Asean free-trade pacts weak, ADB study says

BANDAR Seri Begawan—Free-trade agreements (FTAs) in the Association of Southeast Asian Nations (Asean) tend to be “weak” and could be distracting members from real economic reforms and regional integration, argued a study that reviews progress in the Asean Economic Community.

The Asian Development Bank (ADB) recently published a collection of articles in a study called “Asean Economic Community–A Work in Progress.” The study looked at whether or not the AEC is achievable by 2015, the obstacles along the way in achieving it and the measures needed for eventual achievement.

Included in the study is an article by Razeen Sally, a visiting associate professor at the Lee Kuan Yew School of Public Policy, that characterized Asean FTAs (Afta) as weak compared to other regional FTAs.

In his article titled “Asean FTAs: State of Play and Outlook for Asean’s Regional and Global Integration,” Razeen argued on a wide range of existing FTAs within the regional grouping, as well as economic partners and suggested that “FTAs that Asean has concluded hardly promote regional economic integration or Asean’s integration with the wider Asia or the global economy.”

“They certainly will not help achieve the AEC by 2015,” he added in the report.

“There is ‘no serious prospect’ for regional FTAs actually to deepen economic integration,” Razeen suggested. He also proposed a different approach to regional economic integration.

While the agreements commit the parties to eliminating tariffs on trade among themselves, they do not address regulatory and other non-tariff barriers (NTBs), such as product standards and mutual recognition arrangements, services, investment, intellectual-property rights, government procurement, or the movement of business people, which are all more important than tariffs for regional economic integration, according to the report overview.

Razeen suggested “that the Afta reinforced by the AEC and the Asean Charter, look good on paper.” However, he said that actual liberalization beyond tariffs have been “weak and tardy” which made the most of the ambitious general commitments look like “paper tigers.”

Razeen pointed out that the Afta’s Asean Way is reflected in Asean countries’ bilateral FTAs. “With the exception of some of Singapore’s FTA they are trade-light, at best fairly strong on tariff elimination, but also weak-to-very weak in tackling NTBs and regulatory barriers,” he said.

This, is in turn, reflected in Asesan Plus One FTAs. In general, they are “Afta-minus”: the stronger ones go far on tariff elimination but are weak in other areas; the weaker ones are also less than comprehensive and overly complex on tariff elimination. “The weakness of all these FTAs is highlighted when compared with the three US and EU FTAs in Asia.”

Razeen noted the region’s diversity, saying that “countries [are] at widely different stages of development and differing levels of protection, competing producer interests, a history of intra-regional conflict and lack of a culture of cross-border cooperation, geopolitical divisions.” This, he said, has made impossible the creation of strong regional institutions, and hard policy coordination and deep integration.

“These reasons also preclude the emergence of strong region-wide FTAs. If such FTAs materialize, they will likely be even weaker than Asean+1 FTAs,” wrote Razeen.