Tuesday, October 18, 2011

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.