Beyond the Bali Headlines

The major headlines of the Bali summits were of course the decision to allow Myanmar  to serve as the 2014 ASEAN chair, the announcement of US Secretary of State Hillary Clinton’s visit to Myanmar and various other items related to the U.S. “pivot” towards Asia.  From the ASEAN Economic Community viewpoint, the major announcement was the issuance of ASEAN’s framework for closer economic relations with its trading partners, an economic Treaty of Amity and Cooperation, as one observer put it. 

However, there were other significant developments during the summit season which also affect the AEC:

ASEAN Secretariat – ASEAN Secretary General Surin Pitsuwan announced that the Indonesian government had donated land with two existing buildings to the ASEAN Secretariat.  The additional space will be welcome by the ASEAN Secretariat, whose current physical plant has become very cramped and dated.  Of course, without additional funds this additional space will not be functional, with regard to personnel or resources.  This needs to be remedied by additional budget contributions from ASEAN members, including a rethink of the principle of equal contributions that limits the total amount to what the poorest member can pay.   Dr. Surin has also stressed that much of the Secretariat’s functions are supported by development aid missions from the EU, US, Australia and others. With Myanmar taking over as ASEAN chair in 2014, these donors need to relax the Burma sanctions so that funding of AEC-related activities are not hampered.  However, it looks like that may happen soon.

Timor Leste – ASEAN announced that it has formed a working group to review Timor Leste’s application to join the regional bloc. The Jakarta Post reported that Singapore opposed Timor Leste’s application as it would complicate the formation of the AEC by 2015.  Singapore later denied this report as “inaccurate and misinformed,”  stating that it welcomed the application of countries such as Timor Leste, Fiji and Papua New Guinea to join ASEAN.  Of course, the latter two countries arguably are not part of southeast Asia (whereas Timor Leste was part of Indonesia), so collapsing the three countries together does Timor Leste no favors in its application, despite the denial by Singapore.  Admitting Timor Leste before the AEC formation in 2015 would tax ASEAN’s institutions, this blog argues, particularly at a time when the smaller (but capable in economic policy) countries of Cambodia and Brunei become ASEAN chair in 2012 and 2013, and the completely inexperienced Myanmar becomes ASEAN chair in 2014 (along with all of the attendant potential for distraction over its domestic political situation).  In any event, the working group’s investigation and analysis will likely require considerable time, preventing East Timor from joining before 2015.

ASEAN FTAs – There were many technical developments in ASEAN’s bilateral FTAs.

•  ASEAN and China announced a second protocol to implement the services aspect of the ASEAN-China FTA.  The revised protocol expands the scope and depth of coverage beyond the initial 10 sectors covered by the first protocol, including commercial services, telecommunication, construction, distribution, finance, tourism and transportation, and takes effect on January 1, 2012.   

• Hong Kong (which is a separate customs territory under the WTO) applied to join the ASEAN-China FTA.  

• India set a deadline of March 2012 to conclude the services negotiations under the ASEAN-India FTA.  Talks have stalled for several months.  

•  ASEAN and Korea agreed to amend the ASEAN-Korea FTA to “clearer provisions for tariff reduction or elimination, and incorporates provisions to prevent any potential back-tracking of unilateral tariff commitments,” according to the Singapore government.   The amendment will take effect 90 days after Korea and one other member have started implementation. 

•  Indonesia announced that it had completed domestic procedures to implement the ASEAN-Australia-New Zealand FTA fully by January 10, 2012.

ASEAN Trade in Goods Agreement – Seven ASEAN members (Indonesia, Singapore, Malaysia, Thailand, the Philippines, Vietnam and Brunei) announced they would participate in a pilot program to implement the ASEAN Single Window.  This represents a major and necessary development in AEC formation, as the complexity involved in dealing with various national agencies hinders trade in goods.   Meanwhile, the Philippines tabled a proposal to implement self-certification of goods (although it is not clear how the Philippine proposal will mesh with the existing pilot program administered by Singapore, Malaysia and Brunei).  Finally, ASEAN announced that the ASEAN harmonized tariff schedule would be revised effective January 1, 2012.  There are additional tariff lines for fishery, machinery and vehicle products.

