2010 - The year for ASEAN Free Trade Arias (FTAs), a catalyst for the ASEAN Community by 2015

by Ambassador Gheorghe Săvuică  

While many countries in the West are still struggling to overcome the difficulties generated by the world economic and financial crisis, in another part of our planet, i.e. in Southeast Asia, less affected by the crisis this time, according to the assessment of the ASEAN SECRETARIAT, the1 January 2010 did not only usher in a brand New Year but at the same time also rang in a new economic space that would have major ramifications for millions of people in Asia.

The reference was made to the full implementation of the ASEAN-China Free Trade Aria as well as to the entering into force of ASEAN-Australia-New Zeeland FTA and ASEAN-India Trade in Goods (once India and at least one ASEAN Member State notify completion of their internal ratification process)

These new significant developments enlarge the phenomena of FTA in the aria, having in mind that there are already successfully  functioning  ASEAN Free Trade Aria (among the ASEAN member countries only), ASEAN-Japan FTA and ASEAN-Republic of Korea FTA.

 Southeast and East Asia are two regions that attract the interest from many points of view. It will remain for many years to come the focus of world attention. ASEAN has been conducting regional cooperation for the past 42 years and now is really working vigorously towards establishing an ASEAN Community by 2015, which is rising on three pillars: political and security cooperation (the ASEAN Political-Security Community - PSC); economic and finance (the ASEAN Economic Community - AEC); and socio-cultural (the ASEAN Socio-Cultural Community - ASCC).

Concurrently, Japan and Australia, while supporting ASEAN, in general, including the creation of the ASEAN Community, still have their own ideas for new economic regional architecture. Recently, they renewed their initiatives for East Asian Community (Japan) and Asia Pacific Community (Australia). Japan views EAS (East Asia Summit - established in 2005 as a forum for dialogue on broad strategic, political and economic issues of common interest by the 10 Member Countries of ASEAN, Australia, China, India, Japan, Republic of Korea and New Zealand),  as the basis for an East Asia Community. Australia wants an even more inclusive Asia-Pacific Community to evolve, with both a security and economic mandate, and the U.S. engaged.

 ASEAN and its targets are also supported by the USA, the EU, Canada, Russia, and many other countries, which are trying and acting to be involved directly or indirectly in the formation of the new political, security, economic, socio-cultural Asian brand.

In order to promote trade and investment flows between the two regions, ASEAN and EU agreed on the Trans-Regional ASEAN-EU Trade Initiatives (TREATI), which is a policy dialogue mechanism/process in economic and trade related issues. TREATI will also include technical assistance and pave the foundation for the development of an ASEAN- EU FTA. However, theASEAN-EU FTA negotiations have been stalled for quite a while due to objective reasons.  It seems that in 2010 the EU will probably have to build FTAs individually with ASEAN countries interested in doing so and then perhaps try to get into the regional level.

ASEAN, in its partnership with big political and economic regional and world powers, is recognized as a driving force and center in the regional cooperation and integration. As China is rising and India is emerging, ASEAN is working hard together to remain competitive and relevant to its people and regional peace, stability and prosperity.

ASEAN being strengthened by entering into force in December, 2008 of the ASEAN Charter it has to deliver in time the ASEAN Community in order to remain the driving force and center for the regional cooperation, as it is so much insisted by the leaders of ASEAN member countries on questions regarding the regional cooperation.

The chain of the FTAs mentioned about will be the catalyst for the creation of the ASEAN Community.

The ASEAN-China FTA is the world’s third largest free-trade aria. It was first made in 2001 at the ASEAN-China Summit, which formulated a Framework on Economic Cooperation and established an ASEAN-China Free Trade Area. Under this framework, establishing a free trade area within 10 years time was agreed.

Based on ASEAN Secretariat statistics, China is a key trading partner of ASEAN – the third largest – and is responsible for 11.3% of total ASEAN trade in 2008 or US$ 192.6 billion. And the data clearly show the economic clout of the FTA: a combined GDP of US$ 6.6 trillion, 1.9 billion people and total trade of US$ 4.3 trillion.

The FTA positions ASEAN to take advantage of the next phase of China’s growth, as its expanding middle-class consumption trends are expected to predicate the next wave of economic expansion. 

            However, the respond from some ASEAN business circles was not as enthusiastic as the official statements. They fear that the entry of cheaper Chinese products would undermine domestic manufacturing.

           The ASEAN-Australia –New Zeeland FTA, which will be fully realized by 2015, is described as the single most comprehensive economic agreement among ASEAN’s Dialogue Partners.It hopes to create a trans-Pacific free trade zone comprising a market of 600 million people with a combined GDP of US$ 2.7 trillion. It is expected to substantially reduce barriers to trade in goods and services, thereby, opening up a wide range of opportunities for trade and investment in the region not only for the Parties but non-Parties as well, in order to be able to reap the benefits from the Agreement as early as possible.

           The ASEAN-India Trade in Goods (TIG) Agreement was concluded on 12 August, 2009. It paves the way for the creation of one of the world’s largest free trade areas (FTA) - market of almost 1.8 billion people with a combined GDP of US$ 2.75 trillion. The ASEAN-India FTA will see tariff liberalization of over 90 percent of products traded between the two dynamic regions, including the so-called “special products,” such as palm oil (crude and refined), coffee, black tea and pepper.

          In fact, with this engagement with India, an emerging economic giant, ASEAN has now completed the creation of the largest economic space for ASEAN business to operate.

        With a combined GDP exceeding USD 1 trillion by 2010, reach natural and energetic resources, an expected contribution to half of the global output by 2025 and 570 million populations, ASEAN region presents a huge market and investment destination for foreign companies and industries, including those from the EU. The economic factor is not the only attraction. Southeast Asia is a part of a large aria of civilization, with significant democratic processes being implemented.

         The benefits from the greater access to emerging markets in Asia, will also be coupled by the expansion of ASEAN exports to non traditional markets, including those that were previously not very much pursued, such as the Eastern European countries.

         The status of Romania as member of the EU as well as of the Dialogue between Europe and Asia (Europe Asia Meeting – ASEM) could represent a background to promote its political, diplomatic, economic, military, cultural, and techno- scientific projects with ASEAN member countries. This would require a robust strategy on ASEAN.

        An ASEAN foreign policy priority under current circumstances is both necessary and possible for our country, having in mind that Romania still benefits of significant traditional relationship with ASEAN countries. The latter expect a more active implication of Romania in their new developments toward an integrated Asia as well in the common efforts to bring closer Asia to Europe and Europe to Asia.

         In case of a political and diplomatic delay in undertaking a more proactive bilateral and regional vision and approach toward ASEAN could undermine Romania’s advantage resulted from its traditional relationship with ASEAN member countries.