Saturday, September 28, 2013

An ASEAN Seat on the UN Security Council

This week the ASEAN foreign ministers agreed to support the bids of Malaysia and Thailand to the United Nations Security Council as a grouping.  That means that Malaysia’s bid  for the 2015-16 term and Thailand’s bid for the 2017-18 term would be made as a representative of ASEAN, rather than only in their individual capacities.

ASEAN members have served on the UN Security Council, of course.  ASEAN members have also worked together to support candidates for international organizations, such as Dr. Supachai Panichpakdi’s candidacy for WTO director general and UNCTAD secretary general. ASEAN countries coordinate their work at the WTO and other international forums, and have standing committees in various foreign capitals to coordinate their foreign policy.  The ASEAN countries look to  Indonesia as their representative to the G-20.

This agreement represents another step in ASEAN operating as a bloc, something envisioned by the ASEAN Charter.

The question will become whether an ASEAN member serving on the UN Security Council can represent all of the bloc if there are internal conflicts within the bloc?  Would Malaysia represent the bloc or only Malaysia if there were another incursion by Philippine rebels into Sabah?  Would Thailand put national concerns over ASEAN-wide concerns should the International Court of Justice, another UN entity, rule in favor of Cambodia in the Preah Vihear case?  Diplomatic disputes among members of a regional bloc are not new – this a regular occurrence in the EU with the United Kingdom and France. But in less mature grouping such as ASEAN such disputes carry more risk to the grouping.

How these members would prioritize and handle their national and ASEAN responsibilities as UN Security Council members, now that they would speak for ASEAN, will be another test of the ASEAN institutions.  Let’s hope that they will give priority to their ASEAN responsibilities, much as Indonesia and others have done for the grouping in other contexts.

Saturday, September 21, 2013

The EU and Singapore Initial Their Bilateral FTA

On Friday the EU and Singapore initialed the legal text of their bilateral FTA.  This represents the EU’s first FTA with an ASEAN member.  The EU had shifted to a bilateral FTA approach after bloc-to-bloc FTA negotiations failed with ASEAN.

The full text is available here, but I summarize the major points below:
  • Investment chapter – this is not in the FTA text.  This is perhaps the most important development, because the EU was very concerned about national treatment, e.g., the right for its investors to be treated the same as Singaporeans.  For example, the US and the EFTA countries are exempted from much higher stamp duties on property purchases because of their own FTAs with Singapore.  By not including investment, the EU and Singapore will have to tackle these and other issues in future negotiations.
  • Import duty reductions – the EU agreed to eliminate import duties on almost all goods, with the exceptions being certain fruits and vegetables, most of which are not grown in Singapore anyway.  Import duties will be eliminated over 4 to 6 years. Singapore of course has no import duties, but imposes excise taxes on automobiles, liquor, tobacco and petroleum, which are not affected by the FTA.
  • Trade remedies – the FTA provides for special provisions for trade remedy investigations, such as the lesser duty rule and consideration of the public interest. Most notably, trade remedies are excluded from the scope of the FTA’s dispute settlement mechanism, meaning that parties must use domestic judicial means to appeal such cases.
  • Technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures – the FTA has special provisions to deal with these matters, particularly with geographic designations, a major EU concern.   There are special provisions on standards for automobiles, pharmaceuticals and electronics, and parties have the right to conduct on-site verification of SPS measures.
  • Services– the FTA covers trade in services except for audio-visual services, maritime, air transport and military.  Companies which have at least 50% ownership by Singaporean or EU natural persons can qualify for the protections of the services chapter, which include national treatment, market access and right of establishment.   The agreement also allows for the temporary movement of natural persons, e.g., management executives and professionals. There are also special provisions for computer services, financial services, telecoms and postal services. There is a special exemption from the national treatment obligation for direct taxes (reflecting the EU’s concern that Singapore may serve as a tax haven for its nationals; such concerns had contributed to the delay in the FTA talks). Singapore did not commit to further liberalization of the legal sector due to its ongoing liberalization of that sector.
  • Other – the FTA includes chapters on government procurement, intellectual property (including geographic designations), renewable energy generation, customs cooperation and trade facilitation, competition (which is also excluded from the FTA’s dispute resolution provisions), trade and sustainable development, mediation and dispute resolution (which allows the parties to use WTO dispute resolution but requires that only one settlement procedure can be applied at a time to a dispute).  Also of note is that Singapore agreed to negotiate with countries which have a customs union with the EU, the most important of which is Turkey.