Private Sector Integration – the Philippine Stock Exchange announced it was delaying its participation in the ASEAN Trading Link (which will see Indonesia, Malaysia, Singapore, Thailand and Vietnam cooperating to allow cross-trading in their stock exchanges by mid-2012).  Meanwhile, ASEAN telecommunications ministers announced that they had reached an agreement in principle to eliminate cellphone roaming charges within ASEAN.

Whew! That was a lot.  Perhaps the most immediate impact will come from the elimination of cellphone roaming charges.  Hopefully this will apply not just to voice services, but to data roaming as well (a smartphone becomes a handheld bundle of unlimited liability when one crosses a border!).

Drawing Strength from an American Tradition

Today is Thanksgiving in America.  Rather than the usual posting on the AEC, I provide a link to an op-ed article published in the Straits Times today.  An excerpt is below:

As the "American" season in Asia, which began with the APEC summit in Honolulu, closes with the end of U.S. President Obama's visit to the region, readers are bombarded with analyses focused on the diplomatic and economic impact of America's so-called "pivot" towards the region.  Yet the end of this season also coincides with that most American of holidays, Thanksgiving, which perhaps more than any other US holiday, is an expression of American exceptionalism, the belief that America is a unique country with a special mission in the world. This week’s Thanksgiving holiday is an appropriate prism to consider how Asia interacts the other aspect of American influence in the region, that of its culture. 

Unlike other American holidays such Valentine's Day and Halloween, Thanksgiving offers no commercial opportunities to exploit overseas.  Unlike other holidays devoted to the

American state, such as Independence Day or Memorial Day, the underlying concept of Thanksgiving, of giving thanks, is not limited to America by definition. Thus, the U.S. Thanksgiving holiday remains sui generis, an American holiday that remains purely American for reasons beyond mere nationality.

In my view, Thanksgiving represents the ultimate expression of American culture’s uniqueness. The roots of Thanksgiving are in the celebratory feast of the Pilgrims in the Massachusetts colony, during the earliest days of America’s founding. They celebrated having survived the voyage across the Atlantic, the harsh winter, and the dread illnesses that befell them. These survivors had made personal choices, most for religious reasons, some to seek fortune, others for their own reasons; however, all had voluntarily chosen to make a new life in a new world, a choice made by individuals, not by the state.

The Pilgrims thus represented the core nature of America. The American people, for the most part, are a self-selected people.  There is no "typical American" now.  Based on their own choices or those of their ancestors, Americans can be of any race, religion or ethnicity.   More than any other country then, Americans are defined by the belief system they internalize within themselves, and not by any particular national attributes which have been externalized.

This sense of individualism remains the most attractive attribute of America to Americans and non-Americans alike.  Self-identification and re-invention based on individual considerations are the aspects of American culture most copied in Asia, where individualism is less favored.   Individualism seeps through American media, culture, business and politics.  This diversity can be both fascinating and frustrating, and is appealing to many.

Yet unbridled individualism is a caricature, which if adopted without limits, results in the worst abuses. Selfish disregard of greater society is what motivates factory owners to put melamine in milk or company officials to force their workers to gamble in casinos.  

Such destructive behavior comes from incorporating a superficial understanding of the American way of life without understanding its full context.  A further discussion of Thanksgiving provides such context.

More than any other American holiday, Americans spend Thanksgiving with their families.  They rush through airports and highways on Wednesday to get home. They spend Thanksgiving cooking, eating and watching football.  They spend the next day, “Black Friday,”  shopping for Christmas presents.  Americans may each have different variations of Thanksgiving – I remember my mother trying to cook soya roasted turkey, and we still cook turkey rice porridge – but the holiday remains centered around the family.

