Even CLMV Countries Feel the AEC Blues

It is commonly believed that the CLMV countries (Cambodia, Laos, Myanmar and Vietnam) countries will benefit the most from the ASEAN Economic Community (AEC), with their large labor pool and reduced operating costs.  However, even the CLMV countries can have the same anxieties as more developed ASEAN members such as Thailand. See this from Vietnam News:

Businesses in HCM City are urging government agencies to create more technical barriers to trade to protect domestically manufactured goods from foreign competition. Nguyen Quang Anh, chairman of the HCM City Plastics and Rubber Manufacturers Association, said the country's technical barriers were inadequate, leaving local industries vulnerable.

Their proposed solution is to create even more non-tariff barriers (NTBs):

Nguyen Quoc Anh of the HCM City Enterprises Association said the association would work with government agencies to promote the establishment of more technical barriers to trade. Over the last five years, Viet Nam had set up only a few technical barriers to trade, while global trade expanded greatly, according to Do Duc Chi of the city's Planning and Investment Department.

Of course, eliminating existing NTBs, let alone creating new NTBs, is a core commitment of the ASEAN Trade in Goods Agreement (ATIGA).  Thus these  Vietnamese companies are -- perhaps innocently, perhaps ingeniously -- publicly articulating that their government adopt new NTBs to protect their domestic markets.

This is nothing new, and in fact happens within ASEAN countries all the time.  Only in this case, the Vietnamese made their demands public, rather than in the hushed halls of government ministries. 

NTBs can indeed be effective protective measures.  For example, in one ASEAN-6 country, it can take many months (in some cases exceeding a year) to qualify a steel shipment for customs clearance.  In another ASEAN-6 country, imports are channeled through a limited number of ports, with sensitive items subjected to more rigorous customs checks.  In both cases, exporters are discouraged from shipping goods to those countries.

As I wrote in the earlier blog post, eliminating NTBs is both a critical and continuing task for the ASEAN Secretariat to establish a single production base and single market.  Finding NTBs is difficult enough without ASEAN member states conjuring up even more NTBs, and not all of them will do us the favor of publicly advocating for them.  This task alone will require additional resources and powers for the ASEAN Secretariat.  

US Import Ban on Myanmar Renewed

The US Congress voted yesterday to extend the ban on imports from Myanmar. The import bans are authorized by the Burmese Freedom and Democracy Act (BFDA) of 2003.  Thursday’s US Congressional resolution extended authoritization for the BFDA ban for another three years, to July 2015.  The resolution also extended the ban itself for another year, to July 2013 (note the distinction between the authorization for the ban and the ban itself).  The ban can be renewed for another year by another Congressional resolution before July 2013.

The US President retains the ability to terminate the ban “upon request of a

democratically elected government in Burma” and when conditions in Section (3)(a)(3) of the BFDA — progress on human rights, release of all political prisoners, freedom of speech and the press, freedom of association, peaceful exercise of religion, democratic governance, not designated as “a country of interest” for narcotics trafficking—have been met.  That would require the Administration to submit a formal report to Congress on bilateral and multilateral efforts to promote human rights and democracy in Myanmar, the effectiveness of the trade sanctions on improving conditions in Myanmar and furthering U.S. policy objections towards Myanmar, and the impact of the trade sanctions on national security, economic, and foreign policy interests of the United States.

As I discussed earlier, the US Congress is supportive of current Obama administration policy, but was expected to renew the BFDA.  Not only is the Obama administration not prepared to make the case for the full waiver, those in Congress who are focused on the Burma issue would not accept that a “democratically elected government” exists in the country and that all of the Section (3)(a)(3) conditions have been met. 

In any event, another year of the ban should provide constructive pressure on the Myanmar regime to continue its reform efforts, with lifting the ban a useful incentive.  It also gives companies in Myanmar – particularly those who are not on the Specially Designated Nationals list – time to organize and prepare themselves to re-engage with the US market.  That re-engagement will take time, and I’ll have more on this after I get back from Yangon and Naypyidaw.

Thai Anxiety/China’s Resident ASEAN Ambassador Arrives

This week I was in Chiang Mai for the 2012 International Conference on International Relations and Development, jointly organized by Chiang Mai, Thammasat, Chualongkorn and Mahidol universities.  The subject this year is “Towards an ASEAN Economic Community (AEC): Prospects, Challenges and Paradoxes in Development, Governance and Human Security.”  I spoke on “Developing an Indigenous ASEAN Economic Community Law and Policy,” which I have written about before. 

It was interesting to speak directly with Thai academics about the AEC. The daily Google news summary I get in my e-mailbox is routinely filled with articles expressing dread and anxiety about the AEC, mainly from the English language media based in Thailand.  Having written for them before and being somewhat familiar with their core readership, O had thought that these media outlets were somewhat overreacting to the AEC.  Indeed, Khun Nipon Poapongsakorn of the Thailand Development Research Institute did a very good job in his opening address at the conference, explaining away many of the myths perpetuated about the AEC, particularly that the fear of a flood of goods, labor and capital in 2015 is overblown.  Those who regularly read this blog know that the AEC is already in effect for goods, and will not lead to massive waves of labor movement or capital flows by 2015, so they will already know that Khun Nipon is mostly correct.

Yet there is a palpable fear of the AEC in Thailand, a fear which I have not sensed in other parts of ASEAN.  This insecurity, I think, comes from Thai fears that they will not be able to compete with the CLMV (Cambodia, Laos, Myanmar and Vietnam) countries in goods due to their higher cost structure, and that they will not be able to compete with the other ASEAN-5 countries in services due to inefficiencies in Thailand.  A recent study showing that Thailand ranked below Malaysia, Indonesia and Vietnam in English language proficiency may have something to do with this.  Without doing better in Bahasa ASEAN, e.g., English, the medium of delivering services in ASEAN, Thai companies will not be able to compete.    In that regard, Thailand does have some grounds to worry, and Thais should take steps to improve English proficiency and service standards. But these concerns are not unique to Thailand and apply to every ASEAN member.  The AEC should be viewed as an opportunity to improve ASEAN economies, not just an eventuality to be feared.

Also happening this week was the arrival of China’s resident Ambassador to ASEAN, Yang Xiuping in Jakarta. This makes China the fourth country to have a resident ambassador solely accredited to ASEAN, after Japan, the US, and South Korea.    This reflects the importance of ASEAN to China in economic and diplomatic terms.  Yet it also elevates ASEAN-China relations to a more formalized level, establishing another means for ASEAN to raise the South China Sea territorial dispute directly with China, and on an ASEAN-China basis rather than on a bilateral basis.  Perhaps after the events of the past month – the ASEAN foreign ministers’ impasse in Cambodia, Indonesia’s shuttle diplomacy to patch things up, China putting up South China Sea drilling rights up for bidding, and China’s establishment of a municipal government for the South China Sea – China may feel more confident about dealing with ASEAN.  Whether this will lead to China continuing to overplay its hand, as some have argued, will remain to be seen.  Again, ASEAN needs to address the South China Sea dispute as an opportunity its value as a regional organization, not just an eventuality to be feared.