Patience Required for America's Positive Outreach to ASEAN

Last week the U.S.  moved forward with two steps for engaging with ASEAN, with the U.S. Congress finally passing legislation to implement the Asia Pacific Economic Cooperation (APEC) Business Travel Card, and U.S. business and policy leaders issuing a framework for future U.S. relations with ASEAN.   Both developments should be welcomed, even though the former required more than a decade to get passed and the latter may take even longer.

The APEC business travel card was first implemented in 1997, with 18 APEC members  now fully applying the card.  The card allows businesspeople access to expedited travel lanes, without the need for country-specific visas. The card represents more than just shorter immigration lines for businesspeople. Rather, it represents a basic commitment to reduce regulatory barriers to trade and investment, in this case, immigration.    That’s positive.   What’s negative is that it required more than a decade to get the travel card adopted and implemented by the U.S.

Unfortunately, the card is only the latest example of the slow motion of U.S. trade and investment policy at the moment.  This was also demonstrated by the 4+ years needed to get the Korea-U.S. free trade agreement through Congress earlier this year. 

It was with that sanguine view of domestic U.S. politics that the U.S.-ASEAN Strategy Commission at the Center for Strategic and International Studies (CSIS) issued a set of proposals for advancing U.S. policy in southeast Asia.  The Commission recommended several measures, including the negotiation of a U.S.-ASEAN free trade agreement (FTA) and a presidential or vice-presidential level business promotion campaign through the region.  The report acknowledged that the current U.S. Burma sanctions prevented any immediate start to FTA talks, but that a U.S.-ASEAN FTA should be established as a long-term goal.

Given the state of U.S. trade politics, “long-term” is an understatement.  Besides Burma policy, divisions between the Democrats and Republicans mean that any trade initiative will not make any meaningful progress until after the 2012 elections, and perhaps only with one party taking over both the White House and Congress.  That’s possible, particularly if President Obama’s re-election campaign fails and the Republicans re-take the Senate as expected (when the Democrats had both Congress and the White House in 2009-2011, TPA and other trade issues were not a priority).  In all likelihood only then would Congress delegate “trade promotion authority” (TPA) to the President to negotiate a comprehensive FTA; the lack of TPA affects the Trans Pacific Partnership (TPP) negotiations, although the Obama administration states that it can overcome this legislative hurdle. 

Nevertheless, the CSIS recommendations correctly postulate that the TPP is an imperfect substitute for a U.S.-ASEAN FTA.  The TPP is the potential basis for a Free Trade Area of the Asia Pacific, but as a result, the TPP talks are being conducted with one eye towards China, complicating matters.  U.S.-ASEAN FTA talks, on the other hand, can focus exclusively on issues related directly to southeast Asia and the United States.

That does not mean that U.S.-ASEAN FTA talks would be uneventful. Besides Burma sanctions, the broad agenda for any U.S. FTA negotiations (going beyond the scope of FTAs that ASEAN has with China, Japan, Korea, Australia, India and New Zealand) would be controversial within ASEAN.  Thailand and Malaysia would have to revisit issues that derailed their own bilateral FTA talks with the U.S., and Indonesia and the Philippines would have to face serious market access issues in their own countries.  These issues, along with the less-developed nature of the ASEAN institutions, stalled the EU-ASEAN FTA talks, forcing the EU into bilateral FTA negotiations while maintaining the eventual goal of an ASEAN-level FTA.  In all likelihood, the U.S. may have to pursue a similar approach.

Both developments are positive and should cheer U.S. supporters of the region.  They are reminders that the United States remains committed to Asia Pacific and ASEAN in particular, even if one must be very, very patient. 

Injecting Business Acumen into ASEAN's Leadership

Yesterday CIMB Bank head Nazir Razak, the chief organizer of the ASEAN Business Club (ABC) and supporter of the CIMB Asean Research Institute (CARI),* proposed that the next ASEAN Secretary-General come from the corporate sector in order to support development of the ASEAN Economic Community.  According to the Bernama news service, ASEAN needs “someone who can really shake things up.”   Although Datuk Seri Nazir’s proposal has almost no chance of being adopted in its entirety, it is exactly the kind of input that the business community needs to contribute to ASEAN and it needs to be adopted in some form. 

ASEAN Secretary-General Surin Pitsuwan’s term ends at the end of next year.  Being a former Thai Deputy Prime Minister and Foreign Minister, Dr. Surin has instilled greater political and diplomatic prestige to the position, and by extension, to the ASEAN Secretariat.  Dr. Surin has succeeded in his immediate and primary task, the full implementation of the ASEAN Charter.

The current crucial task is to implement the AEC fully within the region by 2015. Datuk Seri Nazir correctly identifies the need to have the next ASEAN Secretary-General be someone who understands the corporate community.   A Secretary-General with direct corporate experience will have greater appreciation of the aspirations and frustrations of the ASEAN business community, especially the lack of development in ASEAN’s institutions.  There is no shortage of ministers and former ministers with business experience in Indonesia, Malaysia, the Philippines, Singapore and Thailand who are well-qualified to serve as ASEAN Secretary-General.

