Brexit's Direct and Indirect Impacts on ASEAN

This week I was asked by a client about the potential effect on ASEAN of the United Kingdom’s (UK) referendum on whether the country should stay in the European Union (EU), e.g,. what would happen if “Brexit” were to become reality.  I had a twofold reaction: first on the practical effects on British companies operating in ASEAN and second on how ASEAN would handle a member which wished even to consider pursuing a course similar to what the UK is contemplating.

First, if the UK were to leave the EU, it would have to renegotiate how it would deal with the EU.   Some anti-EU proponents contend that a newly departed UK could negotiate a free trade agreement (FTA) with the EU, whether as part of the European Free Trade Association, or separately, as Switzerland has done.  However, the EU would not be likely to be generous or sympathetic to a UK that had just left. 

Just as important in the ASEAN context, however, is the fact that the EU is a party to recently concluded FTAs with Singapore and Vietnam, and is negotiating FTAs with Indonesia, Malaysia, and the Philippines and even considering an overall FTA with ASEAN.  Such FTAs provide for preferential tariffs for EU goods and investment protections for EU investments, benefits which a newly departed UK would not enjoy.   Furthermore, the UK's bilateral investment treaties (BITs) will no longer provide investment protections, as ASEAN members such as Indonesia are withdrawing from these BITs.   A non-EU UK thus would have to attempt FTA negotiations on its own with these ASEAN members; the terms of the EU FTAs with Singapore and Vietnam require these ASEAN members to enter into FTA negotiations with those countries that have customs unions with the EU, but whether (1) the UK could conclude such a customs agreement with the EU and (2) the UK could reach agreement on FTAs with the ASEAN members is not certain at all.

In such an eventuality, Scotland, which had only just voted to stay in the UK, would be motivated to leave the UK and join the EU.  If Scotland were to join the EU, Scottish exports would qualify for tariff privileges under the EU FTAs with Singapore, Vietnam and other ASEAN members and Scottish investment would be protected by these EU FTAs. 

Thus, although the EU FTAs with ASEAN members are probably not primary considerations for British voters, increasing the likelihood for Scotland to leave the UK and join the EU after a Brexit should be a major consideration.

Second, if an ASEAN member were to consider leaving the regional grouping, could it?  Unlike the EU treaty, ASEAN’s foundational document, the ASEAN Charter, does not provide for the departure of a member (or the expulsion of a member, for that matter).  

Also unlike the EU, ASEAN’s economic agreements do allow for a couple of halfway measures for any ASEAN member inclined to retreat from its commitments under the ASEAN Economic Community.  The ASEAN Trade in Goods Agreement (ATIGA), for example, contains a reciprocity clause that provides that an ASEAN member can enjoy tariff privileges only to the extent that it provides them to other ASEAN members.  Hence an ASEAN member could elect to withdraw from its ATIGA commitments, on condition that the other ASEAN members would do the same. Similarly, the “ASEAN-X” formula in the ASEAN Charter, which allows a sub-grouping of ASEAN members to progress faster with economic integration, could be interpreted to allow a sub-grouping of ASEAN members to go slower or withdraw from economic integration.  Either way, the wayward ASEAN member(s) would still remain part of ASEAN.

Hopefully we never have to see such an eventuality, as the regional dynamics of ASEAN differ greatly from that of the EU.  At least the availability of these halfway stations would allow the wayward member to bring itself back into the ASEAN fold, something that is not readily conceivable for a UK that votes to leave the EU. 

Strengthening All Aspects of the ASEAN Institutions

The Institute of Southeast Asian Studies (ISEAS) has published a fascinating paper on the ASEAN Secretariat entitled “A Strong Secretariat, a Strong ASEAN? A Re-evaluation”. Incorporating oral history and written reflections, this paper provides a socio-political analysis of the ASEAN Secretariat, positing that the ASEAN Secretariat actually had robust authority and influence during the pre-Charter era, only to have it eroded by a lack of resources and support to decline into its current state.

The paper asserts that the heyday of the ASEAN Secretariat began in 1992 when the Secretary General of the ASEAN Secretariat became the Secretary General of ASEAN.  With that change in status came higher salaries and increased resources, which attracted talent from within the region.  Just as importantly, the paper puts forth that the ASEAN Secretariat assumed a greater role over ASEAN matters through a combination of geniality and indirect influence, particularly when a weaker ASEAN member served as the ASEAN Chair (imagine an ASEAN-version of Sir Humphrey Appleby from “Yes, Minister”). 

However, according to the paper, the failure of the ASEAN Secretariat to keep up with market salary levels, an influx of less experienced officers from the newer, less developed ASEAN members, and personnel policies that discouraged staff retention all eroded the overall capability of the ASEAN Secretariat, as well as the ties between the ASEAN Secretariat’s staff and the ASEAN member states, resulting in a decline in its influence on ASEAN.   The paper opines that the formalization of the authority of the ASEAN Secretariat and the ASEAN Secretary General coincided with, but did not cause, a decline in influence.  Yet, according to the paper, the culture of geniality remained, albeit with lessened indirect influence. 

