Friday, February 17, 2012

What Does “2 x ASEAN – 6” Equal?

Reportedly four ASEAN members (Indonesia, Laos, the Philippines and Vietnam) are preparing a pilot program to implement self-certification for exporters to qualify their goods as originating in ASEAN for the ASEAN Trade in Goods Agreement (ATIGA).  This would represent an application of the “ASEAN – X” concept  contained in the ASEAN Charter, which allows a subset of ASEAN to proceed with an economic policy without waiting for participation by other member states.  I discussed this in a post last year.

This would be uneventful but for the fact that there is already an existing ASEAN pilot program on self-certification involving Malaysia, Singapore and Brunei, which Thailand joined in December 2011.  Hence if the new pilot program comes into fruition, there would be two pilot programs for self-certification, each with four ASEAN members.  In other words, we would have two “ASEAN-6” groups operating at the same time.   

At first glance, this would appear to be an absurd situation.  It would be as if the EU had decided to have two “common” currencies, one with the Euro and one with the ECU, each competing to be the common currency of the EU.    Is this the “buffet” system of selectively picking and choosing economic policies?

The answer is no. 

A closer examination of the reasons for creating a second pilot program demonstrates that a competition of ideas is not necessarily a bad thing.  In my post last year on self-certification, I explained the fundamental disagreement between the Malaysia-Singapore-Brunei-Thailand group and the Indonesia-Laos-Philippines-Vietnam group:

Indonesia has publicly stated that it would participate in the pilot program only if participating companies were limited to manufacturers, and if the authorized signatories per company were limited to three persons.  This reflects a general suspicion among certain ASEAN customs authorities that companies, and in particular trading companies, could abuse the system to obtain FTA origin wrongly.   These countries also expressed skepticism about the success of the pilot program.

Hence the incumbent group allows trading companies to participate whereas the potential new group would not allow for this.   This issue will need to be resolved for self-certification to be applied universally throughout ASEAN in ATIGA.

However, I think having two pilot programs would allow for that.  So long as the pilot programs remain just that – temporary programs to test the merits of a policy -- they will be useful. 

The potential new group is very skeptical of self-certification.  Having a pilot program that they can administer on their own terms will give them confidence that self-certification can work.  They can administer the program in their own way (e.g. for manufacturers only) and review their own data. 

Meanwhile, the incumbent group will have data for comparison purposes, based on both quantitative and qualitative approaches.  After the pilot programs have generated sufficient data, a proper debate can be held on which approach is best, given the various policy priorities and administration issues that will have arisen.

Thus, the intent of ASEAN-X, to allow a pathfinder group to move ahead with a policy and letting the others catch up later at their own pace, can be applied properly in this case.  However, doing so will require that the pilot programs run their course and proper policy debate proceed.  If the pilot programs become entrenched, with each group running its own way, then “buffet” style policymaking will also take root in the ASEAN Economic Community.  Such confusion must not be allowed to happen.  I still look forward to hearing more good news about the pilot program(s) and the increased use of self-certification.