Indonesia's ASEAN Shuttle Diplomacy

It looks like Indonesian foreign minister Marty Natalegawa has put together a face-saving ASEAN joint statement on the South China Sea issue.  Although it is impossible to “unring the bell” of the missed ASEAN foreign ministers’ joint communiqué in Cambodia, the statement should serve as a marker for the ASEAN Summit to be held in November in Cambodia.  It would be extremely humiliating for Cambodian prime minister Hun Sen to allow a similar episode to occur during the summit, particularly in the presence of his peers among the ASEAN national leaders as well as the ASEAN Regional Forum leaders who will also attend the summit.  At least that is the intention behind the new joint statement.  I hope that is the case.

Thus Indonesia comes through again to provide leadership in ASEAN, like in last year’s Preah Vihear dispute between Cambodia and Thailand. But unlike last year, Indonesia had no formal ASEAN role, as Cambodia is now ASEAN chair, and not Indonesia.  Should this be a cause of concern?  Not necessarily.  Regardless of any formal role in ASEAN, the relative size and historical legacy of Indonesia will make the country a natural leader in Southeast Asia.  After all, Germany does not currently hold any formal leadership role in the EU, yet its leadership in the current Eurozone crisis is not lessened in any way by the lack of a formal institutional role.

Nevertheless, the impasse following the ASEAN foreign ministers’ meeting does highlight the need to improve the ASEAN institutions.  Again, Kavi Chongvittakorn in the Nation eloquently makes the case for improving the resources for the ASEAN Secretariat.    

Of course, I would agree.  The ASEAN Secretariat does need more funding, not just to hire more staff and expand its physical plant, but to improve its institutional memory.  Currently, there are only one or two archivists in the ASEAN Secretariat who are dealing with mounds of uncatalogued paper records.  Getting to grips with this internal institutional legacy is necessary for ASEAN to cope with the challenges of the future.  Perhaps one of the ASEAN aid dialogue partners could fund an archival project, if ASEAN is not willing to fund it.

Beyond improving funding and staff for the ASEAN Secretariat, ASEAN also needs to address the very limited nature of the ASEAN Secretariat’s powers, at least in ASEAN Economic Community matters.  I have written about this issue before, and I think this should be reconsidered during next year’s ASEAN Charter review, which is mandated by Article 50 of the Charter.

Finally, the impasse in Cambodia may have validated Vietnam’s choice of foreign affairs vice-minister Le Luong Minh as ASEAN Secretary-General-designate, at least from its point of view. Although the ASEAN Secretary General is supposed to represent all of the ASEAN membership, Vietnam should be assured that he will more than account for its views on the South China Sea dispute, given both his background and UN experience. 

Impasse at the ASEAN Foreign Ministers' Meeting (Updated)

I have been asked to comment on last week’s ASEAN foreign ministers’ meeting in Cambodia and its failure to issue a joint communiqué, due to differences on how to address the South China Sea/Spratly Islands issue. 

First, this blog’s focus is on the economic pillar of the ASEAN community, so I won’t comment directly on the impasse, other than on how this reflects on ASEAN institutions (see next point).  For an excellent political analysis, see Kavi Chongkittavorn’s take here. 

Second, despite some breathless reporting, the impasse does not represent the end of ASEAN.  Yes, it was quite unfortunate that an ASEAN foreign ministers’ meeting ended without a joint communiqué for the first time ever.  Apparently this represents a clash between the role of the ASEAN chair and ASEAN way of consensus.  From an institutional point of view, perhaps what happened was the best possible outcome, given the extreme differences involved.  In other words, a failure to reach consensus – publicly explained by the participants in the transparent manner that has happened since the meeting – could be viewed as preferable to a watered-down communiqué, e.g., an agreement to do nothing.   The controversy may even force all sides to come together by the time of the ASEAN Summit in November.   Other areas of ASEAN decisionmaking would have been improved by publicly acknowledging disagreement rather than issuing a weak agreement that addresses nothing.

Third, diplomatic disputes in Southeast Asia usually do not spill over into economic integration matters on a permanent basis.   Philippine bananas may be a victim of the South China Sea dispute, but overall economic forces should still foster cooperation.  After all, at the same time China, Korea and Japan are discussing a tri-lateral free trade agreement, the China-Japan dispute over islands in the East China Sea.  In fact, the AEC has been cited by Thailand as contributing to the withdrawal of troops from the Preah Vihear temple area this week:

(AFP PHOTO/KHEM SOVANNARA)  


It's all too easy to forget how close Cambodia and Thailand were to armed conflict last year, and how Indonesia, empowered as ASEAN Chair by the ASEAN Charter, mediated a cease-fire.  