Unfortunately, Article 11.1 of the Charter requires that the next ASEAN Secretary-General must come from Vietnam, the country next in alphabetical order after Thailand.  Because Vietnam is relatively new to international commerce, it has not developed the pool of ministerial level candidates who also have business experience.  Fortunately, Vietnam is both an eager supporter of globalization and of ASEAN, so I remain confident that it will put forward a suitable candidate experienced from Vietnam’s WTO accession negotiations and implementation, if Vietnam correctly understands that ASEAN’s current great task is economic integration, and not necessarily resolving the South China Sea/Spratly Islands dispute.    Such a candidate will be able to appreciate the business community’s needs, even if she or he does not have first-hand corporate experience.

Nevertheless, ASEAN can still follow through on Datuk Seri Nazir’s proposal by selecting one of the Deputy Secretary Generals from the corporate community.  There are 4 Deputy Secretary Generals, 2 of which are chosen competitively and 2 of which are chosen through the alphabetical rotation system.   The current Deputy Secretary General for the AEC,  S. Pushpanathan, is a veteran of the ASEAN Secretariat and has done admirably.  However, he and the ASEAN Secretariat would benefit from the input of corporate experience.

In any event, Datuk Seri Nazir’s proposal is exactly the type of provocative proposal that the ABC and CARI should put forth.  Full development of the AEC requires active and constructive input from the ASEAN business community, and I hope that the ABC and CARI will continue to provide such input.

*CARI has republished some of my AEC blog articles. This article, as is the case for all of my articles, represents my personal opinion and not that of CARI or any other direct or indirect affiliation of mine.

ASEAN Economic Ministers Lay Down a Marker for FTA Negotiations

ASEAN Economic Ministers at their informal retreat in Kuala Lumpur last weekend prepared a draft framework of general principles regarding ASEAN’s future participation in free trade agreement (FTA) talks, including a broader free trade agreement of the Asia-Pacific.  According to Kyodo News, the “ASEAN Framework for a Comprehensive Regional Economic Partnership” commits ASEAN to pursuing FTAs that include general principles such as differential treatment for Cambodia, Laos, Myanmar and Vietnam (CLMV countries), transparency, economic and technical cooperation, trade and investment facilitation, and consistency with the group’s plans for the ASEAN Economic Community (AEC).  The full text is available here.

The importance of this draft framework lies more in its timing rather than its substance, other than the requirement of differential treatment for CLMV countries (which is embodied throughout ASEAN’s economic agreements).  The other general principles are positive and should be incorporated as best practices in any FTA. 

Rather, the announcement of the draft framework represents a marker thrown down by ASEAN to remind its trading partners of the regional bloc’s importance.

For the United States, the draft framework indicates that ASEAN does not view the Trans Pacific Partnership (TPP) as a substitute for a broader US-ASEAN FTA.  Progress in the TPP talks, perhaps even the announcement of an agreement in principle, is quite possible by the November 2011 APEC summit in Hawaii.  Yet the TPP only involves four ASEAN members (Brunei, Malaysia, Singapore and Vietnam) and issues particularly relevant to Vietnam (state-owned enterprises, textiles) have been quite difficult.  The draft ASEAN framework serves to remind the United States that ASEAN has alternatives, and that the grouping wants to be considered as a whole (even if US Burma sanctions would prevent this).

For the EU, the draft framework is a reminder that ASEAN does not consider EU-ASEAN FTA talks to be ended, merely suspended.  The EU suspended talks in favor of bilateral FTA negotiations with Singapore, Malaysia and Indonesia, with the EU claiming that a lack of institutional development in ASEAN and the EU’s own Burma sanctions prevented negotiations on a bloc-to-bloc basis.  With the EU and Singapore expected to announce successful FTA talks any time, the ASEAN framework reminds the EU that the other ASEAN members still want a broader agreement, but perhaps with a scope narrower than the EU would like but which would be more consistent with ASEAN’s existing FTAs with Australia, New Zealand, China, India, Japan and Korea.

For those other Asia-Pacific partners, the draft framework indicates that ASEAN wants to remain at the center of any discussions of a FTA of the Asia Pacific.  ASEAN sources indicated that the framework would be the group’s preferred initial focus of future FTA discussions in the Asia Pacific, rather than the joint China-Japan FTA study program presented to the ASEAN Economic Ministers meeting in Manado in August 2011.

For India, the draft framework demonstrates that ASEAN is not satisfied with the status quo in the ASEAN-India FTA (AIFTA). AIFTA currently only covers trade in goods (and even then in an incomplete way, as there remain gaps such as on product-specific rules of origin).  Last week ASEAN and India engaged in another round of AIFTA talks regarding trade in services, which has proven difficult to resolve, despite the fact that the other ASEAN-level FTAs have included at least goods and services and in some cases, investment.

Thus, the ASEAN Economic Ministers are using the draft framework as indicator of how the group will address future developments in its FTA efforts with trading partners.  The framework expresses a willingness to negotiate but on terms that are acceptable to the entire grouping, and in a manner consistent with ASEAN’s current program to implement the AEC.   Whether ASEAN’s trading partners will heed the different messages conveyed by the FTA framework remains to be seen in the weeks to come.