Page 2 of
2 ASEAN
lightweights get by in the big
world By Alan Boyd
greatly disadvantaged, because
their economies were already integrated with
global markets before the agreements took effect.
Regional integration efforts that began
with the launch of AFTA in 1992 were preceded by a
period of unilateral liberalization in the 1980s
and 1990s that limited the risks of trade
diversion once the FTAs took effect. "Therefore,
variables that pick up changes in
trade flows may be
capturing the effects of lower [tariff] rates,"
Tumbarello said.
Data from the ASEAN
Secretariat show that only 22.8% of collective
trade by the bloc's 10 nations was with other
members in 2005. While this is a vast improvement
from the 10-12% levels posted when the grouping
was founded in 1967, it still suggests a limited
degree of integration. Myanmar (51.5%) and Laos
(58.2%) had the highest intra-ASEAN trade in 2005,
but much of this was in the form of border
transactions that were not included in the AFTA.
Vietnam (22.8%) and Cambodia (19.8%), both heavily
reliant on textile exports that compete globally
with their more developed regional neighbors, had
the lowest ASEAN trade component of any member
states.
Hence while Indochina's trade with
the ASEAN six dropped sharply between 1997 and
2002, when the region was still recovering from
the economic turmoil, shipments to the rest of the
world have followed a consistent growth pattern
since the late 1980s. Indochina has also been
helped by the non-discriminatory nature of the
FTAs.
Although most are of a bilateral
nature, they did not result from a form of
regionalism that might shut other countries out.
Tumbarello said the research indicated that ASEAN
members of FTAs "showed a higher degree of
openness vis-a-vis the rest of the world than
other members of other [FTAs] outside the region".
But she warned that the FTAs experiment might
backfire if it is not accompanied by continuing
unilateral and multilateral liberalization,
especially as they had thrown up inconsistent
rules of origin that could complicate production
and sourcing decisions.
"An Asian Free
Trade Area could potentially avoid some of the
risks associated with proliferating FTAs. However,
whether it would make sense to consolidate Asian
FTAs into a single free-trade area is a more
complicated issue that would require further
research and analysis," Tumbarello noted.
It is unlikely that the Indochinese states
will be able to match the FTAs with their own
free-trade pacts until they commit to further
unilateral liberalization. On average, their
tariffs are 30-40% higher than for other ASEAN
members. They are already partners in ASEAN's
multilateral FTAs, but have been slow to
capitalize on the biggest pact, a preferential
tariffs agreement signed with China in 2002 that
also provides for the establishment of a
free-trade area within a decade.
China is
ASEAN's third-largest trading partner, with
transactions worth $114.3 billion in 2005, but
Vietnam, Laos and Cambodia will not get full
benefits from the Early Harvest Program of lower
tariffs until 2015. (Myanmar is not yet a party to
the agreement.) The Indochinese countries have
meanwhile run up big deficits in both their
mercantile and service accounts, with Vietnam
accounting for a quarter of the region's trade
imbalance in 2005. And despite their geographical
and low-cost advantages, Cambodia, Laos and
Myanmar were able to attract only 3-4% of all
tourists to ASEAN in that year, though Vietnam
fared much better.
One reason for the slow
uptake may be that the Indochinese countries are
marketing a vastly different product range: farm
goods, one of their prime export segments, are not
fully covered by the agreement. Malaysia's trade
minister, Rafidah Aziz, suggested in a defense of
the FTAs last year that Indochina might benefit
from following a different reform path than the
other ASEAN members - an approach that would
differentiate the bloc from the European Union
model of coordinated liberalization.
"What
we want in terms of market access may not be the
same as what Myanmar and Laos want,'' Rafidah
said. "They may not want electronics, but we want
electronics. So the EU is not ASEAN. The EU is a
completely different kettle of fish.''
Alan Boyd, now based in Sydney,
has reported on Asia for more than two decades.
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