The holiday also originated as an informal, regional celebration.  Hence it is a “bottom-up” institution, adopted originally by families celebrating the fall harvest and commemorating the efforts of the early settlers.   However, it was the state, the U.S. federal government, that gave it a uniform day.  President Abraham Lincoln ended slavery, but he also created Thanksgiving as a national holiday.

Thus, Thanksgiving, like American society in general, is the product of a balancing of individual, family and the state.  That balancing is done by the people of every country.  Ultimately, each country must strike its own balance and continually struggle to maintain that balance.  In this way, America is exceptional in its weighting towards the individual, but it maintains a balance, just as Singapore has successfully managed to achieve its own balance.  Yet the struggle to maintain that balance in a constantly changing world remains a difficult but necessary proposition.

This will be my fifteenth Thanksgiving in Singapore.  When I sit down with my own family for Thanksgiving dinner,  our celebration will blend American, Singaporean, Chinese and other traditions.   I will be thankful for an America that provided educational and social opportunities unavailable elsewhere.  I will be thankful for a Singapore that provides a secure environment to raise our family and earn a living.    I will be thankful for the difficult choices made, and continue to be made that allow us to enjoy our way of life. 

Perhaps Thanksgiving will remain a uniquely American holiday.  However, as we come to the end of a difficult year, we can all take a moment to reflect and  give thanks for our personal and national condition.  Then we can gather our strength for the tasks ahead.

We’ll resume AEC comments after the holiday (there was a lot from the summits!). Happy Thanksgiving!

Coping with Myanmar as ASEAN Chair

To the disappointment of many (including this author), ASEAN leaders have decided to let Myanmar become ASEAN chair in 2014.  Most critics disagree with “rewarding” the Myanmar regime for its reform efforts since the installation of an elected government.  I share some of those concerns, but as the focus of this blog is on the ASEAN Economic Community (AEC), I am much more concerned about the ability of a government which has relatively limited experience in international trade and finance matters to serve as ASEAN chair going into the final preparation year before the AEC takes effect in 2015. 

In any event, the ASEAN leadership has spoken.  The question is how everyone else, in particular the critics of the Myanmar regime, should react. 

First, those concerned about the development of ASEAN’s three pillars of regional cooperation (political-security, economic and socio-cultural) should not allow disappointment to overwhelm their support for the regional bloc.  At some point Myanmar was going to become ASEAN chair, if not in 2014, then in 2016 as per the alphabetical rotation system (the 2014 bid arose because Myanmar invoked its having deferred its previous spot in the rotation).  The West, in particular the United States, needs a fully developed ASEAN to stabilize the region politically and economically.  By and large, the West has understood this and avoided counterproductive outbursts regarding ASEAN’s decision.

As a result of ASEAN’s decision, the West needs to adjust its Burma sanctions accordingly.  Aid intended to assist ASEAN with economic integration should be allowed to support Myanmar’s participation both in the AEC and the greater world economy.    This is important because much of the ASEAN Secretariat’s functions are supported by aid from the West; continued blocks on applying that aid to help Myanmar cope with economic integration will drag down AEC formation, particularly with Myanmar as ASEAN chair.  Furthermore, sanctions which are in some cases overbroadly written should be trimmed back to allow the business community to explore appropriate economic opportunities in Myanmar.  That doesn’t mean that all sanctions should be dropped, only that those sanctions which are counterproductive either to the regional goal of ASEAN economic integration or the national goal of improving the lot of the Burmese people should be dialed back.

ASEAN, for its part, needs to take measures to ensure that having Myanmar as ASEAN chair does not adversely impact regional integration.  Now more than ever, it is imperative that the next ASEAN Secretary-General have some economics background, for Myanmar as ASEAN chair is not going to provide economic leadership during 2014.   ASEAN countries will have to step up their leadership roles within the grouping to make up for this capacity deficit.  The ASEAN Secretariat also needs institutional strengthening to help the Secretary General and chairs.   Finally, ASEAN needs to maintain scrutiny on reforms in Myanmar and be prepared to delay Myanmar’s chairmanship term to 2016 or later if necessary; this will require having Indonesia or another member serve as mentor/backup chair.