Overall, this is a positive development for both Singapore and the EU. However, with the investment chapter still to be concluded, the definitive impact of the FTA remains to be seen.  The FTA’s initialing will also increase pressure on other ASEAN members to conclude their FTA negotiations with the EU, particularly for members such as Malaysia which face the impending expiration of the EU’s Generalised System of Preference duty exemptions on January 1.  

Thursday, September 19, 2013

Indonesia and Malaysia's Bilateral Haze Agreement

Last week it was reported that Indonesia and Malaysia had agreed on a bilateral deal to address the haze.  The Edge Review reported that the two countries signed an agreement to exchange digital-geo-referenced maps to show when and where the forest fires started, as well as information on who started the fires.  This information could be used by the Malaysian authorities to pursue legal action against plantation owners, many of whom are Malaysian companies. 

If correct and if implemented fully, this would represent a major step towards controlling the annual haze, which intensified this year. However, the difficulty from the ASEAN point of view was that the two ASEAN members also agreed to keep the shared information confidential: the data would not be shared with other ASEAN members nor with the ASEAN Secretariat:

A source complained that any favourable treatment given to big Malaysian companies by Jakarta and Kuala Lumpur would be at the expense of millions in the region forced to live with the thick smog.  "Singapore has said this does fall short of what it's been trying to achieve," the source said, adding that the new Asean secretary-general from Vietnam, Le Luong Minh, is also angered by the deal.

The problem is that the bilateral deal’s confidentiality requirement undermines the 2002 ASEAN Agreement on Transboundary Haze Pollution.  That agreement calls for the similar sharing of information, but on a bloc-wide basis, through the ASEAN Secretariat.  Indonesia is the last remaining ASEAN member not to ratify the agreement, which is a fundamental defect in the agreement since Indonesia is also the source of the haze.

Indonesia had vowed to ratify the haze agreement this year, but according to the Edge Review,  Indonesia backed out after the bilateral deal became known to the other ASEAN members. 

To residents in Thailand, Indonesia, Malaysia and Singapore who suffer from the haze, whether a bilateral deal or an ASEAN solution ends the haze may not matter. A bilateral deal offers a more rapid solution than Indonesia’s ratifying the ASEAN haze agreement this year, a somewhat remote prospect given the upcoming Indonesian elections and the end of the Yudhoyono presidency.  Implementation of the haze agreement on a bloc-wide basis will also take time.

However, the fear is that without the involvement of the ASEAN institutions and the other ASEAN members, a bilateral deal may either be ineffective or be inconsistently applied.  The bilateral deal also undermines the ASEAN institutions, e.g., the haze agreement and the ASEAN Secretariat, on perhaps the most visible (literally) problem currently affecting the ASEAN Socio-Cultural Community. 

The real question, thus, is whether the Indonesia-Malaysia bilateral deal ultimately is an intermediate step towards an effective ASEAN-centered solution through full implementation of the ASEAN haze agreement, or not.  If so, then the tradeoff of confidentiality for expediency may be acceptable. If not, then it will become yet another sad chapter in the ASEAN haze agreement.  The proof will be in the skies.

Wednesday, September 18, 2013

Australia Posts Resident Ambassador to ASEAN

Australia announced today that it would post its first resident ambassador to ASEAN:

Foreign Minister Julie Bishop confirmed on Wednesday that Simon Merrifield would be Australia's first resident ambassador to ASEAN. His appointment has official approval from ASEAN foreign ministers, Ms Bishop said. The position is based in Jakarta and Mr Merrifield will officially take up his role on Friday. Mr Merrifield is a career diplomat with the Department of Foreign Affairs and Trade and has spent 13 years living in south east Asia, including three in Myanmar. 

Of course, this represents another recognition of ASEAN's growing international status.  China, Korea, Japan and the United States also maintain resident ambassadors to ASEAN.  Australia's move makes India and New Zealand the only "ASEAN plus" trading partners (e.g., those countries have FTAs with ASEAN) without resident ASEAN ambassadors.  Due to its small size, New Zealand's ambassador to Indonesia may justifiably handle double duty to ASEAN, which many countries do.  However, India's  absence may also be due to resource constraints, which is more embarassing for a country with ambitions to play a major role in ASEAN.