If anything then, ASEAN diplomats will busy over the next four months trying to avoid a similar impasse at the ASEAN Summit in Cambodia. Indonesia is again moving in to bridge the differences.  With no one wanting a repeat performance with national leaders in attendance, I think they’ll get the job done.

Tobacco Tussles Reach the AEC

According to the Malaysian Star, last week the ASEAN Health Ministers meeting in Phuket (held every two years) had agreed to “withdraw tobacco from AFTA”:

            Malaysia and Asean member nations have agreed to withdraw tobacco from the Asean Free Trade Area (AFTA) list for implementation by 2015. Health Minister Datuk Seri Liow Tiong Lai said a consensus was reached at the 11th Asean Health Ministers Meeting at Phuket, Thailand last Thursday. He said Asean Health Ministers discussed how to reduce consumption of tobacco as well as the ways to control the item from becoming widespread in the region. “We agreed that tobacco needs to be withdrawn from the list of AFTA products as it could reduce the number of smokers and create a tobacco-free environment,” he said.

(note that the official ASEAN Health Ministers' joint statement makes no reference to removing tobacco)  Regardless of one’s views on tobacco regulation, the author feels compelled to address several aspects of this report.

First, the governing agreement for trade in goods in the ASEAN Economic Community (AEC) is the ASEAN Trade in Goods Agreement (ATIGA).  Administration of ATIGA falls under the purview of the ASEAN Economic Ministers, not the ASEAN Health Ministers.  The ASEAN Health Ministers can only recommend action to the ASEAN Economic Ministers, and cannot “withdraw” products from ATIGA on their own.

Second, under ATIGA’s tariff reduction schedules, ASEAN member states have already agreed to 0-5 percent duty treatment for ASEAN-origin tobacco products.  Raising the ATIGA import duty rates for tobacco products to MFN levels (e.g. the non-preferential rates applied to goods that do not qualify as ASEAN-origin or for preferential treatment under ASEAN’s free trade agreements (FTAs)) would require consensus to renegotiate ATIGA, which would be difficult given the presence of strong tobacco industries in some ASEAN member states.  Furthermore, increasing the ATIGA rates for tobacco would simply divert the tobacco trade to China, Korea, India, Japan and Australia-New Zealand, which have FTAs with ASEAN which also have reduced preferential tariff rates for tobacco products.  These countries would benefit at the expense of ASEAN domestic producers unless they also agreed to renegotiate the tobacco duty rate provisions of their FTAs with ASEAN. That also appears to be difficult.

Third, ATIGA covers not only tariff measures but also non-tariff measures and other regulations related to trade in goods.  Hence what the ASEAN Health Ministers may have meant by “withdrawing” tobacco from ATIGA would be differential treatment of tobacco products under such measures. This could be justified under ATIGA Article 8(c), which allows for discriminatory measures if “necessary to protect human, animal or plant life or health.”  Other jurisdictions have imposed plain packaging and other special rules applicable to tobacco products, claiming authority, inter alia, under GATT Article XX(c), which ATIGA Article 8(c) is based on.  However, such measures have to be drafted carefully, as they have been subject to much litigation both at the domestic level and before the WTO.

Which brings me to my fourth and final point, which is that any measures aimed at tobacco would be subject to immediate and aggressive dispute resolution procedures. The tobacco industry has actively defended its interests in litigation and arbitration elsewhere, and ASEAN would be no different. 

Hence media reports that ASEAN has decided to “withdraw” tobacco from ATIGA are premature. The ASEAN Health Ministers’ declaration is merely a recommendation to the ASEAN Economic Ministers. Furthermore, modification of tobacco duty rates under ATIGA and other ASEAN FTAs is not realistic.   Whether ASEAN intends to follow the lead of other jurisdictions in imposing non-tariff measures will also remain to be seen, and even then such measures would be subjected to much scrutiny and possible litigation within ASEAN and perhaps at the WTO.  But the ASEAN Health Ministers’ declaration does mean that the tobacco regulatory debates have reached the AEC and will test both the ASEAN institutions and their regulation of the ASEAN single market.