Finally, critics of the Myanmar regime’s politics and treatment of ethnic and religious minorities will be disappointed with this decision.  However, they should also understand that the ASEAN chair decision has handed them another arena for pressuring the Myanmar regime.  For example, the debate on whether the U.S. president should attend an East Asia Summit in Naypidaw in 2014 will provide additional opportunities for discussing the plight of the Burmese people.  Furthermore, although the reform efforts in Myanmar are not optimal, they should still be met by appropriate steps; allowing aid to support Myanmar’s economic integration would be such a step.

Thus, the decision on Myanmar as ASEAN chair has closed, yet opened up another set of problems and opportunities for the region.  This requires that ASEAN redouble its efforts on regional integration, and ensure that having Myanmar as ASEAN chair does not serve as a permanent distraction or millstone around those efforts.  Similarly, ASEAN leaders need to recognize that the concerns of the West need to be met by holding Myanmar under continued scrutiny.   Finally, the Myanmar regime should continue its political and economic reforms to ensure that the country fully participates in the regional and world community.

Taking Incremental Steps Towards the AEC

In today’s post, we examine recent incremental steps taken by ASEAN to realize the ASEAN Economic Community.  Considered separately, each step may not seem like much. However, taken as a whole, they evidence active foundation-building at various levels in ASEAN.

Statistics --  ASEAN announced the formation of an ASEAN Community Statistical Committee (ACSS) composed of chief statisticians and heads of government statistical offices. This may be perhaps the most prosaic yet most important development.  Without accurate and meaningful statistical data, policymakers and economic actors in ASEAN cannot conduct proper analyses and make appropriate decisions.  Current economic data collection is difficult in certain ASEAN members and certain sectors, even for the ASEAN Secretariat.  Statistics have even been a diplomatic issue between ASEAN members in the past, such as regarding bilateral trade between Singapore and Indonesia.   Hence formation of the ACSS is a big step towards economic integration.

Common Visa -- ASEAN announced that it was studying a common tourist visa for the region.  A common tourist visa essentially amounts to an ASEAN Single Window for tourists (just as freedom of movement for ASEAN nationals would require a similar effort).  This will require significant upgrades to the intergovernmental operating system in ASEAN.   As I’ve discussed before, operational linkages for the region, such as the ASEAN Single Window for goods, are inconsistently implemented. Yet improving the intra-ASEAN flow of people and goods will bring major benefits to the region, particularly as it eyes a soccer World Cup bid.     Perhaps the region’s latent soccer-mania is the necessary motivation for improvements.

Education --  the ASEAN University Network has started discussing the harmonization of academic calendars; Thailand, the Philippines and Myanmar start their academic years in June while most ASEAN universities start their years in September.  An academic credit transfer system and increased use of English should also help students move around the region and learn more about their fellow ASEAN citizens.   This level of cooperation is noteworthy, particularly given the great disparity among academic institutions that would normally cause jealousies and resentments. 

Legal – ASEAN law ministers met and signed off on the Terms of Reference and the Rules of Procedure of the Advisory Panel to advise ASEAN Member States on matters relating to the adoption and implementation of the UNCITRAL Model Law on International Commercial Arbitration.  Harmonization of commercial arbitration will encourage further trade with ASEAN members with less-developed judicial systems and reduce the costs and burdens of dispute resolution.   Progress on a Treaty on the Abolishment of the requirement for Legalisation of Foreign Public Documents among ASEAN Member States, examining modalities for harmonization of ASEAN trade laws, the progressive liberalization of trade in legal services in ASEAN, and proposals for a model law on maritime security and uniform laws on legalization of documents were also discussed by the ASEAN law ministers.  Progress on all of these issues would be welcomed by the business community.

All in all, ASEAN took many incremental steps in forwarding the AEC, particularly during the run-up to the APEC Hawaii meeting and the East Asia Summit in Bali. Continued scrutiny and advocacy will be required to ensure that they lead to real progress.  

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.