Whither Trade Policies in Southeast Asia? the Wider Asian and Global Context
Sally, Razeen, Sen, Rahul, Journal of Southeast Asian Economies
This paper analyses trade policies in Southeast Asian countries in their wider Asian and global contexts. In essence, it not only compares and contrasts trade policies in individual Southeast Asian countries, but also analyses these policies in the context of regional and global economic integration, as well as the economic emergence of two other major Asian economies, China and India. The paper first looks at recent trends in trade and foreign direct investment (FDI) patterns in ASEAN. Then it summarizes key trade policy features in ASEAN countries, especially to get a sense of policy variety in the region and to see how policies have changed since the 1997-98 Asian economic crisis. Then follows an examination of ASEAN countries in international trade negotiations and agreements: first within ASEAN; second on cross-regional free trade agreements (FTAs); and third in the WTO, especially in the Doha Round.
The discussion is organized as follows. Section II analyses the economic performance of ASEAN-6 (1) countries in Asia and the global economy, focusing on trade and FDI flows. This is compared with basic economic performance indicators for China and India. This sets up some economic implications of China's and India's rise for ASEAN. Section III provides an overview of trade policies among the individual ASEAN-6 economies, highlighting key similarities and differences. Section IV provides an assessment of ASEAN economic integration in terms of trade and investment policies geared to regional liberalization, while section V assesses the state of bilateral trade liberalization initiatives involving ASEAN as a whole. Section VI provides an assessment of the ASEAN-6 countries in the WTO. The final section (section VII) highlights policy implications for the ASEAN-6 in pursuing trade policies on multiple tracks.
II. ASEAN-6 in the Global Economy: Trade and FDI Inflows
Although the ASEAN-6 economies were growing at an average rate of 7.3 per cent during 1996, the triggering of the economic crisis in mid-1997 with the devaluation of the Thai baht seriously affected their growth prospects, with all the ASEAN-6 economies except Vietnam registering a negative growth rate for the year 1998 (Figure 1). Although most of the ASEAN-6 economies have now recovered from the crisis, the average growth rate of in 2003 was 4.2 per cent, far lower than the pre-crisis levels.
[FIGURE 1 OMITTED]
In sharp contrast, the 1996-2003 period saw the economic emergence of China and the recent economic boom in India, wherein two of Asia's largest economies registered a growth rate of 9.1 per cent and 8.1 per cent respectively in 2003. In particular, the average growth rate of the Chinese and the Indian economy over 1999-2003 was 7.9 per cent and 5.8 per cent compared with 4.2 per cent for the ASEAN-6 economies. Table 1 provides some selected macroeconomic indicators of the ASEAN-6 economies and also of China and India in 2003, given that economic developments in the latter are likely to have an indirect impact on the former. The following observations can be made:
(i) The ASEAN-6 economies constituted about 7 per cent of the world's population; and about 4 per cent of world income measured in Purchasing Power Parity (PPP) terms. However, on per capita basis, the income of these economies was close to a quarter of the world's average in current value terms in 2003. In contrast, China accounted for more than a fifth of the world's population and about 12.5 per cent of the world's PPP GDP, but on a per capita basis, its income level compared with the world average in current value terms was lower than that of the ASEAN-6 economies. The Indian economy constituted nearly 18 per cent of the world's population, but its PPP GDP was less than half of that of China in current value terms.
(ii) However, there are significant differences with respect to levels of economic development, domestic market size, and openness to the international markets among these ASEAN-6 economies, compared with China and India. …