Introductory Overview: Revisiting Trade Policies in Southeast Asia
Sally, Razeen, Sen, Rahul, Journal of Southeast Asian Economies
Trade policy is clearly back on the radar screen in Southeast Asia, having been overshadowed by monetary and financial matters in the aftermath of the Asian crisis. The New Regionalism--the proliferation of free trade agreement (FTA) initiatives--has occupied centre stage since 1999/2000. Singapore blazed the trail, and other ASEAN members, notably Thailand, have been catching up. FTA initiatives have become equally popular in Northeast and South Asia, Australasia, and beyond. New FTAs concluded so far in the region have been mostly bilateral, involving individual ASEAN countries and partners outside the region. They have been supplemented by plurilateral, big-block FTA initiatives, involving ASEAN collectively and others (China, India, Japan, Australia, New Zealand). In all, about forty FTAs have been negotiated or are under discussion in the Asia-Pacific since 1999. There is talk of an East Asian Economic Community bringing together ASEAN, China, Japan, and Korea, and even of an Asian Economic Community that would subsume South Asia too.
Not too long ago, China acceded to the World Trade Organization (WTO) in 2001, crowning the most sweeping set of market-oriented reforms, including the biggest dose of trade and investment liberalization, the world has ever seen. Arguably, China's WTO accession, with very strong commitments that go far beyond those of other developing countries, is the symbol of the liberalization wave worldwide over the past quarter century, and of modern economic globalization more generally. It is also a marker for the way in which China is reshaping economic activity and policy in East and Southeast Asia.
India, too, is integrating faster into the world economy, though not nearly as fast or as dramatically as China. The global integration of these two big developing countries is probably the lead trend in economic globalization today and for some time to come. It has powerful, not-to-be underestimated implications for trade and wider economic policies in Southeast Asia.
Turning to multilateral matters, the WTO, after the crippling failure of the Seattle Ministerial Conference in 1999, witnessed the launch of a new round of multilateral trade negotiations in Doha at the end of 2001. The round came to a halt with the collapse of the Cancun Ministerial Conference in 2003; but it was revived, with a new negotiating framework put in place by July 2004. Nevertheless, grave doubts about the future of the WTO and of the multilateral trading system persist--a major factor in turning to FTAs in Southeast Asia and elsewhere.
Finally, ASEAN itself has hardly been short of initiatives to deepen its own economic integration. The tariff reduction timetable for the ASEAN Free Trade Area (AFTA) has been advanced and a new agreement announced to achieve an ASEAN Economic Community (AEC) by 2020. However, grand visions belie the reality on the ground, with at best modest results in bringing down intra-regional trade barriers. …