA and the EC’s SEM, there was very little local analysis of anticipated consequences. In part, this was because both SEM and NAFTA were still in flux...