Thus, the paper concludes that the ASEAN Secretariat actually had strength and authority in the past.  Hence calls to strengthen the ASEAN Secretariat should be considered with this in mind, e.g., that a strengthened ASEAN Secretariat is actually a return to a norm rather than an unprecedented situation. Furthermore, without improving the operating culture of ASEAN, increasing the formal authority of the ASEAN institutions alone will not strengthen ASEAN.

I think this paper is a welcome addition to the very small collection of scholarly material focused on the ASEAN institutions themselves.  However, I would make some additional points.

First, the purported heyday of the ASEAN Secretariat in the 1990s and 2000s was a time where ASEAN was smaller and less formal.  This was the case, in particular, for political-security matters.  Since that time, ASEAN and its commitments have grown significantly, particularly in the ASEAN Economic Community (AEC).  Under such circumstances, the ASEAN Secretariat would necessarily have to take on more formal roles (and has done so), as the depth and breadth of the AEC has developed.  Hence in its AEC role, at least, the ASEAN Secretariat cannot operate as it did 20-25 years ago (although a stronger ASEAN Secretariat probably could do so in political-security matters). 

Second, the resources, capability and culture of any international bureaucracy are always inter-related.  For example, there were institutional deficiencies in the early days of the EU, as salary and status did not keep up with those of national governments or the private sector.  The EU also has had to incorporate less experienced officers from newer member states.  Yet as the EU strengthened its institutions with funding and resources, they were able to attract better officials, creating a virtuous cycle whereby better officials strengthen the institutions.  If the ASEAN leaders were to make the same commitment to a more professionalized ASEAN Secretariat with better funding and support, the Secretariat will attract qualified staff from all across ASEAN and create its own virtuous cycle.

In sum, the paper does shine a useful light on the unwritten history of the ASEAN Secretariat, showing that the interactions of a regional organization such as ASEAN do not only depend on formal rules, but also on the people involved: it is a living entity. I hope that ASEAN’s leaders keep this in mind as they examine the challenges facing ASEAN, and the need to strengthen the ASEAN institutions.

Building on the U.S.-ASEAN Sunnylands Summit

This week I am in Washington.  From inside the Beltway, one could make the assessment that this week’s U.S.-ASEAN summit at Sunnylands was just another instance of America’s indifference to Southeast Asia.  For most media coverage, the summit was just a backdrop for another front on the 2016 U.S. presidential election campaign and/or the U.S. Supreme Court vacancy.  The former is a consequence of the timing of the summit (the last year of the Obama administration) and the latter is a consequence of fate (the death of Justice Scalia). 

Some who did pay attention to the summit have criticized it for being symbolic only and without significance.  This is a bit unfair.

The Sunnylands summit was always intended to be a proof of concept, evidence that the U.S. is committed to Southeast Asia. This was evident from the location (the same locale as the Obama-Xi meeting) to the timing (Presidents’ Day).

Moreover, to ASEAN, symbolism is important.  Over the years, I have had countless conversations with ASEAN diplomats and observers who complained about the absence of the U.S. President (or in some cases the U.S. Secretary of State) from ASEAN meetings due to various domestic considerations (elections, natural disasters, shootings).  Also recall that the previously proposed U.S.-ASEAN summit in Crawford was never held.  Thus, being able to conduct the Sunnylands event with relatively minimal effects from U.S. domestic and foreign policy events should therefore not be discounted.   

The presence and participation of almost every ASEAN national leader is also important.  Concerns about having a military government in Thalland did not prevent the Thai prime minister from coming.  Leaders from Laos and Vietnam came after leadership transition decisions.  The only leader who did not come, Myanmar president Thein Sein, justifiably stayed home to deal with his country’s own political transition.   

The output of Sunnylands thus should be considered in this context.  The joint declaration did not single out China’s behavior on the South China Sea/West Philippine Sea controversy.  However, doing so would not have been realistic nor in keeping with previous ASEAN declarations on the subject, and the declaration does refer to resolving the dispute through international law and principles, which implicitly supports the Philippine position on the dispute. 

Also, the U.S. announced it would set up hubs in Bangkok, Jakarta and Singapore to support business investment in the region.   To a large extent, this is a repackaging of existing U.S. government programs, but again, the optics of this initiative are important, particularly the involvement in Bangkok (a sign of continuing presence regardless of any domestic issues) and Jakarta (a needed indication of support against Indonesian revanchism on trade and investment).  The U.S. will also conduct workshops on the Trans Pacific Partnership (TPP), which are needed to counter the misconceptions and distortions surrounding the TPP (even among ASEAN leaders).

Hence the Sunnylands summit demonstrates the value of engaging with the Southeast Asian countries through ASEAN, something that should be done at other levels of government as well.  In other words,  both the process of having had the summit and its output, strengthen the U.S.-ASEAN relationship.

The real question is whether these U.S. commitments and initiatives will survive the change of government in January 2017.  From past experience, I would think so.  For example, the U.S.-Singapore Free Trade Agreement was first floated in the last days of the Bill Clinton administration, and the U.S. entered the TPP talks in the last days of the George W. Bush administration.  Regardless of what happens in the November 2016 elections, I think the Obama administration initiatives with ASEAN will also be continued by his successor.